NBFC vs bank personal loan: what is different for the borrower

A personal loan from a bank usually costs less but requires a high credit score and takes days to approve. A loan from an NBFC gets approved in minutes and accepts lower scores. Both lenders are regulated by the RBI. Read how interest rates, fees and approval times compare.

By Qrates research desk · 2026-10-27

A personal loan from a bank usually costs less but requires a high credit score and takes days to approve. A loan from a Non Banking Financial Company (NBFC) gets approved in minutes and accepts lower scores. You pay higher interest rates for this speed, but both types of lenders are regulated by the Reserve Bank of India.

Quick answer: NBFC vs bank personal loan

Feature	Bank personal loan	NBFC personal loan
Interest rate	Usually lower	Usually higher
CIBIL score	Requires a high score	Accepts lower scores
Approval time	Takes a few days	Approved in minutes
Regulator	Reserve Bank of India	Reserve Bank of India

What is the difference between a bank and an NBFC?

What is a bank personal loan?

A bank holds your savings deposits and lends money to borrowers. You borrow money directly from an institution that is allowed to hold public funds. Both banks and NBFCs are regulated by the Reserve Bank of India (loantap.in).

What is an NBFC personal loan?

An NBFC cannot open savings accounts for the public (adityabirlacapital.com). It holds a specific licence to lend money. Most digital loan apps that offer instant cash are NBFCs or partner with an NBFC to give you the loan.

How interest rates and costs compare

Interest rate calculation

Both banks and NBFCs use the reducing balance method to calculate interest (tatacapital.com). This means you only pay interest on the remaining loan amount.

Take a ₹1,00,000 unsecured loan over two years. A bank might charge 11 percent interest, making your total interest ₹11,858. An NBFC might charge 18 percent interest on the same loan, taking your total interest to ₹19,818.

Processing fees and prepayment charges

Lenders deduct a processing fee and an 18 percent GST before sending you the money (iifl.com). This means an approved ₹1,00,000 loan will result in less than ₹1,00,000 hitting your bank account.

Prepayment charges apply if you want to close the loan early. NBFCs often charge higher prepayment penalties to recover the interest they lose when you pay off the debt ahead of time.

Approval speed and CIBIL score requirements

Bank vs NBFC loan approval time

Banks take a few days to verify your documents and approve a loan. They manually check your income and credit history. NBFCs use automated systems to check your profile and approve loans in minutes.

NBFC loan for low CIBIL score

Banks typically require a CIBIL score of 700 or higher for a personal loan (financebuddha.com). NBFCs often approve borrowers with a low CIBIL score or no credit history at all. They manage this higher risk by charging higher interest rates.

Is it safe to take a loan from an NBFC?

How to check if an NBFC is RBI registered

It is safe to borrow from an NBFC if it appears on the official RBI register. You can check the latest registration and phone permissions for any app in the Qrates lending apps directory.

You can also verify the licence yourself:

Go to the official RBI website.
Open the list of registered NBFCs.
Search for the company name listed at the bottom of the loan app.

To ensure your safety, learn how to check if a loan app is RBI registered and understand the RBI digital lending rules before applying. You can also compare money apps side by side to see which lenders have better reputations.

New RBI rules on loan recovery

The RBI strictly prohibits loan apps from accessing your phone contacts, call logs and media files (cybersigmacs.com). Recovery agents cannot call borrowers before 8 AM or after 7 PM under the RBI circular on Outsourcing of Financial Services (oquilia.com).

Common mistakes when taking a personal loan

Ignoring the processing fee when comparing the total cost of the loan.
Not checking the prepayment charges before signing the loan agreement.
Downloading an unregistered loan app that asks for permission to read your contacts and photos.

FAQs

NBFC se loan lena safe hai kya?

Yes, it is safe if the company has an active RBI licence. You can check the RBI website to confirm the licence number.

Which gives personal loan faster bank or NBFC?

NBFCs usually approve and disburse funds faster than banks. Many digital NBFCs approve loans in minutes using automated checks.

Can NBFC give loan without CIBIL score?

Yes, some NBFCs lend to new borrowers without a credit history. The interest rate on these loans will be higher to cover the risk.

The short version

Banks offer lower interest rates but require a CIBIL score of 700 or higher.
NBFCs approve loans faster and accept lower credit scores.
NBFCs charge higher interest rates and processing fees.
Both entities are regulated by the RBI and must follow strict recovery rules.

Sources

Disclaimer

Qrates is an information directory. It takes no commission from any company listed and does not recommend products. Figures are taken from the sources named and dated, and they change; check the company's own page before you decide. This is not investment, credit, insurance or tax advice for your situation. Borrow only from an RBI-regulated lender or its listed partner app.