Personal loans: If you are looking to raise a loan – the first logical thing for you to do is to choose the right financial institution. Those who are not aware there are different categories of institutions such as banks, NBFCs (non banking financial institutions), and fintech platforms.
What kind of deal you manage to pull off is partially incumbent upon the choice of financial institution. For instance, banks typically would charge a lower rate of interest whereas fintechs tend to charge a higher interest from borrowers.
If you are also unsure about choosing the right platform for loan, you could consider the following key points which we have listed here.
Banks Vs fintechs: Key points of difference
I. Rate of interest: As mentioned above, banks tend to charge slightly lower interest rates on loans they disburse in comparison to fintech platforms.
II. Hidden charges: Although any financial institution could levy some hidden charges — smaller fintech platforms are more likely to levy hidden charges. However, it varies from case to case basis.
III. Regulatory approvals are a must: Before choosing an institution, it is important to ensure that the platform you chose is part of an RBI approved NBFC. There have been cases in the past where fake apps were seen disbursing loans to desperate borrowers. So, it is vital to be careful about these things.
Notably, Google removed around 4,700 illegal loan apps from PlayStore in a period of two years ending Aug 2023. Read this for more details.
IV. Amount: Generally banks are a go-to place for borrowing large amounts such as ₹10 or ₹15 lakh, whereas smaller fintech platforms are chosen when the loan amount is tiny — say under ₹one lakh.
V. Time to process application: Another key difference between the two categories of institutions is that banks tend to approve an application within a day or two, whereas fintech platforms can be as quick as a few minutes or one hour.
To sum up, if you plan to borrow a large sum of money and you can afford to wait for a couple of days before receiving the money — you are recommended to knock on a bank’s door. On the other hand, if you need a small amount on an urgent basis, you are advised to explore the option of approaching a fintech platform. However, make sure to approach an RBI-approved platform only.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
