Personal loan: bank or NBFC

You could be faced with one important question when it comes to taking a personal loan – Do you borrow from a bank or from a non-banking financial company? What's the difference between taking a Personal Loan from a bank and a non-banking financial firm (NBFC)?

Before we discuss the variations between banks and NBFCs, let 's look at the value of personal loans first.

Firstly, personal loans can be easily acquired to fulfill one or more of the financial obligations described below:

• Payment Dues on Credit Card

• Meets Medical Emergency Costs

• Wedding plans are payable

• Meeting home renovation costs

• Expenditure on Traveling Bearing

• Start an Entrepreneurial Project

• Scaling up a business

Factors Affecting Personal Loan Interest Rates

As personal loans are unsecured and you do not need to offer collateral against the amount of the loan to the lender, they usually attract higher interest rates ranging from 11% to 22%. The percentage of interest varies mainly according to the factors below:

Annual Income

The higher your salary, the greater the ability to repay the loan would be, and therefore the lower the interest rates paid.

Profit Source

Whether you are an employee of a reputable company, or if your corporation or medical practice receives a steady sales flow, you will most likely earn a reduced interest rate on your Personal Loan.

Personal Loan from Banks

Banks are financial institutions that are governed by the nation's apex bank-Indian Reserve Bank (RBI) Because of their highly coordinated functioning, banks often set strict guidelines for loan offerings. More often than not, banks need the borrower to provide proof of their income along with a fairly high credit score of 700 and above in order to accept a Personal Loan on favorable terms.

Personal Loan from NBFCs

NBFCs are not constrained by the RBI guidelines, and may therefore work on their own terms. This often implies that when it comes to offering Personal Loans NBFCs are somewhat lenient in their approach. For example, a vast majority of NBFCs are readily lending loans to individuals with lower than ideal credit scores.Indeed, these financial service providers do not even hesitate to offer loans to self-employed individuals who are unable to provide the proof of income required. Because of such leeways, the lenders' risk tendency is growing, which is why they sometimes charge a higher interest rate than conventional banks.

We hope you now know the simple yet striking difference between taking a Personal Loan from a bank and taking the same from an NBFC. So, don't wait any longer before analyzing which of these financial institutions will fit your circumstances better, and willingly offer you the funds you need. After all, regardless of your current situation, you can still take a shot to turn the tables around.