{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/uncategorized\/why-a-personal-loan-from-a-bank-is-better-than-one-from-an-nbfc\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/uncategorized\/why-a-personal-loan-from-a-bank-is-better-than-one-from-an-nbfc\/","headline":"Why a Personal Loan from a Bank Is Better Than One from an NBFC","name":"Why a Personal Loan from a Bank Is Better Than One from an NBFC","description":"In today\u2019s financial marketplace, individuals seeking personal loans have a choice between traditional banks and Non-Banking Financial Companies (NBFCs). While both types of institutions provide the funds needed for various purposes\u2014from consolidating debt to covering major expenses\u2014the advantages of obtaining a personal loan from a bank often surpass those of an NBFC. This blog delves...","datePublished":"2024-06-28","dateModified":"2024-06-28","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/vinayak\/#Person","name":"Vinayak","url":"https:\/\/www.indusind.com\/iblogs\/author\/vinayak\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/83880c90630f0d98ec7d461acb74bdf6?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/83880c90630f0d98ec7d461acb74bdf6?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/PL_394.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/PL_394.jpg","height":260,"width":688},"url":"https:\/\/www.indusind.com\/iblogs\/uncategorized\/why-a-personal-loan-from-a-bank-is-better-than-one-from-an-nbfc\/","about":["Uncategorized"],"wordCount":1545,"articleBody":"In today\u2019s financial marketplace, individuals seeking personal loans have a choice between traditional banks and Non-Banking Financial Companies (NBFCs). While both types of institutions provide the funds needed for various purposes\u2014from consolidating debt to covering major expenses\u2014the advantages of obtaining a personal loan from a bank often surpass those of an NBFC. This blog delves into the reasons why a personal loan from a bank is typically a better choice, offering insights into interest rates, credibility, customer service, and more.Understanding the BasicsBefore we explore the comparative benefits, it\u2019s essential to understand the fundamental differences between banks and NBFCs:– Banks: Banks are highly regulated financial institutions authorized to accept deposits and provide loans. They are subject to strict oversight by the Reserve Bank of India (RBI) and offer a wide range of financial services.– NBFCs: Non-Banking Financial Companies are financial institutions that offer all banking services, but do not accept deposits repayable on demand. These are also regulated by the RBI but operate under different regulatory requirements compared to banks.1. Lower Interest RatesOne of the most compelling reasons to choose a bank over an NBFC for a personal loan is the interest rate. Here\u2019s why banks often provide better rates:– Cost of Funds: Banks generally have a lower cost of funds due to their ability to accept all types of deposits, which they can lend at competitive rates. This advantage often translates into lower interest rates for borrowers.– Regulatory Influence: Due to stringent regulatory requirements and oversight, banks are usually more stable and able to offer lower interest rates compared to NBFCs, which might have to charge higher rates to cover their higher cost of funds.– Promotional Offers: Banks often have periodic promotional offers, especially for existing customers, which can further reduce the cost of borrowing through discounted interest rates or processing fee waivers.2. Higher Credibility and TrustWhen it comes to borrowing money, trust and credibility are crucial. Banks often have an edge in this regard for several reasons:– Reputation: Established banks, particularly those with a long history, have built strong reputations for reliability and trustworthiness. Borrowers are often more comfortable dealing with banks that have a proven track record.– Regulation and Oversight: Banks are subject to rigorous regulatory standards and oversight, ensuring higher levels of transparency and security for borrowers. This reduces the risk of unethical practices or hidden terms that might be more common with less regulated NBFCs.– Customer Protections: Because banks are closely monitored by regulatory authorities, they are often required to adhere to strict customer protection policies, offering greater peace of mind to borrowers.3. Comprehensive Services and FacilitiesBanks typically provide a wider range of services and facilities compared to NBFCs, which can be advantageous for personal loan borrowers:– Integrated Banking Services: Customers of banks often have access to a comprehensive suite of financial products and services, such as savings accounts, credit cards, and investment options, all under one roof. This integration can make managing finances more convenient and efficient.– Value-Added Services: Many banks offer value-added services like financial advisory, insurance, and overdraft facilities. Borrowers can benefit from these services without having to seek multiple providers.– Branch Network: Banks usually have a more extensive branch and ATM network, offering easy access to in-person support and services, which can be especially beneficial for resolving any issues that may arise with loan accounts.4. Better Customer ServiceCustomer service quality can significantly impact the borrowing experience, and banks often excel in this area compared to NBFCs:– Dedicated Support: Banks often have dedicated customer service teams and relationship managers who can provide personalized assistance and support throughout the loan application and repayment process.– Multiple Communication Channels: Banks typically offer multiple channels for customer support, including in-person assistance, phone support, online chat, and email, making it easier for borrowers to get help when needed.– Dispute Resolution: Because of their regulatory obligations, banks are often better equipped to handle customer complaints and disputes effectively, ensuring issues are resolved in a fair and timely manner.5. More Stringent Eligibility CriteriaWhile this might seem like a disadvantage, the stringent eligibility criteria imposed by banks can actually be beneficial for borrowers in the long run:– Risk Mitigation: Banks\u2019 rigorous assessment of applicants’ creditworthiness helps in mitigating the risk of defaults, which can indirectly benefit borrowers through lower interest rates and a stable lending environment.– Better Loan Terms: Due to their thorough credit evaluations, banks are often able to offer better loan terms, such as longer repayment periods or lower penalties for prepayment, which can make managing the loan easier and more affordable for borrowers.– Credit Building: For borrowers with good credit, meeting the strict criteria of a bank can help in maintaining or improving their credit score, as timely repayments are reported to credit bureaus, enhancing their creditworthiness for future borrowing.ConclusionWhile both banks and NBFCs provide valuable lending services, personal loans from banks generally offer significant advantages in terms of lower interest rates, higher credibility, comprehensive services, superior customer support, and stringent eligibility criteria. These factors make banks a preferable choice for many borrowers seeking a reliable and cost-effective personal loan.Before deciding where to apply for a personal loan, it\u2019s important to evaluate your specific financial needs, compare loan offers, and consider the long-term implications of borrowing from each type of institution. By understanding the benefits that banks offer, you can make a more informed decision that best suits your financial goals and ensures a secure borrowing experience.If you\u2019re looking for an instant personal loan at best-in-class rates, then do check out IndusInd Bank Personal Loan that is mindfully designed to fit into the varied needs of individuals as per their lifestyles. With IndusInd Bank Personal loan, you get to enjoy instant approval, quick disbursal, and flexible repayment tenure options. That\u2019s not all, its application process is 100% paperless with minimal or low processing fee.Apply NowDisclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct\/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.Share This:"}