When it comes to funding your education dreams, should you trust your neighbourhood bank or look to a fast-growing NBFC? While both serve the same core purpose, their offerings differ, especially in areas like speed, flexibility and education loan without collateral options. For many families, the decision often comes down to a trusted local bank or a newer, more flexible NBFC. Both have their pros and their cons. While banks bring legacy and stability, NBFCs offer speed and customisation. Let’s break down who really delivers when it matters most.
NBFC (Non-Banking Financial Company)?
An NBFC( Non-Banking Financial Company) is a financial institution that offers many of the same services as a bank, like giving loans or managing investments, but it is not a bank. While NBFCs are also regulated by the RBI, they are not allowed to offer certain banking services. For example, they cannot accept savings deposits from the public or issue cheque books.
NBFCs like Propelld are known for being more flexible and quicker in approving loans. Many students, entrepreneurs, and small business owners turn to NBFCs because their loan process is simpler, and they often don’t require traditional collateral or a long credit history.They have become especially popular for offering Education loans Without Collateral, which helps students who may not have property or security to pledge.
Local Bank
A Local Bank is a type of bank that operates mainly within a specific region, city or district. These banks are part of India’s formal banking system and are strictly regulated by the Reserve Bank of India (RBI). Their main job is to provide basic banking services like accepting deposits and giving loans to individuals, small businesses, and farmers in their area.
Local banks include cooperative banks and regional rural banks (RRBs). These banks are allowed to accept savings and current deposits, issue cheque books, and offer services like fixed deposits, mobile banking, and small loans. They play a very important role in supporting the financial needs of communities that may not have access to large commercial banks. For example, farmers or small shop owners in rural areas often rely on local banks for crop loans or working capital.
Feature | Local Banks | NBFCs |
Interest Rates | Lower (8%–10%) | Higher (11%–15%), but flexible |
Collateral Requirement | Needed for loans above ₹7.5 lakhs | Many offer education loan without collateral even up to ₹20–25 lakhs |
Loan Processing Time | 7–15 business days | Fast approval (2–5 days) |
Repayment Flexibility | Limited | Customizable EMI and moratorium options |
Eligibility Criteria | Stricter | Based on future potential, institute ranking |
Courses Covered | Limited to NAAC/AICTE-approved institutions | Covers private colleges, overseas, MBBS, skill-based |
Customer Experience | Traditional, paper-heavy | Digital-first, hassle-free |
Despite the rise of NBFCs, local banks continue to be popular for a few key reasons:
Lower Interest Rates
Banks often provide subsidized rates to students of premier institutions like IITs, IIMs, and AIIMS, making them attractive to academically strong candidates.
Wider Network
Their presence across rural and semi-urban areas makes them accessible to families who prefer in-person support. However, most local banks require collateral for higher loan amounts, which becomes a difficulty for middle-income families.
Slower Processing Times: The loan approval and disbursement process in banks can be time-consuming, ranging from 20-45 days due to multiple layers of approval and thorough verification. This can be a significant hurdle for students with tight admission deadlines.
Collateral Requirements: For loans above a certain limit (e.g. ₹7.5 lakhs), banks require collateral, which can be a challenge for many students and their families.
Less Flexibility in Course/University Coverage: While evolving, some banks may have a more limited list of approved courses or institutions
NBFCs are revolutionizing the education loan space by offering fast, flexible, and often collateral-free financial solutions.
Education Loan Without Collateral: This is one of the biggest advantages NBFCs provide. For students enrolling in expensive private colleges or international universities, getting an education loan without collateral of ₹15–25 lakhs is now possible, something local banks usually avoid. This is particularly helpful for students pursuing MBBS, MBA, or overseas education, where fees often exceed ₹10 lakhs.
Fast-Track Approvals: NBFCs like Propelld understand the urgency during admission seasons. With minimal paperwork and digital processing, students can get loan approval within 48 hours.
Flexible Repayment Plans: Unlike banks, NBFCs allow tailored EMI options, like interest-only EMIs during the study period or step-up repayment after placement.
Do refer Key Insights of NBFCs from RBI to know more about NBFCs, straight from RBI.
Higher Interest Rates: Generally, NBFCs charge higher interest rates compared to public sector banks. Rates can range from 10.75% to 16% or more, depending on the loan profile, collateral (if any), and the borrower's creditworthiness.
Higher Processing Fees: NBFCs typically levy higher processing fees, often ranging from 0.5% to 2% of the loan amount, which adds to the overall cost.
Co-applicant Requirement: Even for collateral-free loans, a co-applicant with a stable income and good credit history is almost always required.
For students looking for innovative, flexible, and transparent education loan solutions, Propelld has emerged as a trusted NBFC partner. With a student-first approach, Propelld ensures that financing never becomes a roadblock to your academic journey.
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