Understanding the Key Factors to Look for When Choosing an NBFC for Personal Loan
The need for financial assistance, especially in the form of personal loans, has escalated over the years. Modern-day expenses and unforeseen circumstances often require individuals to seek additional financial resources.
This search can become quite daunting when traditional banking institutions impose stringent rules and regulations, creating hurdles for potential borrowers.
Non-Banking Financial Companies (NBFCs) can act as lifesavers in such scenarios. These organizations have significantly impacted the Indian financial landscape, offering a more flexible and customer-oriented approach towards lending.
The purpose of this article is to guide you through the vital factors to consider when choosing an NBFC personal loan and how to apply for a personal loan via an NBFC.
The Role of NBFCs in Personal Loan Disbursement
Non-Banking Financial Companies are vital financial intermediaries that significantly meet the country’s financial demands. NBFCs complement banks in reaching out to unbanked areas, providing financial services that contribute to national income and promote inclusive growth.
Over the years, NBFCs have gained popularity for personal loan disbursement, majorly due to their flexible policies and quicker processing time. They are known for their innovative product lines, customized services, hassle-free procedures, and fair interest rates, making them a preferred choice for borrowers.
Understanding Personal Loans from NBFCs
NBFCs offer different types of personal loans catering to various financial needs. These include personal loans, wedding loans, travel loans, home renovation loans, and more. The borrower can choose a loan type depending on their specific need.
To understand how to apply for a personal loan from an NBFC, you need to follow a straightforward process:
● Application: Fill out the application form online or at the branch.
● Document Submission: Submit necessary documents like identity proof, address proof, income proof, and so on.
● Verification: The NBFC will verify the documents and check your credit score.
● Loan Approval: The loan is approved and disbursed after successful verification.
Unlike traditional banks, NBFCs are more lenient with their credit score requirements and quicker in processing, making personal loans easily accessible.
Key Factors to Consider When Choosing an NBFC for Personal Loan
1. Interest Rates: The interest rate impacts the total cost of your loan. Look for an NBFC that offers competitive interest rates. Remember, the lower the interest rate, the lower the EMI and total repayment amount.
● Compare interest rates of various NBFCs
● Check if the rates are fixed or floating. Fixed rates remain constant while floating rates change according to market conditions.
2. Loan Approval and Disbursal Time: In emergencies, getting instant personal loans is crucial. Therefore, the NBFCs ability to quickly process and approve the loan can be a deciding factor.
● Research the average loan approval and disbursal time of the NBFCs
● Look for reviews and customer testimonials on their loan disbursal speed
3. Eligibility Criteria: Understanding how to apply for a personal loan includes meeting the lender’s eligibility criteria. Some NBFCs have flexible criteria, making it easier for more people to avail of loans.
● Check the eligibility criteria set by the NBFC
● Keep in mind that a good CIBIL score (above 700) can increase your chances of loan approval
4. Repayment Flexibility: A good NBFC will provide flexible repayment options, making it convenient for the borrower to repay the loan.
● Look for NBFCs that offer different repayment options
● Check if they offer any benefits or waivers on prepayment or foreclosure charges
5. Customer Service: Good customer service is crucial to address any queries or issues during the loan tenure.
● Check if the NBFC provides 24/7 customer service
● Look at reviews and ratings on their customer service
6. Transparency: Ensure the NBFC is transparent about all terms and conditions, charges, and fees related to the loan.
● Look for any hidden charges or fine print
● Ensure they provide complete information on interest rates, processing fees, prepayment charges, etc.
7. Online Presence and Digital Process: An NBFC with a strong online presence makes it easier to apply for a loan, check the loan status, and make repayments.
● Check if they have an online loan application process
● Look if they have a mobile app for easy access
Planning Your Repayment Strategy: Tips to Remember
While availing of instant personal loans from NBFCs, creating a robust repayment strategy is essential to manage your finances efficiently and prevent debt accumulation.
● Align Repayment with Income Cycle: Align your EMI dates with salary credit dates. This way, you can ensure the necessary funds are available for EMI payment.
● Maintain Sufficient Bank Balance: Always keep a buffer amount in your account over and above the EMI amount to prevent EMI bounce due to any unplanned expenses.
● Avoid Multiple Loans: Having multiple loans can strain your finances. Hence, it’s advisable to clear one loan before applying for another. Remember, a high debt-to-income ratio might affect your creditworthiness and ability to apply for a personal loan in the future.
Summing Up
In conclusion, while availing of instant personal loans from NBFCs can be a simpler process, it is essential to consider the above factors carefully to make an informed decision. Remember, a personal loan entails a financial commitment and requires proper due diligence.