0

0

0

0

0

0

0

0

0

This article is more than 4 month old.

5 reasons why NBFCs are a better option than traditional banks for loans

Mini

The catalyzing effect of COVID-19 on the constantly evolving finance and economic ecosystem has paved a way for new financial institutions and NBFCs (Non-Banking Financial Companies) to offer convenient, hassle-free, and easy to borrow fintech solutions.

5 reasons why NBFCs are a better option than traditional banks for loans
The catalyzing effect of COVID-19 on the constantly evolving finance and economic ecosystem has paved a way for new financial institutions and NBFCs (Non-Banking Financial Companies) to offer convenient, hassle-free, and easy to borrow fintech solutions.
With their cutting-edge technology and futuristic methods, NBFCs are progressively replacing traditional banks.
Borrowers were only dependent on banks and certain government institutions before fintech players distinctively took over the market and established their prominence. This aspect of novelty is one of the significant reasons for borrowers to remain confused between NBFCs and traditional lenders from time to time.
So, here are 5 reasons that explain why a loan from NBFCs may be better off in comparison to the traditional banks, which may help borrowers decide and select the best way to go, according to their needs.
Here are a few points to explain why you should apply for a loan from NBFCs instead of traditional banks:
1. NBFC prioritize customers
Both banks and NBFCs are service-led industries, but when it comes to providing customer-centric services, NBFCs easily outrun banks. Most often than not, borrowers are worried about interest rates and hidden charges; and they often neglect the fact that interest rates can fluctuate as they are subject to market risks. NBFCs, including HFCs (Housing Finance Companies), are systematically evolving to provide handheld customer service. The borrowers can stay up to date about loan details, payment, and extra charges for using their accounts online.
2. Flexible eligibility criteria
Traditionally, banks have very stringent criteria for lending money, while NBFCs are far more lenient and flexible. For instance, a previously unbanked student based in tier-2 or 3 regions who do not have a credit history, might not be able to secure a loan from a bank since they usually require applicants to have a CIBIL score of over 750. This is where NBFCs come into the picture. NBFCs offset the strict criteria of banks by using innovative technologies.
With the help of AI (Artificial Intelligence), ML (Machine Learning) and other new-age fintech solutions, NBFCs are looking beyond credit history and taking a holistic approach for assessing the creditworthiness of an individual.
3. Hassle-free loan process
In comparison to the banks, the loan process with NBFCs is seamless. While a loan disbursal in the banks can take a few days to weeks, NBFCs can process an application within 24 hours of its approval. NBFCs are more flexible when it comes to loan approval as opposed to banks. The swift and time-saving process with NBFCs is beneficial, especially during unexpected crises such as medical emergencies where NBFCs are proving to be exceptionally helpful and sometimes even lifesaving.
4. Digital process
The new-age digital fintech world has little or no space for hard copies. Today, most NBFCs offer a completely online process through which the customers can borrow money by uploading information digitally and getting money transferred into their account without stepping outside. Whereas the banks still require hard copies and lengthy paperwork along with the physical presence of the borrower. The conventional methods of the banks are no longer convenient and are proving to be slower in a digitally powered world.
5. Lowers interest rates and payment fees
NBFCs are very competitive with interest rates than traditional banks. Yet, they offer lower interest rates than banks. Sometimes, a borrower may feel that NBFCs are charging high pre-payment and late-payment charges, but most banks also charge similar amounts.
Conclusion
According to reports, in a span of a decade, between 2005 to 2015, NBFCs credit in India went up to 10 to 13 percent. NBFCs credit share has since been on the rise and is expected to accelerate further owing to the prevailing COVID-19 situation, which caused financial misery to the citizens. Now that we have established that NBFCs may be a better option to take loans, remember it is crucial to choose the right fintech solution. Look beyond interest rates and processing fees, and try to do a thorough analysis of non-banking institutions from which you are borrowing money. Check the credibility of your lender and do a complete assessment before taking any final decision.
The author, Anil Pinapala is Founder and CEO at Vivifi India Finance. The views expressed are personal
Tags
next story