Universities have been constantly increasing their tuition fees for a while and all the burden is coming upon the students and their families. Do you find it relatable? As the cost of higher education increases, more people search for good options to avail education loans. You might wonder whether banks are your only option for education loans? No. There are many NBFCs and private financing companies which have emerged in the past decade to offer you education loans.
Since their advent, these NBFCs have taken very less time to gain the trust of people. NBFCs offer education loans starting from zero interest rates and many other attractive schemes. This has helped them in gaining a lot of customer base in almost no time. Recently only, Eduvanz Financing Pvt. Ltd., a private financing company gained its NBFC license from RBI and also managed to get funds worth $2 million from social-impact investment firms like Unitus Ventures and Michal & Susan Dell Foundation. This serves as an evident example of their growing popularity.
Though NBFCs do not have any regulatory agency monitoring them, they are regulated by the Reserve Bank of India (RBI) itself. RBI monitors them regularly and keeps a strict vigilance. Recently in 2017, RBI issued some guidelines concerning outsourcing of services by NBFCs.
There are a lot of factors that play an inevitable role in determining which education loan provider is best suited for your needs. Here are some of the differences tabulated to help you determine which one suits you the best.
|Types of Courses offered||Banks provide education loan to a variety of graduate, post-graduate, diploma courses offered by top reputed universities/ institutes in India and Abroad.||NBFCs are comparatively relaxed on the types of courses offered. It offers education loan schemes to a variety of courses studied worldwide.|
|Loan Amount||The loan amount varies with each bank. Most Banks offer INR 10 Lacs for studies in India, and INR 20 Lacs for studies in Abroad||NBFCs do not put a cap on the loan amount. The loan sanctioned by NBFCs depends on the borrower’s requirement and the course he/ she enrolled for.|
|Security required||The security asked by banks varies according to the amount of loan sanctioned. Up to amount INR 4 Lacs: No security; Parents/ Guardian to be co-borrowers. Between amount INR 4 to 7. 50 Lacs: Third party guarantee required Above INR 7.50 Lacs: Collateral security equal to the amount of loan after providing a requisite margin.||Security asked by NBFCs is based on the loan amount and credit history of the borrower.|
|Loan Processing Time and Fees||Most of the banks are prompt and process the loan faster. Banks provide quick approval if the borrower meets all the guidelines. Processing Fee: Range between 0.5% to up to 2%. (Most of the Banks do not charge a processing fee)||NBFCs are also very quick in approving loans after the borrower meets all the guidelines. Processing Fee: Range between 1% to up to 2%.|
|Interest Subsidy by Government||Interest Subsidy schemes are offered by the government for the weaker sections of the society. The Interest Subsidy Schemes are applicable during the moratorium period.||NBFCs do not provide any Interest Subsidy Schemes.|
|Interest Rates||The banks calculate interest rates based on the current base rate of the bank. Education Loan interest rates range from 10% to 17% on average, depending on the bank.||NBFCs offer an interest rate on Education Loan as floating interest rates.|
|Moratorium/ Holiday Period||Moratorium Period/ holiday Period ranges from 6 months to 1 year.||Moratorium Period/ holiday Period ranges from 6 months to 1 year.|
|Repayment Period||Repayment to the banks can be done between 7 to 15 years. (Depends upon the bank) Repayment will start after the moratorium period as monthly installments after the borrower gets a job.||Repayments to the NBFCs can be done within 7 years. Repayment will start after the moratorium period as monthly installments after the borrower gets a job.|
|Expenses Covered||Education Loan offered by banks covers Tuition Fee, Hostel Fee, Lab Fee, Library Fee, Examination Fee, Cost of Books and Equipment’s Needed, Caution Deposit and other Miscellaneous Expenses.||NBFC’s Education Loan scheme covers 100% of the tuition fee and some other expenses like Hostel Fee, Lab Fee, Library Fee, Examination Fee, Travel Expense, Caution Deposit, Books and Equipment’s Needed, and other related expenses.|
|Documents required||Documents required by the bank are: Admission Letter, Loan, Application Form, 2 passport photographs, ID Proofs, Residence Proofs, Bank account statement for last six months, Income Tax Returns Statements, Proof of income, etc.||Documents required by NBFC’s: ID Proofs, Residence Proofs, Signature Proofs.|
|Concessions||0.5% concession is given to the girl child. 1% concession is given to the students applying for admission in top premier institutes in India and Abroad. (Depends upon the bank)||No Concession feature is available with NBFC’s.|
|Pre-Closure Charges||Mostly the Banks do not charge any pre-closure or pre-payment charges.||NBFC’s might charge pre-closure charge depending on the reason for closure.|
Since NBFCs are not regulated by any authority, their selection needs to be a careful process. Some of the popular NBFCs which you can look for are:
While Bajaj and Tata might be the only familiar names for you, the rest of them have also established a good reputation in the market. These NBFCs have been offering education loans to students for years and have very attractive schemes.