Why Personal Loan Interest Rates Differ Between Banks and NBFCs

When you apply for a loan, you might notice that personal loan interest rates vary significantly between banks and NBFCs (Non-Banking Financial Companies). But why does this happen? Understanding the reasons can help you choose the right lender for your needs.

1. Lending Criteria

Banks generally follow stricter eligibility checks compared to NBFCs. This can result in lower personal loan interest rates from banks for borrowers with excellent credit. NBFCs, being more flexible, might offer slightly higher rates but faster approvals.

2. Risk Appetite

NBFCs are usually more open to offering loans to self-employed individuals or those with low credit scores. In return, they often charge higher personal loan interest rates to cover the added risk.

3. Processing Time and Documentation

Banks have a longer approval process, while NBFCs offer faster disbursements—sometimes with minimal paperwork. This convenience often comes at the cost of slightly higher personal loan interest rates.

4. Market Strategy

Each institution has different target customers. Banks may offer lower personal loan interest rates to salaried professionals, while NBFCs target niche or underserved markets.

At Fundcera, we help you compare multiple banks and NBFCs to find the most affordable personal loan interest rate—with zero hassle and instant approval.

Final Thoughts

Both banks and NBFCs have pros and cons. The key is to compare personal loan interest rates, processing fees, and eligibility to find the right fit for your financial needs.