{"id":874,"date":"2025-11-27T11:11:23","date_gmt":"2025-11-27T11:11:23","guid":{"rendered":"https:\/\/oolka.in\/blog\/?p=874"},"modified":"2025-11-27T11:15:30","modified_gmt":"2025-11-27T11:15:30","slug":"what-is-nbfc-loan","status":"publish","type":"post","link":"https:\/\/oolka.in\/blog\/what-is-nbfc-loan\/","title":{"rendered":"What Is an NBFC Loan and How Does It Differ from a Bank Loan in India"},"content":{"rendered":"\n<p>NBFCs, or Non-Banking Finance Companies, are private financial entities that work on similar banking policies as regulated banks. These organisations are approved under the Companies Act, 1951 to provide financial services but do not hold a banking license. Since they are permitted to lend, they may be considered to be on the same level as regulated banks. However, they are not banks. In this article, we discuss how NBFC loans are different from bank loans, the benefits and eligibility criteria for a loan, and some of the important loan terms for applicants to follow.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Understanding What an NBFC Loan Means<\/h2>\n\n\n\n<p>An NBFC loan or a private loan is provided by private financial entities called Non Banking Financial Companies. HDFC Credila, Avanse, Bajaj Finance, etc are some of the prominent, RBI-approved NBFCs operating in India. NBFCs are private institutions that function like banks but do not hold a banking license.&nbsp;<\/p>\n\n\n\n<p>The RBI has bifurcated NBFCs into different categories based on their operations. While NBFCs cannot accept demand deposits like banks, they are allowed to offer services such as:<\/p>\n\n\n\n<ul>\n<li>Personal and <a href=\"https:\/\/oolka.in\/blog\/instant-business-loan-approval-online-startup\/\">business loans<\/a>.<\/li>\n\n\n\n<li>Leasing and hire purchases.<\/li>\n\n\n\n<li>Asset financing<\/li>\n\n\n\n<li>Micro finance<\/li>\n\n\n\n<li>Investment advisory services.<\/li>\n<\/ul>\n\n\n\n<p><br>NBFCs offer personal loans, education loans, home loans, instant loans to those in need. For those who need gold loans (loans disbursed by pledging gold), there are specific NBFCs that offer them. One of the biggest advantages of NBFC loans is that individuals can avail of private loans without having to adhere to strict rules and regulations. While they are required to meet certain basic requirements like possessing legal, valid documents, applicants have flexibility when it comes to meeting other requirements such as salary, collateral, etc.<\/p>\n\n\n\n<p>Based on their product offerings, the RBI has classified the NBFCs into the following categories.<\/p>\n\n\n\n<ul>\n<li>NBFC &#8211; Investment and Credit Company<\/li>\n\n\n\n<li>Asset Finance Company (AFC)<\/li>\n\n\n\n<li>Infrastructure Finance Company<\/li>\n\n\n\n<li>Micro-Finance Institution<\/li>\n\n\n\n<li>Housing Finance Company<\/li>\n\n\n\n<li>Core Investment Company<\/li>\n<\/ul>\n\n\n\n<p>One of the major advantages of NBFC loans is that applicants do not have to adhere to extreme regulations to be deemed eligible for a loan. This is convenient, especially for those who do not have regular income sources, retirees, etc.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Major Loan Types Offered by NBFCs in India<\/h2>\n\n\n\n<p>All NBFCs offer different types of unsecured loans \u2013 from personal loans to housing and business loans. You name it, they offer it. Certain NBFCs offer specialised loans \u2013 like DHFL for housing loans while certain others, like HDFC Credila, offer all kinds of loans to those in need.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Personal Loan<\/h3>\n\n\n\n<p>All NBFCs offer personal loans at varying interest rates, depending on the applicant\u2019s requirement at the time of application. The repayment period is shorter for short-term loans such as quick loans, while it is longer for home loans, education loans, etc. at par with what regular banks offer.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Home Loan<\/h3>\n\n\n\n<p>NBFCs that exclusively give home loans are called housing finance companies. These institutions offer loans to different property owners for different purposes. The interest rate for NBFC housing loans is 7.35% to 9.95% per annum. These rates differ from NBFC to NBFC.