NBFCs Education Loan for Abroad Studies: [Expert Advice & Tips]

In the world of finance, Non-Banking Financial Corporations, or NBFCs, play a significant role as alternative financial service providers to traditional banks. Unlike banks, which primarily utilise customer deposits to fund their lending activities, NBFCs source their funds from a variety of investors, financial institutions, and banks, and then extend loans to customers. This key distinction, coupled with lighter regulations, often allows NBFC for education loan to offer greater flexibility to their clients. In this blog, we will explore deeper about NBFC bank education loan, with eligibility criteria, required documentation, advantages, disadvantages, and even situations where NBFCs shine as the perfect choice for education financing. So, read on!

What Are NBFCs?

Demystifying NBFCs: A Simpler Perspective

Non-Banking Financial Corporations, or NBFC education loans for abroad are like financial institutions but with a twist. While banks primarily use your deposited money to provide loans, NBFCs get their funds from various sources like investors, financial institutions, and even other banks. This difference gives NBFCs the freedom to be more flexible in their services, all thanks to lighter regulations. In simpler terms, NBFCs are a different kind of finance option that can offer unique financial solutions.

Differences Between NBFCs & Banks For Education Loans

Bank education loans offer lower interest rates, collateral requirements, slower processing but provide tax benefits. NBFC student loans offer higher ticket size, greater flexibility in eligibility and expenses covered, but charge higher interest rates. Here is a comparison table highlighting the key differences between NBFCs & Banks for education loans. 

List Of Top NBFCs For Abroad Education Loan

The following table gives a comparison of best NBFCs for education loans like HDFC Credila Vs. Avanse, HDFC Credila Vs. Auxilo and HDFC Credila Vs. InCred for you to plan which NBFCs to choose from while taking an education loan. 

Here is a table comparing the key parameters of top NBFCs providing education loans:

Note: Repayment during studies for all the NBFCs mentioned above is simple interest or partial simple interest. 

Features of NBFCs Abroad Education Loan 

Education loans from NBFCs are tailored financial solutions for students aspiring to pursue higher studies abroad. These loans are typically unsecured, encompassing various expenses such as tuition fees, living costs, travel expenditures, and other study-related outlays. NBFCs providing education loans for international studies often have specific eligibility criteria, which include evaluating academic performance, the chosen course, and the reputation of the foreign educational institution.

Interest rates, repayment terms, and loan amounts can vary across different NBFCs. These variations stem from several factors that NBFCs consider before approving loans. The primary factors include:

1. Applicant’s Academic Details: This involves assessing academic records, including 10th and 12th-grade marks, undergraduate degree and certificate, and standardised test scores.
2. Co-applicant’s Income Profile: Verification of the co-applicant’s income, supported by documents such as income tax returns, salary slips, and credit scores.
3. Choice of Target Country and Course: The destination for higher education and the chosen course of study also impact the loan approval process.

NBFCs Loan Without Collateral

NBFCs provide education loans without requiring any collateral or security from students. This makes them an attractive financing option for those who cannot offer assets to banks as security for education loans. The key aspects of collateral-free NBFC education loans are:

• No Mortgaging of Property: Students do not have to mortgage property or keep other fixed assets as security to avail the loan.
• Flexible Guarantor Criteria: NBFCs allow flexible guarantor options, which can include siblings, relatives or family friends if parents/guardians do not meet the eligibility criteria.
• Higher Risk Pricing: To offset the risk of unsecured lending, NBFCs price these loans higher by charging interest rates between 11% to 14% per annum.
• Focus on Employability Potential: NBFCs analyse critical factors like graduation prospects, reputation of the institute and course specialisation to gauge income potential rather than hard assets.
• Customised Loan Products: Specific products catering to overseas education like payment flexibility for modular programs make them student-friendly.

