A lot of people are now seeking information about personal loans. This may be attributed to their unsecured nature that allows intended borrowers to use the loan amount for any purpose. Apart from choosing your loan amount, the right choice of lending institution is also important. Among all financial institutions that promise loan services with ease and agility, more people are preferring to take loans from non-banking financial companies (NBFCs).
Know how NBFCs score over others
India’s changing economic scenario has had a tremendous impact on NBFC policies. Touted as the next big thing in India’s growing financial stature, NBFCs have experienced a recent spurt in personal loan applications by individuals and corporate houses. Know what prompts people to prefer NBFCs over others.
No collaterals for MSMEs:
Individual borrowers are not required to offer any collateral to secure the loan amount. However, it is not the same for Micro, Small and Medium Enterprises (MSMEs). Many financial institutions have tightened regulatory norms and require their MSME customers to go through a lot of paperwork. In such instances, MSMEs rush to NBFCs for business loans. Apart from the relaxed lending norms, NBFCs don’t require MSME customers to pledge any collateral for the loan amount they wish to borrow. The loan amount can go up to Rs. 50 lakhs in certain cases and the money credited to the current account post quick approval and disbursal of the loan.
Many NBFCs offer pre-approved loans. The benefit of having a pre-approved loan limit is that you are free to use the loan amount whenever required. This means that individuals or business houses can have their choice of loan amount without going through the loan application process. The best part of pre-approved loans is that the borrower must pay interest only on the amount used and not the entire loan amount, which means lower interest payment. To know the equated monthly instalments (EMIs) that you must pay, you may use the personal loan calculator for calculation of interest.
Less dependence on credit score:
Lending institutions want to know your credit history before checking your loan eligibility. Lower credit history or a loan repayment history went awry means increased chances of loan rejection due to greater chances of defaulting at EMI payments. However, NBFCs do not hail the credit score as the ultimate yardstick of their customers’ loan repayment ability, which means that they agree to offer loans to those having a bad credit score. However, the interest rates are higher in such cases as even NBFCs wish to offset the risk of loan default.
Better business loan programmes:
While borrowers check only the interest rates, many forget to look into added charges that lenders may charge. Many NBFCs charge minimal processing fees for personal loans, thus, allowing business enterprises to benefit from competitive loan programmes. Besides, multiple advantages provided by NBFCs have prompted individual borrowers as well as big and small business houses to tie up with them for continued loan availability in the long run.
Lenient eligibility criteria:
Compared to most financial institutions, NBFCs have liberal eligibility criteria and, thus, fewer requirements for loan eligibility. This is in stark contrast to many government sector institutions and public sector lenders that require loan applicants to submit multiple kinds of documents to get funds. Fewer eligibility criteria translate to successful document submission and, thus, more chances of getting the loan. Borrowers who do not meet the eligibility criteria by banks can approach NBFCs for their loan requirements. Also, lenient eligibility criteria make approval of loans easier coupled with smooth loan processing and quick loan disbursal. Besides, in case of large loan requirements, many NBFCs are ready to compromise on the interest rates, which means availing loans at competitive interest charges.