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Education Loan<\/h3>\n\n\n\n<p>Most NBFCs offer education loans for individuals who need a quick disbursement to fund their higher education. Candidates of different profiles are offered different benefits. The typical <a href=\"https:\/\/oolka.in\/blog\/tds-on-interest-unsecured-loan-section-194a\/\">interest rate<\/a> varies between 9% to 14%.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Business Loan<\/h3>\n\n\n\n<p>Working capital loans to start businesses are provided by NBFCs in India. MSMEs. Traders, professionals, can apply for these loans.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How NBFC Loans Differ From Bank Loans In India?<\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Features<\/strong><\/td><td><strong>NBFCs<\/strong><\/td><td><strong>Regulated Government Banks<\/strong><\/td><\/tr><tr><td><strong>Loan Processing Speed<\/strong><\/td><td>Faster than regular banks.One Week for long term loans. 24 hours for quick personal loans.<\/td><td>More than a month<\/td><\/tr><tr><td><strong>Accessibility<\/strong><\/td><td>Better than normal banks because of franchise business framework.<\/td><td>Government banks are presented in remote areas, however they can be located far from residential areas, making it inconvenient for people to access the bank.<\/td><\/tr><tr><td><strong>Credit Score<\/strong><\/td><td>A high credit score is required. However, if that is not the case, then applicants can avail loan with lower scores for exceptional cases.<\/td><td>Certain benchmark credit score is necessary to be eligible for a government bank loan.&nbsp;<\/td><\/tr><tr><td><strong>Secured Or Unsecured Loan<\/strong><\/td><td>NBFCs mostly offer unsecured loans as they are not allowed to accept long term deposits.<\/td><td>Both secured and unsecured loans are available with a generous moratorium period.<\/td><\/tr><tr><td><strong>Interest Rates<\/strong><\/td><td>Higher interest rates due to high-risk candidate profiles.<\/td><td>Nominal interest rates that vary according to repo rates released by government regulatory bodies from time to time.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">How Credit Score Matters While Applying For NBFC Loans?<\/h2>\n\n\n\n<p>An individual\u2019s <a href=\"https:\/\/oolka.in\/blog\/how-to-improve-credit-score-using-ai\/\">credit score<\/a> is one of the most important deciding factors for an NBFC loan. NBFCs are known to offer flexible repayment options and quick approvals provided applicants have a good credit history. Ensure your credit score is not less than <a href=\"https:\/\/oolka.in\/blog\/improve-cibil-score-600-to-750\/\">750 <\/a>to be considered for NBFC loans.<\/p>\n\n\n\n<p>In today\u2019s era which is dominated by the AI revolution, credit scoring algorithms not only provide detailed reports which are easy to analyse and recognise patterns but also actionable insights for users to improve their credit score.<\/p>\n\n\n\n<p>There are numerous tools available in the market that can help new entrants to figure out their credit journey and build a strong profile to prove their creditworthiness, while existing users can install tools like Oolka to strengthen their credit profile and build credibility.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How NBFC Loans Are Beneficial?<\/h2>\n\n\n\n<p>NBFCs are private entities whose loan lending policies are crafted individually. One of the biggest advantages of an NBFC loan is that these come with flexible repayment options and a higher loan amount cap for eligible borrowers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Quick Disbursement &amp; Processing Time<\/h3>\n\n\n\n<p>The borrowing policies of NBFCs are not stringent, meaning these institutions conduct an individual\u2019s background check faster in order to disburse the sanctioned loan amount faster. So, while government-run banks take months to approve and disburse loans, NBFCs process the same within short period of time.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Flexible Repayment Policies<\/h3>\n\n\n\n<p>NBFCs allow borrowers to repay loans within a permissible period which lasts from a few months to a year. This allows an average borrower time to collect enough funds for repayment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Quick Reach and Easy Availability<\/h3>\n\n\n\n<p>NBFCs have a more granular reach within the country. Hence, people from remote areas within the country prefer borrowing from credible NBFCs that have better reach and are credible. In addition, individuals have the liberty to apply for loans and get their disbursement within a week\u2019s time, as compared to regulated banks.