NBFC Education Loan Without Co-Applicant

Many students pursuing higher education abroad face difficulties finding a suitable co-applicant or guarantor for availing large education loans from banks. NBFCs (Non-Banking Financial Companies) fill this gap by offering unsecured education loans up to Rs. 50 lakhs without the mandate of a co-applicant. Key features are as follows- 

Flexible Repayment: Long repayment tenure of 12-15 years after the completion of course and initial moratorium period. This provides adequate time for students to secure employment and repay smoothly.

Focus on Merit: In the absence of guarantor and collateral, NBFCs evaluate critical factors like the applicants’ academic merit, potential employability after completing course, and career growth prospects.

Customised Products: Specific overseas education loan products for modular programs like package systems with flexibility to split disbursals.

Unsecured Loans: No requirement for security deposit of assets or guarantor signature as fall-back option. NBFCs take adequate measures to vet profiles.

By removing the co-applicant criteria, these NBFC loans provide significant financial access and resources to genuine and deserving students based on their own credentials. With prudent applicant vetting mechanisms, NBFCs are able to cover risks and offer such innovative education financing solutions.

Eligibility Criteria For NBFCs Education Loan

To qualify for an education loan from an NBFC, students must meet specific criteria:

1. Indian Citizenship: Applicants must be Indian citizens.
2. Age Bracket: Students should fall within the age range of 18 to 35 years.
3. Academic Record: A good academic record is a prerequisite.
4. Admission to Recognised Institution: Students must secure admission to a recognised university or college abroad.
5. Co-applicant with Steady Income and Good Credit Score: A co-applicant with a stable income source and a favourable credit score is essential.
6. Pre-requisite Exam Scores: Applicants need to achieve decent scores in prerequisite exams such as IELTS, TOEFL, and GRE.

Documents Required For Education Loan From NBFC

The documentation required for NBFC education loans without collateral may vary slightly from lender to lender. However, some common documents usually requested include: 

Applicant’s Documents:

• Proof of admission to a recognised foreign university or college.
• KYC documents of the student, which could include a PAN card, passport, driver’s licence, voter ID card, or any government-issued identification document.
• Completed education loan application form.
• Passport.
• Academic records, including 10th-grade and 12th-grade mark sheets, undergraduate results (semester-wise), and entrance exam results (e.g., GMAT, GRE, TOEFL, etc.).
• Admission letter (conditional admission letters may also be applicable).
• Statement of expenses.
• Two passport-size photographs.

Co-applicant’s Documents:

• KYC documents of the co-applicant, such as PAN card, passport, driver’s licence, voter ID card, or any government-issued identification document.
• Bank account statements of the co-borrower/guarantor for the last 6 months (in case of a takeover of an education loan).
• Loan account statements for the last year (if previous loans were obtained from other banks/lenders).

Income Proof for Salaried Co-applicant/Guarantor:

• Salary slips for the last 3 months.
• Copies of Form 16 for the last 2 years.
• Bank account statements for the last 6 months (salary account).
• A brief statement of assets and liabilities for the parent/guardian or other co-borrower.

Income Proof for Self-employed Co-applicant/Guarantor:

• Proof of business address.
• Income tax returns for the last 2 years (if applicable).
• TDS certificate (Form 16A, if applicable).
• Certificate of qualification (for professionals such as C.A. or doctors).
• A brief statement of assets and liabilities for the parent/guardian or other co-borrower.
• Bank account statements for the last 6 months.

Pros of NBFCs Education Loan

Let’s take a closer look at the advantages that education loans from NBFCs bring to the table:

1. No Collateral Required: Students are not obligated to provide any assets as collateral for the loan.
2. Flexible Repayment Options: NBFCs offer repayment periods spanning 10 to 15 years, providing students with ample time to repay the loan comfortably.
3. Quick Processing: A streamlined loan processing system ensures that students receive the loan amount promptly, facilitating timely admissions and peace of mind.
4. Coverage for Various Expenses: NBFCs cover a wide range of expenses, including tuition fees, living costs, travel expenses, and more.
5. Customizable Loans: NBFCs offer a variety of loan products designed to cater to the unique requirements of students, providing flexibility in loan terms.
6. Pre-Approval of Education Loans (Selective): Some NBFCs offer pre-approval of loans before admission, saving valuable time and providing financial assurance to students.
7. Merit-Based Loans: Academic performance and the employability prospects of the chosen course are considered when approving education loans.

