Private finance or loans through private lenders have always been popular for borrowers who have issues getting loans from traditional banks due to compliance or credit rating issues. Despite the higher cost, they are also acceptable in society because of easy approval terms.
Today’s loan market runs completely on CIBIL scores of the borrowers. The borrower’s credit score plays a significant role in securing a loan from the banks. The higher the CIBIL score, the better the chances of getting a loan approval with good ROI.
So, many borrowers with low or poor CIBIL scores suffered from loan rejections by traditional bankers. Same issues with NPA account borrowers as their CIBIL scores go down drastically due to non-payment of the loans.
What’s the issue for NPA Accounts in getting funds from the traditional banks?
As per RBI guidelines, banks are restricted from funding an NPA account. Moreover, NPAs make a negative impact on their balance sheet as well as cash flows, which could be potential reasons for not extending any financial facility to NPA.
In the case of low CIBIL cases, banks & other financial institutions can have their own judgment on approving a loan. But, generally, they focus more on the clear or high credit score cases.
First, let’s understand -What is Private Finance?
Private finance refers to funding or loans provided by private lenders, investors, NBFCs (Non-Banking Financial Companies), or individuals instead of traditional banks. They offer more flexible and customer-centric loans, which can be utilised for multiple purposes.
Unlike banks, private lenders focus more on:
- Property value
- Business potential
- Repayment Potential
- Overall deal viability
How Private Finance helps NPA Accounts & Low CIBIL Borrowers
Private finance or lenders offer flexible loan options with easy approval terms that can be useful for NPA & low credit cases. They are suitable in the following ways:
Private Finance Helps in the Following Ways:
Closing NPA Accounts & Funding One-Time Settlement (OTS)
Private loans can be used to close an NPA account, as they do not follow the strict guidelines. So, they can fund NPA or OTS directly without the complexity of the policies. These funds are fast; borrowers can save their properties from the legal actions of the bank or auction proceedings.
Funding a Low CIBIL Case
These funds are available for clients with a low credit rating. One can utilise funds for paying the previous loans’ overdues or towards the working capital requirements. It will be helpful in business expansion or making an urgent payment to the vendor.
Credit Revival Finance
Borrowers can use this funding for clearing outstanding dues of stressed loans. That will help make their accounts standard & increase their credit ratings. This will help in securing loans from the bank in the future.
Advantages of Private Finance
- Quick loan approval
- Minimum documentation
- Loan to close NPA account & One-Time Settlement (OTS)
- Loans start from Rs.1 Crore
- Available all over India
- Working Capital Loans
- Flexible Repayment with Moratorium
- 50% of property valuation
It is Suitable for:
- NPA borrowers & Low Credit Cases
- Real Estate Developers & Builders
- Specialised funding for hotels & colleges
- Clients with running legal cases under DRT & NCLT
- Distressed Loans
Conclusion
Private funding could be a good source of finance for NPA accounts & raising funds, especially for borrowers having low CIBIL scores, facing problems in getting a loan from traditional banks. Despite the high cost, borrowers use it to recover from financial stress as it offers easy approval terms, fast process & flexible repayments.