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Less Legal Hassles<\/h3>\n\n\n\n<p>As NBFCs only process <a href=\"https:\/\/oolka.in\/blog\/secured-vs-unsecured-loan-differences\/\">unsecured loans<\/a>, there is no need for them to inspect and confirm the authenticity of pledged collateral. This fastens the processing time significantly, allowing applicants to access their approved loan amounts faster.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Eligibility and Documents Required for NBFC Loans<\/h2>\n\n\n\n<p>The eligibility requirements of NBFCs are simple and easy to follow.&nbsp;<\/p>\n\n\n\n<ul>\n<li>The applicant must be 18 years and above.<\/li>\n\n\n\n<li>They must have a source of income. Those who do not possess an income source are also allowed to borrow loan based on a good, well-to-do co-applicant\u2019s profile.\u00a0<\/li>\n\n\n\n<li>Applicants must possess legal identification documents such as valid Aadhar card and PAN card for internal use.<\/li>\n\n\n\n<li>Applicants must have a credit score of 750 and above to get discounted interest rates and higher sanctioned loans.<\/li>\n<\/ul>\n\n\n\n<p><strong>Documents Required For NBFC Loans<\/strong><\/p>\n\n\n\n<ul>\n<li>Valid identity proof and address proof like Aadhar card, <a href=\"https:\/\/oolka.in\/blog\/pan-card-cibil-check-access-cibil-score\/\">PAN card<\/a> or passport.<\/li>\n\n\n\n<li>Duly filled loan application form<\/li>\n\n\n\n<li>A certain number of passport sized photographs.<\/li>\n\n\n\n<li>Income proof: This is generally the last 3-6 months\u2019 salary slips.<\/li>\n\n\n\n<li>Proof of employment: This document is provided by the applicant\u2019s employer, vouching that the concerned person is their employee.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>NBFCs are an excellent way of obtaining short term loans. If you are looking to borrow loans that can help you with major expenses such as buying a house or funding higher education, NBFCs have flexible loan schemes that can suit your requirements. As their <a href=\"https:\/\/oolka.in\/\">repayment <\/a>policies are crafted keeping a certain audience segment, it is possible to obtain a loan without having to complete a lot of formalities. This is can be a game changer for a lot of people who are looking for quick monetary solutions. However, one must remember that NBFCs majorly operate in the remotest of places for the convenience of their public over there.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">FAQs<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Do NBFCs Look At Credit Score?<\/h3>\n\n\n\n<p>Yes, they do. Higher the credit score, greater the benefits. However, NBFCs are not stringent about CIBIL scores. Hence, even if your CIBIL score is on the lower side, it can be rectified.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">If I Have A Low CIBIL\/Credit Score, Do I Get An NBFC Loan?<\/h3>\n\n\n\n<p>Individuals with Credit scores lower than 400 may find it difficult to secure NBFC loans. However, using AI-powered credit scoring tools like Oolka can save your profile from sinking down further.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What Is The Moratorium On an NBFC Loan?<\/h3>\n\n\n\n<p>While NBFCs are not keen on allowing moratoriums, they make exceptions based on individual profiles. Applicants belonging to lesser privileged backgrounds, or those with less income are allowed to avail longer moratorium on long term loans. For short term loans, NBFCs do not grant long moratorium periods.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>NBFCs, or Non-Banking Finance Companies, are private financial entities that work on similar banking policies as regulated banks. These organisations are approved under the Companies Act, 1951 to provide financial services but do not hold a banking license. Since they are permitted to lend, they may be considered to be on the same level as<\/p>\n","protected":false},"author":3,"featured_media":879,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[73,16],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is an NBFC Loan and How Does It Differ from a Bank Loan in India<\/title>\n<meta name=\"description\" content=\"Learn what is an NBFC loan and how it differs from a bank loan in India. Compare interest rates, eligibility, approval time, and benefits. 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