The final stage of your study abroad student loan is the education loan disbursement. The term, ‘Disbursement’, refers to the transfer of the education loan from the lender to the borrower. In India, the disbursement process of education loans is carried out in various ways depending on the lender policies. This article will explain to you understand the education loan disbursement process of the two prominent loan lenders – Government Banks and NBFCs in a detailed manner. So let’s get started with this article: All About Education Loan Disbursement.
Disbursement Process of Education Loan: Government Banks
Government bank education loans happen to be one of the most sought-after categories of study loans. Let’s quickly understand what is the disbursement procedure for an education loan in government banks.
Recommended Reading: The Role of A Borrower In Education Loans
Popular government banks like the SBI or the Bank of Baroda have very similar loan disbursement processes. First, you are required to submit all the necessary documents to initiate the education loan process. Once the education loan has been sanctioned by the banks, the following steps are followed in the same sequence as a part of the disbursement process of education loans.
- A sanction letter is issued to you once your education loan is approved by the bank.
- On receiving the sanction letter, you are expected to visit the respective branch for the creation of mortgages and signing the education loan agreement along with other necessary documents.
- After your signature, the education loan is ready to be disbursed.
- However, do note that the disbursement process of education loans doesn’t start immediately after you have signed the education loan agreement. You are required to submit an education loan disbursement letter to your lending bank stating the preferred method of payment of tuition fees by your respective university. It may be important for you to know here that certain international universities prefer the payment of tuition fees from third-party payment services. For example, the USA universities appreciate payments from Flywire, GlobalPay, etc. Even countries like Germany and Canada adopt the same process. So it is wise for you to recheck the preferred payment method with your university.
- In order to get your education loan transferred at the right time, you are advised to mention the details of the preferred payment method in an education loan disbursement letter which is to be submitted to the respective government bank post signing the loan agreement.
- Upon receiving the education loan disbursement letter, the majority of the government banks disburse the tuition fee component of the abroad loan education studies either directly into the university’s account or via the third-party payment software as mentioned by you in the disbursement letter.
- Now here is a really important point. Note that government banks do not transfer the entire tuition fee for the course in one single go. The money is released as and when you submit a request to the bank which could be either yearly or semester-wise. This interval will be brought to your knowledge by the university.
- Talking about the disbursement process of education loans, one of the most important parts of the study abroad loan – the living expenses – also deserves a mention here. Most government banks transfer your living expenses into a FOREX card. This card is issued to you in order to make it easier for you to withdraw your money during the study abroad period. Read our blog on ‘Best FOREX Cards For International Students 2021’ to know which one you should choose. Keep in mind that the FOREX card has an expiry date so you will have to renew them.
- Most banks lease the FOREX card to you for a period of three months. You are expected to open a savings account in your foreign country within this time period. The bank will then disburse the education loan into this savings account for the remaining course of your higher education.
Disbursement Process of Education Loan: NBFCs
Understanding the education loan disbursement process of NBFCs is relatively easy and simple. We hope you know the difference Banks and NBFCs, if you don’t, please check out our blog: Differences Between Banks and NBFCs For Education Loans.
Unlike government banks, NBFCs do not ask you to submit an education loan disbursement letter. The disbursement time of NBFCs is way faster than any public bank. This is primarily because there is no involvement of collateral in this process.
Another benefit with NBFCs is that they disburse the education loan amount according to your convenience. If you require the entire education loan amount to be credited into your account at once, NBFCs will comply with the requirement and transfer the loan amount directly to your account or to the university’s account the case may be. As mentioned above, it depends on your preference. Since NBFCs do not necessarily have to comply with the norms laid down by RBI for disbursement of education loans, they do not have subsidized interest rates for education loans. This means relatively higher costs and in some cases, higher disbursement charges. Also, they do not exactly have to worry about how you use the education loan amount.
So, do you see? The education loan disbursement process is not exactly complicated. Hope we helped you in understanding the entire process very well.
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Thank you for reading this blog on the Disbursement Process of Education Loan. If you enjoyed reading this blog then the following blogs on similar student education loans abroad may be of interest to you.
- How To Prevent An Education Loan Default
- How To Refinance Federal Student Loans
- 3 Questions To Help WIth Your Student Loans
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