Banks vs NBFCs: Which Is Better for a Personal Loan in 2025?

If you’re planning to take a personal loan in 2025, one of the first questions you’ll face is should I apply to a bank or an NBFC?

Both offer personal loans, but the experience, eligibility, and approval process can be very different. Understanding these differences can save you time, money, and unnecessary loan rejections.

Let’s break it down simply.

What Are Banks and NBFCs?

• Banks are regulated financial institutions that accept deposits and offer loans.

• NBFCs (Non-Banking Financial Companies) also provide loans but do not accept savings accounts or demand deposits like banks.

Both are regulated by the RBI, but their lending approach differs.

Personal Loan Approval Speed: Who Is Faster?

1. Banks

   1. Approval process is usually slower

   2. Requires detailed verification

   3. Multiple internal checks

   4. Average approval time: 3–7 working days

2. NBFCs

   1. Designed for quick approvals

   2. Digital-first processes

   3. Faster document verification

   4. Average approval time: Same day to 48 hours

✅ Winner: NBFCs

If you need urgent funds, NBFCs are generally quicker.

Interest Rates for Personal Loans: Who Is Cheaper?

1. Banks

   1. Offer lower interest rates for strong profiles

   2. Best rates for salaried individuals with high CIBIL scores

   3. Stable income and employer category matter

   4. Typical rates: Lower for prime borrowers

2. NBFCs

   1. Slightly higher interest rates

   2. More risk-based pricing

   3. Rates depend heavily on credit profile

   4. Typical rates: Higher than banks for most borrowers

✅ Winner: Banks

If you have a high CIBIL score and stable income, banks are more cost-effective.

Personal Loan Eligibility Flexibility: Who Is More Lenient?

1. Banks

   1. Strict eligibility criteria

   2. Higher minimum CIBIL score

   3. Fixed salary and employer requirements

   4. Difficult for: Low CIBIL borrowers, freelancers, self-employed professionals

2. NBFCs

   1. More flexible eligibility norms

   2. Accept lower CIBIL scores

   3. Better options for: Self-employed individuals, variable income earners, first-time borrowers

✅ Winner: NBFCs

If your profile is non-traditional, NBFCs are more accommodating.

Personal Loan Amount & Tenure Options

1. Banks

   1. Higher loan amounts

   2. Longer tenures available

   3. Conservative eligibility calculation

2. NBFCs

   1. Moderate loan amounts

   2. Flexible tenure structures

   3. EMI-friendly options

This is more profile-dependent than lender-dependent.

Documentation & Process

1. Banks

   1. More documentation

   2. Physical verification may be required

   3. Longer processing time

2. NBFCs

   1. Minimal paperwork

   2. Digital KYC and online approvals

   3. Faster disbursals

Who Should Choose a Bank?

Choose a bank if:

• Your CIBIL score is 750+

• You have stable salaried income

• You want the lowest possible interest rate

• You are not in a hurry

Who Should Choose an NBFC?

Choose an NBFC if:

• Your CIBIL score is below 750

• You need quick approval or urgent funds

• You are self-employed or have variable income

• You’ve faced bank rejections before

The Smart Approach: Don’t Choose Alone

Many borrowers make the mistake of applying randomly to multiple lenders, which:

• Lowers CIBIL score

• Increases rejection risk

At One Day Finance, we evaluate your profile first and check eligibility (which does not harm your CIBIL score) and then:

1. Match you with the right bank or NBFC

2. Improve approval chances

3. Avoid unnecessary credit enquiries

4. Help you get the best possible rate

Final Thoughts

There’s no single “best” option for everyone in 2025. Banks offer better rates. NBFCs offer better flexibility.

The right choice depends on your income, credit score, urgency, and loan purpose. When chosen wisely, both can be excellent options. Need help deciding? Let One Day Finance guide you to the right lender; contact now.