Cons Of NBFCs Education Loan

It’s equally important to be aware of the disadvantages that come with NBFC education loans:

1. Higher Interest Rates: NBFCs typically charge higher interest rates compared to public and private banks.

2. High Processing Fees: A processing fee ranging from 1% to 2% of the loan amount can increase the overall cost of the loan for students.

3. Co-applicant Requirement: NBFCs mandate a co-applicant with a stable income and a good credit score, which can be challenging for some students.

4. No Tax Benefits: Unlike bank loans, NBFC education loans do not offer tax benefits under section 80E for education loan interest.

5. Excluded from Government Schemes: NBFC loans are not eligible for government schemes that provide benefits on education loans, unlike loans from banks.

6. Hidden Charges: NBFCs may impose various hidden charges, such as bounce charges, prepayment charges, and penalty charges, which can add to the cost.

Pro Tip: Situations Where NBFCs Shine for Education Loans

NBFC education loans are particularly beneficial in certain situations:

1. Academic Scale and Criteria: When applicants fail to meet the academic criteria set by banks, NBFCs offer an alternative solution.
2. Urgency: If a student urgently requires a loan, NBFCs often provide quicker loan disbursal.
3. Specialised Courses: For courses like sports, journalism, creative writing, fashion design, etc., not covered by banks, NBFCs step in.
4. University Choice: When students aim to study at universities not on the bank’s approved list, NBFCs offer a lifeline.
5. Documentary Challenges: In cases where applicants lack sufficient documentation for a bank loan, NBFCs are more accommodating.
6. Higher Expense Coverage: NBFC education loans often provide coverage for a broader spectrum of study-related expenses compared to banks.
7. Unsecured Loans: For those seeking unsecured loans of larger amounts, NBFCs can be a viable option.

Conclusion

Non-Banking Financial Corporations have emerged as formidable players in the realm of education financing, especially for those pursuing higher studies abroad. These institutions offer a lifeline to students who may not fit the traditional mould for bank loans or government-sponsored educational funding.

As you navigate the labyrinth of education loan options, understanding the nuances of NBFC loans is crucial. Pay close attention to the terms and conditions, including associated charges such as processing fees, prepayment charges, and penalty fees. Armed with this knowledge, you can make informed decisions and select the loan that aligns perfectly with your educational aspirations.

Education is an investment in your future, and NBFCs are here to help you reach your goals. Whether it’s studying abroad or pursuing specialised courses, these financial institutions provide the support you need to make your dreams a reality. So, embrace the flexibility, explore your options, and embark on your educational journey with confidence!

FAQs 

1. Which NBFC is best for education loan?

Prominent Non-Banking Financial Corporations (NBFCs) operating in India include HDFC Credila, Avanse, Incred, and Auxilo.

2. Is NBFC better than bank?

The key difference: Banks follow RBI-mandated rates, while NBFCs set their rates internally, giving them more flexibility on rate control.

3. What happens if I don’t pay my NBFC loan?

Failure to repay your loan can lead to legal action by the lender. In such a scenario, the court may demand full repayment or impose penalties like wage garnishment or asset seizure.

4. Why do people prefer NBFC over banks?

NBFCs play a significant role in providing unsecured loans to small businesses, often with minimal documentation and paperwork requirements. In contrast, banks can be less flexible in document approvals, potentially leading to loan application rejection if essential documents are not provided.

5. Who is eligible for an NBFC loan?

To qualify for NBFC financing, applicants should be between 20 and 60 years old. Self-employed individuals must meet income requirements set by leading NBFCs in India for personal loans.

6. Can I get an education loan from NBFC with a low CIBIL score?

Yes, getting an education loan from NBFCs is possible even with a low CIBIL score. This is because NBFCs have more flexible applicant eligibility criteria compared to banks when sanctioning education loans.