by Kavita Gusain
For many first-generation college students in India, the dream of higher education often comes with the challenge. While traditional banks have long been the go-to for education loans, Non-Banking Financial Companies (NBFCs) are emerging as a vital support system, especially for students who may lack the credit history, collateral, or financial backing typically required by banks.
What Are NBFCs and Why Do They Matter?
NBFCs are financial institutions that provide banking services without meeting the legal definition of a bank. They are regulated by the Reserve Bank of India but have more flexibility in their lending criteria and processes. This flexibility allows them to cater to a broader range of students, particularly first-generation college aspirants.
Key Features of NBFC Education Loans
NBFCs have tailored their education loan products to address the unique challenges faced by first-generation students:
- NBFC loans usually cover all major educational expenses, ensuring students aren’t burdened by unexpected costs.
- Many NBFCs provide flexible repayment options, including a grace period after graduation to help students become financially stable before starting repayments.
- Numerous NBFCs offer collateral-free loans up to a certain amount, making them accessible to students without significant family assets.
- The application process with NBFCs is often simpler and faster, allowing students to obtain funds quickly with minimal paperwork.
How NBFCs Empower First-Generation Students?
First-generation college students basically can have limited family exposure to banking systems, lack of collateral, and the need for urgent funding, traditional financing options often fall short.
- NBFCs bridge the gap for first-generation students by supporting those with limited banking experience, no collateral, and urgent funding needs.
- They enhance financial literacy by providing personalized guidance on loan processes, eligibility, and repayment options.
- NBFCs make higher education more attainable by offering loans without the need for collateral or strong credit histories.
- With quick processing and adaptable loan terms, NBFCs help students seize time-sensitive admission opportunities.
Notable NBFCs Supporting Education Loans
Choosing the right education loan provider is crucial for students planning to fund their higher studies. This has details on most notable NBFCs to help you make an informed decision.
- Propelld: Propelld provides unsecured loans up to ₹10 lakh for Indian courses and up to ₹50 lakh for select programs, covering all major education-related expenses without collateral.
- Avanse: Avanse provides collateral-free loans up to ₹75 lakh, with interest rates starting at 11%, covering tuition, living costs, travel, and exam fees.
- InCred: InCred grants unsecured loans up to ₹60 lakh with interest rates between 11% and 15%, financing tuition, living expenses, books, travel, and exam fees without collateral.
- HDFC Credila: HDFC Credila offers unsecured loans up to ₹75 lakh with competitive rates, covering tuition, living expenses, books, travel, and exam fees, without requiring collateral for eligible applicants.
For many first-generation college students, arranging collateral can be a major hurdle. Propelld makes higher education more accessible by offering an Education Loan without Collateral for Students, helping them pursue their goals with fewer financial barriers.
NBFCs V/s Traditional Banks
Non-Banking Financial Companies (NBFCs) and traditional banks both play significant roles, but they differ in their approach, speed, and flexibility.
| Feature | NBFCs | Traditional Banks |
|---|---|---|
| Collateral Requirement | Often collateral-free up to a limit | Collateral usually required |
| Processing Time | Fast, minimal paperwork | Slower, more documentation |
| Flexibility | High (repayment, eligibility, etc.) | More rigid |
| Interest Rates | Slightly higher (10–17% per annum) | Lower, but stricter criteria |
| Coverage | Tuition, fees, living, travel, etc. | Similar, but may be less flexible |
Points to Consider Before Applying
Interest Rates: NBFCs may charge slightly higher interest rates due to the risk profile of borrowers, but the ease of access and flexibility often outweigh this for first-generation students.
Loan Amount: Depending on the NBFC and the student’s profile, loan amounts can range from ₹4 lakhs to ₹40 lakhs or more.
Repayment Terms: Most NBFCs offer 5–10 years for repayment, with moratorium periods during the course and job search.
Eligibility: Academic performance, course reputation, and employability prospects play a significant role in loan approval.
You might also want to check out the RBI Guidelines on Education Loans.
NBFCs are playing a transformative role in democratizing access to higher education in India. By offering flexible, accessible, and student-friendly loans, they empower first-generation college students to pursue their academic dreams without being held back by financial constraints. As more NBFCs innovate and expand their offerings, the path to higher education is becoming smoother and more inclusive for all.