Fintech lending platforms are bridging the financial gap for Indian students


Fintech companies have become a tool for greater financial accessibility for the new India. For many young Indians and their families, especially from tier 2, 3 and 4 cities, having a viable option to finance their education is vital before committing to a higher cost education. Sometimes even the most promising students give up on their dreams or families end up pawning jewelry, ancestral land, emergency medical funds, etc. to enable the education of their children.

However, with modern fintech companies, this trend is gradually changing. There is a focused effort by many companies to create specific loan products aimed at helping aspiring young people gain access to quick and easy online loans, based solely on their academic potential and not their family assets.

Fintech loans offer convenient and fast disbursements to students

Sometimes low family income and lack of assets such as property etc. that can be pawned are enough deterrents for Indian applicants to discourage them from pursuing higher education. While there are several national and multinational banks that offer student loans, most require a large number of documents and some form of collateral against the loan. Banks find it difficult to make accurate assessments of a student’s potential earning capacity, so they continue to fund these loans with a conservative approach. The processing time of the request by banks is excessively slow, sometimes reaching months, compared to fintech companies that offer fast disbursements in less than 5-7 business days.

With the advent of the digital realm, these companies are investing heavily in making the entire process of applying for and obtaining a loan completely digitized. This means that people can now easily access the lending platform from their smartphones, without having to physically visit an office. With this notable effort to bridge the gap between credit needs and the availability of funds, many of these fintech giants have raised seed capital from big hedge funds and media attention for being the antithesis of traditional credit schemes in the country.

While banks typically finance only tuition fees and charge 8-15% interest, fintech players allow much more flexibility and use analytics-based technology and credit models to underwrite the loan. Some of the companies also go so far as to cover ancillary expenses such as the cost of educational devices, food, lodging, and health insurance, which are necessary but often treated as non-essential by conventional lenders.

Fintech companies have a constantly evolving relationship with customers.

India is today home to 17 fintech companies, which have achieved Unicorn status. Furthermore, the country’s alternative financial segments or digital investment market is projected to be worth $14.3 billion by 2025. With evolving technology coupled with a well-thought-out proactive approach to lending, fintech companies are today the companies faster and easier to manage. They eliminate queues, waiting times and all administrative congestion through their state-of-the-art hands-on approach.

In a contemporary loan method, students are not even required to provide securities in exchange for the sanctioned loan amount. New technology, data science and analytics are used to provide easy loans through an online application journey from start to finish and offer unsecured loans. This convenient loan was inconceivable before the arrival of these fintech giants, as most banks require a mandatory collateral against any money they eventually lend. Fintech companies are making these trips easier, keeping the needs and comfort of students at the forefront. Some companies have also come up with innovative credit cards for their customers, which can be used both internationally and domestically, and are part of an active loan account, rather than being a credit card in the strict sense.

The bottom line

In light of COVID-19 and war-induced economic imbalances, India’s fast-growing fintech sector is emerging today to serve a grand purpose. They are funding the education of many Indians, bridging the country’s pressing geographic and class divides. Fintech is the future of student loans in India and can act as a driving force in fostering educational mobility.



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Disclaimer

The opinions expressed above are those of the author.



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