NBFC Personal Loans: Benefits, Eligibility & Types

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Ever needed a quick cash boost for an unexpected expense or a dream you want to chase? Personal loans can be a lifesaver, and increasingly, NBFCs (Non-Banking Financial Companies) are becoming popular players in this field. But what exactly are NBFC personal loans, and how do they differ from traditional bank loans? Let’s break it down.

What Is An NBFC Personal Loan?

An NBFC loan is a financial service or credit option offered by a finance company that is regulated and licensed by the RBI. NBFCs are financial entities that provide various financial services and products akin to banks, but they do not hold a banking license. They are essential to the financial system as they extend credit to various economic sectors.

Think of NBFCs as financial institutions that offer various loan products, including personal loans. They’ve become a popular alternative to banks because of their:

5 Benefits Of NBFC Personal Loans

1. Faster Approvals: NBFCs often have streamlined processes, meaning you might get your loan approved quicker than at a bank. Banks generally have more complex internal processes, leading to longer approval times.

2. Flexible Eligibility: They may be more open to borrowers with non-traditional income sources or a less-than-perfect credit score. NBFCs offer straightforward eligibility criteria for personal loans, focusing primarily on your credit score. A CIBIL score of 685 or above usually guarantees quick approval, although those with lower scores can still qualify by demonstrating strong income and a solid career portfolio.

3. Variety of Loan Options: NBFCs offer different types of personal loans, including secured (backed by collateral) and unsecured loans, catering to various needs.

4. Fewer Documentation Needs: For existing or pre-approved customers, NBFCs require no additional documents when applying for a personal loan. New customers only need to provide basic documents like KYC forms, bank statements, and recent salary slips. Banks, however, often require extensive paperwork, including additional documents from self-employed applicants.

5. Fast Loan Processing: NBFCs can process applications and disburse funds within one working day post-approval, making them an excellent option for urgent financial needs. In comparison, banks may take anywhere from a few days to several weeks to process personal loans.

Also, Read: I Need ₹5000 Rupees Loan Urgently: Quick Guide

How Are NBFC Personal Loans Different From Personal Loans Via Banks?

Types of NBFCs in India

Based on Activity:

1. Asset Finance Company (AFC): This type of company focuses on financing physical assets like vehicles, equipment, and industrial machines. At least 60% of its assets and income must come from these activities.

2. Loan Company (LC): Mainly provides loans and advances for various purposes, but does not include activities of an AFC.

3. Mortgage Guarantee Company (MGC): This company specializes in mortgage guarantees, with at least 90% of turnover or income derived from this and a minimum net-owned fund of Rs. 100 crore.

4. Investment Company (IC): Engages primarily in acquiring securities.

5. Infrastructure Finance Company (IFC): Focuses on infrastructure loans, maintaining at least 75% of its total assets in such loans, with specific requirements for funds, credit rating, and capital adequacy ratio.

6. Non-operative Financial Holding Company (NOHFC): Enables promoter groups to establish new banks and holds financial services firms, adhering to regulatory standards.

7. Infrastructure Debt Fund (IDF-NBFC): This fund provides long-term debt to infrastructure projects and issues bonds with a minimum five-year maturity. It is sponsored by Infrastructure Finance Companies.

Based on Deposits:

1. Deposit-Accepting NBFCs: These NBFCs are permitted to accept deposits ranging from 12 to 60 months but cannot take demand deposits. Due to stringent regulations, the number of such NBFCs has been decreasing.

Non-Deposit Accepting NBFCs:

1. NBFC – Factors: Focuses on factoring with significant proportions of its assets and income deriving from this business.

2. Micro-Finance Institution (NBFC- MFI): Provides small loans primarily to low-income rural and semi-urban households, with strict criteria on loan amount, tenure, and usage.

3. Core Investment Company (CIC-ND-SI): Holds a significant portion of its assets in shares and securities of group companies, with stringent conditions on asset management and public fund interactions.

Now that you are aware of the various types of NBFCs, let’s examine the eligibility criteria for getting a loan through them.

Also, Read: I Need 50000 Rupees Loan Urgently

Eligibility Criteria for A Personal Loan Through NBFC

The requirements for a personal loan from an NBFC may differ depending on the lender. Here are some of the basic eligibility requirements:

• Nationality: Must be Indian.
• Age: Between 21 and 80 years. You should be 80 years or younger at the end of the loan term.
• Employment: Must be employed with a public sector, private company, or multinational corporation.
• Credit Score: A CIBIL score of 685 or above.
• Monthly Income: Starts from Rs. 25,001, varying based on the city you reside in.

Required Documents for Applying for a Loan from an NBFC

The documents needed can vary by lender, but  you typically need to submit:

• KYC (Know Your Customer) Documents: Aadhaar card, passport, voter’s ID, driving license, or Letter of National Population Register.
• PAN Card.
• Recent Salary Slips: From the last three months.
• Bank Account Statements: From the last three months.

If you have a bad CIBIL score or have just started the loan journey and want to take a loan through an NBFC, read our blog “NBFC Loans Without CIBIL Score: Your Complete Guide.”

While NBFCs offer several advantages, it’s important to compare them with bank loans:

• Interest Rates: Banks generally offer lower interest rates, especially for individuals with a strong credit history.
• Stability: Banks are considered more stable institutions, which can provide peace of mind for some borrowers.

Choosing the Right NBFC Personal Loan Involves:

1. Researching interest rates and terms offered by different NBFCs.

2. Checking their reputation and customer service.

3. Carefully consider the loan amount, tenure, and interest rate.

Instead of wasting hours on researching, you can opt for Credmudra. We will match you with the right lender, based on your requirements! We also ensure the loan disbursement process is smooth for you, so trust us. 

Points To Remember:

1. Borrow responsibly and only what you can afford to repay.

2. Be aware of hidden charges and understand all loan terms before signing.

3. Building a good credit score can help you qualify for better rates in the future.

NBFC personal loans can be a convenient and accessible option for your financial needs. By understanding their features and comparing them with traditional bank loans, you can make an informed decision and choose the right fit for your situation.

If you liked this blog, let us know your thoughts or experiences in the comments section below!

Also, Read: I Need a 3000 Rupees Loan Urgently

FAQs:

1. Can I Change My Personal Loan?

If you want to switch your loan provider or lower your interest payments, refinancing could be a good option. Before committing to a new lender, ensure that the new loan includes all the features that matter to you.

2. What are the Different Types of NBFCs Registered to RBI?

The different types of Non-Banking Financial Companies (NBFCs) registered under the Reserve Bank of India (RBI) include various categories. These are Asset Finance Companies, Investment Companies, Loan Companies, Infrastructure Finance Companies, Microfinance Institutions, and Systemically Important NBFCs.

3. Why do People Choose NBFCs Over Banks?

People choose NBFCs for personal loans because they are more flexible with loan requirements, process loans faster, and can help people with different credit histories. They provide easy-to-access financial options, making them a popular choice for borrowers.