The credit share of NBFCs has been on the rise for the last few years. Even though the previous two years have been tough for them, they have played the perfect foil to the banking system and have even become the first preference for many people.
Given the diverse approach, it may be difficult for you to decide whether to opt for a bank or an NBFC while availing a loan. They have their sets of advantages and disadvantages pertaining to their banking and non-banking facilities on offer.
This article helps you decide whether banks or NBFCs are the right partners when you need a two-wheeler loan.
While the Reserve Bank of India regulates both banks and NBFCs, the ruling acts vary. The Banking Regulation Act, 1949 rules the way former operates, and The Companies Act, 1956 rules the latter. It allows the NBFCs to be more lenient and offer more leeway to the customers.
Banks depend on RBI’s instructions, and they seldom have the option to go out of the way to make decisions.
The banks charge interest on loans depending on the RBI policy rates’ vagaries and the requisite market forces, whereas the NBFCs have a unique approach. The central bank does not decide for them. Instead, their percentages depend on their competition, and they use RPLR and other factors to set the most appropriate one.
“The average lending rate of interest of the NBFCs ranges from 11 percent to 13 percent ROI, depending upon the candidate profile, eligibility and other criteria which may vary from case to case,” says Amit Gainda, CEO, Avanse Financial Services.
Banks are more stringent about processing loans, such as checking creditworthiness, eligibility, and other complicated processes. They ensure that you have completed the paperwork and fulfill all the criteria to initiate the approval process.
Whereas NBFCs are far more accommodating and take it as an opportunity to impress the customers by offering them faster services. It is also because they have lesser norms to burden themselves and have more freedom to exercise.
Banks follow a stricter norm and usually show reluctance in disbursing loans to people with lower credit scores. As for personal and two-wheeler loans, if your CIBIL score is below 700, most banking facilities will shy away from approving a loan to you. Most banks are happier to discuss if your CIBIL exceeds 750.
But NBFCs have moved past it, and they even accommodate people with scores up to 600. They no longer use the stale mechanism but have taken a dynamic approach by bringing artificial intelligence (AI) and machine learning (ML) in the frame. It uses a sophisticated algorithm to determine if you can repay the loan in a hassle-free manner. After that, decide if they will pass the personal or two-wheeler loan or reject your proposal altogether.
Shriram City is India’s largest MSME and two-wheeler financier, and we specialize in curating tailor-made solutions for each of our clients. We ensure that the entire process is hassle-free, and you get up to 100 percent financing of the on-road price of your choice of vehicle and instant SME loan approval process to meet your working capital needs.
Not only that, but we also have a wide-spread network across the nation and partnership with the most renowned showrooms. We have a team of hard-working professionals dedicated to providing the best services at your disposal.
Here is why you should choose Shriram City Union Finance for your two-wheeler loan requirements –