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Personal Loan

NBFC vs bank personal loans: Which one should you choose?

Key Takeaways

  • Both NBFCs and banks offer personal loans, but they differ in terms of regulations from RBI, interest rates, and approval processes.
  • Choosing between the two depends on your financial situation, credit score, and urgency of funds.
  • IDFC FIRST Bank’s FIRSTmoney smart personal loan combines the best of both worlds with quick approvals, competitive interest rates, and flexible tenure options.
17 Feb 2025 by Team FinFIRST
NBFC vs Bank: Which is Better for Personal Loan
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When considering a personal loan, one of the most common questions is whether to opt for a bank loan or an NBFC personal loan. Both financial institutions cater to borrowers, but they differ in eligibility criteria, interest rates, loan processing time, and flexibility. While banks follow stricter regulations, NBFCs are known for quicker approvals and more relaxed norms.

Choosing between the two depends on your financial preferences and borrowing needs. Understanding these differences will help you make an informed decision. In this article, we explore the differences and why FIRSTmoney is an ideal personal loan choice for you, offering the best of both worlds.

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What is an NBFC?
 

A Non-Banking Financial Company (NBFC) is a financial institution that offers banking services like loans and credit facilities, except for traditional banking services such as accepting demand deposits. Unlike banks, NBFCs operate under the Companies Act, 1956 and are regulated by the Reserve Bank of India (RBI).

Features of NBFCs:
 

  • Provides loans, advances, and credit facilities similar to banks.
  • Do not accept demand deposits like savings or current accounts.
  • Their regulations are less stringent than banks, making them more flexible in approving loans.

What services does an NBFC offer?
 

NBFCs primarily focus on lending, offering financial services like:

  • Personal loans (NBFC personal loans are known for faster disbursals).
  • Vehicle loans for purchasing cars, bikes, or commercial vehicles.
  • Home loans for property purchases.

Choosing between a bank and an NBFC for a personal loan depends on your financial priorities — whether it’s quick approvals, lower interest rates, or flexible repayment options.

How is an NBFC different from a bank?
 

While both banks and NBFCs provide personal loans, they differ in several key areas:

  • Loan amount flexibility: Based on customer’s credit score, banks usually offer higher loan amount compared to NBFCs.
  • Loan application: With digitisation, banks and NBFCs both offer easy online application; however, the eligibility and approval process may vary.
  • Charges and fees: Typically, banks levy lower interest rates and related fees compared to NBFCs 

·      

Key differences between NBFCs and banks
 

Feature

NBFC personal loan

Bank personal loan

Regulatory authority

RBI

RBI (Fully regulated)

Processing time

Faster approvals

Can be lengthy due to documentation

Interest rates

High

Competitive

Eligibility criteria

Flexible

Rigid

Loan tenure

Can be customised

Predefined options

Loan amount

May offer smaller amounts

Additional loan offer

 

Which one should you choose?
 

Both NBFCs and banks are available when you have a good credit score. However, there are certain conditions where you can choose one or the other based on the convenience.

  • Your urgency: Need instant cash? NBFCs offer quicker approvals.
  • Credit score: If your score is slightly low, NBFCs may still approve your loan.
  • Interest rates: If you qualify for lower rates, banks may be a better option.
  • Loan flexibility: If you need customised repayment options, NBFCs offer better choices.


Why is FIRSTmoney smart personal loan an ideal choice?
 

Instead of an NBFC loan or a regular bank loan, FIRSTmoney smart personal loan from IDFC FIRST Bank provides a balanced solution, offering the best of both worlds:

  • Quick online application process with instant approvals.
  • Competitive interest rates starting from 10.70% p.a.
  • Zero foreclosure charges, allowing you to close your loan early without penalties.
  • Flexible repayment tenure from 9 to 60 months.
  • Higher loan amounts up to ₹10 lakhs, catering to various financial needs.
  • Completely paperless – you only need to display your physical PAN card during the video KYC process.


Conclusion
 

Both banks and NBFCs offer personal loans, but your decision should be based on your financial needs, urgency, and credit profile. If you are looking for fast approvals, minimal paperwork, and flexible repayment options, then IDFC FIRST Bank’s FIRSTmoney smart personal loan is the perfect solution for you.

So, whether you need funds for an emergency, travel, or personal expenses, FIRSTmoney offers the ideal balance of quick disbursal and affordability. Apply today and meet your financial needs with ease!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank 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 mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

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