NBFCs are Non-Banking Financial Companies that are into the business of lending to retail and corporate borrowers. Typically, when a borrower has trouble getting a loan from any conventional commercial bank, they turn to these NBFCs. This is because these NBFCs are less stringent and finance the whole loan amount. On the flip side, if the loan amount is higher, the bank usually sanctions a percentage of it, and the borrower has to arrange the remaining.    

Also, getting a bank loan is a tedious process and involves much documentation, unlike an NBFC. NBFCs are considered less stringent than banks as they don’t do strict credit checks. Loan processing time is another advantage with NBFCs as loan application approval, or rejection decisions take minutes. NBFC personal loan is also unsecured, i.e., without any collateral or guarantor, which is very rare in banks’ loans.  

Personal Loans Disbursal: Banks vs. NBFCs

The table below is for a comparative study between personal loans being disbursed (in crores) by NBFCs, private sector banks, and public sector banks in India over the last few years. You can see the percentage increase of personal loans disbursed by NBFCs is 286% from FY16 to FY18-19. And the percentage increase is 73.1% for private banks and 140% for public sector banks in the same period.  

Year NBFC Private Banks Public Sector Banks Total Amount Lent
FY16 18,009 83,259 55,070 1,56,338
FY17 22,162 95,599 89,183 2,06,994
FY18 47,428 1,24,661 1,23,206 2,95,295
FY18-19 69,517 1,44,177 1,32,222 3,45,916

Difference between Loans from NBFCs vs. Banks

The table below shows the difference between personal loans taken from banks vis-à-vis NBFCs.

Parameter Banks NBFCs
Loan Application The borrower has to visit a branch with all documents to apply for a loan. The loan application process is usually online through the NBFC’s website or app.
Time Loan processing takes time with many checks and balances. Loan processing and disbursal are quick.
Flexibility Bank loans are usually standard with little or no scope of negotiation. Few conditions are negotiable with flexible repayment options.
Processing Fees Abysmally low, 0.5-2%. Typically ranges between 1-4%.
Interest Rates Interest rates are comparatively lower if the credit score is good. Higher interest rates than banks.

Benefits of Personal Loans from NBFCs

There are many advantages and benefits of taking an NBFC personal loan over any commercial bank (be it a private bank or a government-owned bank)loan. These benefits are listed below:

  • Credit Score:

    A borrower with a substandard credit score is usually not entertained by banks, and his loan application is rejected, which further lowers the credit score. However, these borrowers can quickly get a loan from an NBFC as they have certain loan products especially for them.

  • Quicker Turnaround Time:

    The eligibility criteria and application scrutiny are less stringent in NBFCs than in traditional banks. If you are looking for a loan in an emergency, then NBFC is the best bet.·   

  • Loan Amount:

    Banks usually do not sanction the entire loan amount. They approve a certain percentage of the loan amount. However, NBFCs approve the whole loan amount without putting any restrictive covenants on loan. Thus, if you want a big loan, then prefer approaching an NBFC.  

  • Customer Service:

    NBFCs offer better customer service to their customers during the loan approval and post-disbursal stages. Borrowers can view the loan status, enable notification on the installment deadline.       

Why Choose Navi?

Navi has a smooth loan application process. You just have to download their app and apply for a personal loan by sitting on your couch. Fill a small loan application form, enter your income details and PAN number. Navi will process your loan application in 10 minutes. Another good part is that Navi only asks for 3 documents only in PAN card, Aadhar card, and a photograph. Just a few clicks on your smartphone, and you can get an easy personal loan of up to RS. 5 lakhs. The interest rates are also relatively meager in personal loans offered by Navi. A borrower can also prepay the personal loan if he wants that, too, with no extra charges or penalty. He can also choose the EMI amount while applying for the loan at his convenience, making it the best NBFC for the personal loan.   

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Frequently Asked Questions

What is the interest rate on Navi’s personal loans?

The interest rates vary from one borrower to another, but Navi’s interest rates are quite affordable. A borrower has the freedom to select the EMI amount as well.

What is the procedure to apply for a personal loan with Navi?

You have to download the Navi app from Play Store and apply for a loan from there.

What are the minimum and maximum loan amounts offered under personal loans?

Navi offers personal loans ranging from Rs. 10,000 to Rs. 5,00,000 without asking for any collateral or guarantor.

How many days does Navi take for a personal loan to be sanctioned?

Once you apply for a loan on the Navi app, the team takes 10 minutes to approve and sanction the loan. The loan amount is disbursed on the same day.

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