If you have been around for a while, you must all have been to the bank at least once in your life, maybe for a quick loan, to transfer money, or anything related to your finances. Well, talking about the time that is “now”, banks have become a thing of yesteryear and NBFCs are slowly and surely taking over.
WHAT ARE NBFCs?
NBFC stands for Non-Banking Financial Company which basically are companies that are registered under the Companies Act 1956 and 2013. Under this act, companies are allowed to provide loans and advances, acquisition of shares/stocks/debentures, selling of bonds, and so on. The responsibility of supervising and regulating the NBFC loan companies falls under RBI’s Department of Non-Banking Supervision (DNBS).
Basically, if we look at it, NBFCs provide most of the services that banks provide to individuals. Over the past few years, the focus has shifted from Banks to NBFCs, and let us see what are the reasons or advantages that NBFCs have over banks that have caused this shift.
Advantages of NBFCs
NBFCs offer many advantages to their customers over traditional banks. Let us have a look at some of them.
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Quick Loan Processing
The thing with banks is that they are more stringent with the loan application process and require more documents, which results in a very long application process. On the other hand, NBFCs offer a hassle-free and comparatively quicker loan application process with fewer documents required. So, if you need an online personal loan, you should go for an NBFC over a traditional bank.
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Minimal Paperwork
Unlike the numerous documents that are required at the bank for availing of a quick personal loan, NBFCs require the most minimal of documents. These documents include- identity proof, age proof, and address proof among others.
Thus, as compared to traditional banks, NBFCs ask for fewer documents thus making the process faster as well.
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Less Stringent with Credit History
If you have a credit score that is not one you can boast about, NBFCs are your savior. Where banks rely a lot on your credit score and history, NBFCs focus on other factors as well including your account transaction patterns, your ITR, and a few others.
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Option to Apply Online
NBFCs also provide their customers with the option of applying for loans online, which is obviously a quicker way of availing of loans. On the other hand, most banks, if not all, still offer the traditional way of availing of loans, which is more time-consuming for the users.
Related Post: Reasons to avail yourself of a personal loan in Emergency
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Competitive Interest Rates
If we talk about traditional banks, the base rate for the same is regulated by RBI and thus even if the bank wants to keep the best interest of its customers in mind, they cannot change the interest rates on their own. However, NBFC rates are determined by prime lending rates rather than the repo rate as is the case with banks. Therefore, NBFCs are better where the aspect of interest rates is concerned.
So, now that you are aware of all the advantages that NBFCs offer to their users over traditional banks, you can make a wise choice and go forward with taking loans from NBFCs. Furthermore, you must ensure that the NBFCs you are taking a loan from are legitimate. That was it for this topic, we hope we could be of help to you!