Why NBFC Personal Loans Are Beating Bank Offers

Are banks still your first choice for personal loans? Maybe not anymore. The world of personal finance in India is shifting fast. In 2025, borrowers will choose NBFCs over banks for personal loans, not by mistake. 

They want quick money, flexible plans, and fewer questions asked. A recent figure shows NBFCs are leading the loan book growth with 17% growth in the last fiscal.

Why are NBFCs Winning the Personal Loan Race?

Borrowers today are different. They’re younger, busier, and want control. NBFCs saw that. They dropped the lengthy paperwork, added easy apps, and made approval fast. While banks still ask for the usual stack of documents and longer wait, NBFCs give you money in just hours.

Let’s break this shift using a human lens and examples.

NBFCs Speak the Language of the Borrower

Banks were once the only doors open. Today, NBFCs speak to the salaried, the self-employed, and even the gig worker. They ask simple questions. They digitally process your PAN, Aadhaar, and account history, no longer queues.

NBFCs like Bajaj Finserv, Tata Capital, and PaySense approve loans based on alternate credit scores, not just CIBIL. This opens doors for more Indians.

Loan Approval Time Comparison

Also Read -  Most Borrowers Are Choosing NBFCs
 

This faster process wins urban and semi-urban users. Especially the ones earning ₹25,000 to ₹50,000 per month. They don’t have time to chase loan officers. They want cash quickly for weddings, hospitals, travel or emergencies.

NBFCs even allow top-ups without new paperwork. You borrow ₹1,00,000 and repay half. You can apply again for more without starting over. Banks? They’ll begin again.

Custom Offers That Understand Your Life

NBFCs work like Netflix. They personalise. You’re a freelancer with irregular income? NBFCs look at your bank credits, not your salary slip. You’re a salaried person with a past EMI bounce? NBFCs offer lower amounts, not rejection.

Compare that with banks. They stick to age-old checks. They want stable jobs and long IT returns. Even if you earn ₹75,000 monthly, missing one EMI could deny you a fresh loan.

Loan Feature Differences

One report even said that 60% of NBFC borrowers are under 35. That shows youth are driving this trend.

Now, let’s understand this with an Indian example:

You need ₹2,00,000 for a home renovation. You apply:

• At a bank, they ask for the last 3 ITRs, salary slips, and a 3-month statement. Takes a week.
• At an NBFC, they ask for PAN + Aadhaar + the bank SMS for the last 6 months. Loan approved same day. Money in your account the next morning.

Which would you choose?

Smaller Ticket Sizes and Easy Top-Ups

NBFCs lend from ₹5,000 to ₹10,00,000. Banks avoid smaller ticket loans under ₹50,000. NBFCs, however, built their tech to manage even ₹10,000 loans profitably.

Read More -  NBFCs No Longer ‘Shadow Banks

This means someone with ₹18,000 salary in Tier 3 city can get a ₹25,000 emergency loan. That was never possible before.

Also, NBFCs allow flexible EMI options. Pay ₹3,000 per month for 6 months. No need to stretch.

Example EMI Table for ₹1,00,000 Loan

Yes, NBFCs may charge slightly more. But that’s the cost of speed and access. Borrowers who need fast approvals are okay paying ₹200-₹300 extra in EMI.

Also, many NBFCs offer step-up EMIs. Your EMI grows as your income grows. Banks mostly have fixed EMIs.

India’s Credit Landscape is Changing

NBFCs now cover 35% of personal loan disbursements, which is huge. Five years ago, it was under 15%.

Why? India has 15 crore self-employed people. Many of them have never had access to banks. NBFCs have stepped in with soft checks and faster approvals.

Comparison: Bank vs NBFC Share in Personal Loans (FY23-FY25)

*Estimated based on FY25 trends

And this growth is not limited to metros. NBFCs are going deep into Bharat. They use mobile apps in Hindi, Marathi, Bengali and offer support on WhatsApp. Banks don’t have that reach or agility.

Also, many Indians now prefer NBFCs for better privacy. There is no branch visit, no long chat with bank staff. Just fill out the form on your mobile, get your OTP, upload a selfie, and you're done.

People Want Loans that Work Like UPI

UPI changed how we pay. NBFCs are changing how we borrow.

• Real-time approval
• EMI calculator in the app
• Auto debit from the account
• Pay early and get cashback

NBFCs are building financial tools like Amazon: friendly, fast, and easy. They don’t shame borrowers; they support them with credit coach tools. Many even share credit score tips.

Conlusion

In 2025, it will be quite obvious why more Indians are choosing NBFCs over traditional banks. People today want quick cash, short waiting times, and a system that suits their fast lifestyle. NBFCs give exactly that. 

While banks may still work well for very large loans, they come with more rules and slow processes. On the other hand, for smaller amounts like ₹50,000 to ₹5,00,000, NBFCs are giving easy options. 

FAQs

1. Is taking a loan from an NBFC in 2025 safe?
Yes, if the NBFC is registered with RBI and follows RBI norms. Always check their registration number before applying.

2. Why are NBFC interest rates higher than banks?
NBFCs take on more risk by lending to those with limited credit history. That’s why their rates are sometimes 1-3% higher.

3. Can I get a loan from an NBFC with low CIBIL score?
Yes, many NBFCs accept low scores. They also approve bank SMS, utility payments, and salary credits.

4. What documents do NBFCs ask for?
Usually, it's just Aadhaar, PAN, and a bank statement. Few ask for salary slips if the amount is above ₹5,00,000.

5. Do NBFCs charge hidden fees?
Most NBFCs show the full cost in their loan agreement. Always read the terms. Look for processing fees, prepayment charges, and GST.