A Complete Guide For Education Loans From NBFCs

October 20, 2020

A Complete Guide For Education Loans From NBFCs

We all are aware of how nationalized banks offer impressive schemes for abroad education loans. Just like there are two sides to a coin, though there are several benefits offered by them, nationalized banks require collateral for processing an education loan. Also, retrieving an unsecured education loan from a nationalized bank can be tedious. Nationalized banks are allowed to offer up to 7.5 lacs as an unsecured education loan, which is considered as quite less for abroad education. This pushes a lot of candidates to turn to NBFCs which are Non-Banking Financial Corporations for their unsecured education loan needs. 

Why NBFCs for unsecured education loans?

NBFCs come to the rescue of candidates when they are not deemed fit for an education loan by a nationalized bank. The most common reasons are below:

  • Under the RBI mandate, nationalized banks can offer unsecured loans of up to only 7.5 lacs, which is at times not enough for abroad education.
  • For 7.5 lacs or below education loan cases, nationalized banks have strict eligibility criteria and hence the process is tedious too.
  • This blog will give you an idea regarding the unsecured education loan from NBFCs. Approaching an NBFC for an unsecured education loan and all additional information about applying for an unsecured education loan with NBFCs.
NBFCs education loans

Major NBFCs functioning in India

Primarily, there are four Non- Banking Financial Corporations functioning in India. They mainly focus on lending educational loans. In the order of their age in the market they are:

  • HDFC Credila
  • Avanse

Factors considered by NBFCs:

Before clearing a candidate for education loan approval, NBFCs take certain factors into the discussion. To give you an outline, the following aspects of a candidate’s profile are considered:

  • The candidates’ academic details (10th, 12th, degree certificate, TOEFL, IELTS, GRE, GMAT scores)
  • Co-applicant’s income profile with proof (Salary slips, Income Tax Returns, CIBIL score, etc.)
  • Location in India. ( NBFCs do not operate in all cities within India.)
  • Chosen country for higher education.

Why do applicants opt for NBFCs?

Applicants who choose NBFCs for their unsecured education loan needs are sometimes the ones who are not deemed eligible by nationalized banks for loan approvals. However, this may not be the only reason that makes NBFCs a better option for prospective candidates. 

The following reasons also compel candidates to turn to NBFCs

Faster processing time: If a candidate applies for an unsecured education loan to any NBFC, the processing time is generally around four to five days. This procedure can be done in the comfort of your home as it is to be done online.

Easy disbursement of education loan: Unlike nationalized banks, NBFCs don’t really ask for detailed information on how the loan amount is going to be used. They generally immediately disburse the loan amount.

Less Paperwork: Most candidates who need to avail unsecured education loan approach NBFCs. As there is no collateral involved, there is minimal paperwork involved.

Loan Margin: Usually, NBFCs do not have a loan margin on the total loan amount. Hence, the candidates do not have to provide proof of any funds. This system has been adopted by nationalized banks too.

Interest rates : Interest rates are calculated by banks according to the current base rate of the bank. In case of overseas, it generally varies from 10.5-12% for secured loans and 10.75-14% for unsecured loans. In case of domestic loans interest rate varies from 9-14%. The interest rates offered by NBFCs range between 9- 12% for secured and unsecured loans.

Moratorium period : The moratorium period of the banks vary from 6 months to 1 year. Whereas, NBFCs provide a moratorium period or EMI holiday period of 6 months.

Course flexibility : The banks generally offer education loans for renowned universities in India and abroad. The category of courses covered differs across, graduate, postgraduate and diploma courses. NBFCs offer education loans to a wider category of unconventional courses across different colleges. However, the interest rate varies for different colleges. The interest rate is lower for the top-notch universities and higher for the others.

Customised services: Some private banks provide certain customized services and loan packages according to the requirement of the borrower.NBFCs provide customized products like doorstep services, pre-admission, pre-visa and fast-track loans.

Processing fees : The banks charge 0.5-2 % processing fees for their operation charges. Whereas the processing fees charged by the NBFCs vary from 1-2%.

Everything about an education loan from NBFC

Here is some information that every student who plans to approach NBFCs for their loan needs must know.

  • NBFCs charge a processing fee, which is to be paid after a provisional approval of the loan is granted. This fee amounts up to 1% of your loan amount, plus GST. It may go up to 1.5% + GST.
  • The applicant must take loan insurance. The loan insurance fee is adjusted in the loan amount. It is a one-time payment fee, which is about 1% to 2% of the total loan amount sanctioned.
  •  NBFC candidates may repay the loan with full simple interest or partial simple interest, with monthly payable amounts ranging anywhere between Rs. 2000 to Rs. 25000.

We hope this blog has provided you with sufficient information regarding unsecured education loans from NBFCs.


MuskanWitten by Muskan The name is Muskan, so probably was destined to spread smiles wherever I go. Writing is something which has grown on me with each passing day. Follow your passion in saying is a cliché but in doing is serious fun. So here I am to engage with my passion and maybe spread some smiles along the way.
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