The amount of money students spend studying abroad is expected to increase due to rising education costs. As such, public vs private bank education loans have gained notoriety among Indian students as a means to bridge the financial gap and pursue higher education abroad. That said, there are slight differences between public vs private banks education loans that students must consider before applying for one.
| Particular | Public Banks | Private Banks |
| Interest Rates | Starting from 8.30% | Starting from 9.5% |
| Maximum Loan Amount | Limited up to INR 20 Lakh | No limits depending on the applicant |
| Moratorium Offered | 6-12 months | Mostly charge full or partial interest |
| Repayment Terms | 12-15 years | 10 years |
| Processing Time | 4-6 Weeks | Digitised and faster processing |
| Processing Fees | Nil to 1.5% | Up to 2% |
| Margin Money | Dependent on amount | 100% Financing |
Eligibility Criteria
The fastest way to secure a public bank vs private bank abroad education loan in India is to meet all the eligibility criteria. Although each public bank and private bank may have distinct requirements, some general requirements boost the student’s likelihood of landing a student loan.
| Eligibility Criteria for Private Bank Vs Government Bank Education Loans | |
| Private Bank | Public/Government Bank |
| -Indian citizen/permanent residency -Minimum credit score of 700 -16-35 years -Secured and unsecured loans -Eligible co-signor -Admission letter from a reputable institution -Funding for most courses | -Indian citizen -Minimum credit score of 700 -18-35 years -Mostly secured loans (collateral required) -Eligible cosigner, e.g., parent, guardian, spouse -Admission letter from a reputable institution -Funds courses on an approved list |
Private banks are flexible with the terms of their education loans and less strict on the courses funded. Government banks, on the other hand, only fund approved courses from approved institutions. This is one significant difference between NBFCs and banks financed by the government. Private banks and NBFCs may be ideal if pursuing offbeat courses.
Interest Rates
Interest rates on education loans are a top determinant for public banking vs private banking for students. While public banks typically offer lower interest rates, private banks offer more flexibility, including a higher loan amount. The table below shows a breakdown of the interest rates in education loans from the top-performing public sector banks vs private sector banks:
| Public Banks | Private Banks |
| State Bank of India – 8.15% to 11.15% | HDFC Credila – 9.5% onwards |
| Punjab National Bank – 8.55% to 12% | ICICI Bank Education Loan – 9.5% to 15.85% |
| Bank of India – 9.95% to 11.60% | South Indian Bank Ltd – 12.9% to 13.65% |
| Bank of Baroda Student Loan – 9.10% to 12.45% | Federal Bank – 12.55% onwards |
Processing Fee
Processing fees charged on public bank vs private bank education loans typically cover expenses in evaluating and processing the loan, including conducting credit checks, verifying documents, and approving the loan. Private banks usually charge a processing fee of 1%-2% of the loan amount. However, most public banks aim to ease student loan repayment and only charge a small fee on loans beyond a certain amount.
| Bank | Processing Fee |
| Public Bank | INR 5,000 on loans above INR 4 Lakh |
| Private Bank | 1%-2% |
Maximum Loan Amount
Since studying abroad comes with relatively higher fees and living expenses, international students may opt for a bank that offers higher loan amounts. Public banks tend to have limits on the funding given. In contrast, private banks go beyond paying the full tuition fee and offer international Indian students additional funds to cater for living expenses. This is a critical factor when considering which bank is best, a public or private bank, for student loans.
| Bank | Maximum Loan Amount |
| Public Bank | Up to INR 20 Lakh |
| Private Bank | No limit |
The maximum loan amount and interest rates are crucial when considering the difference between private and public bank education loans in India. Banks will consider other factors such as the course employment predictability, reputation of the education institution, and credit score, among others.
Moratorium Period Offered By Private And Public Banks
The moratorium period refers to the grace period after the student completes the course before starting to pay the loan. International students often consider the moratorium period in education loans when comparing public bank or private bank which is better. This is because job availability is beyond the student’s control.
Most private banks don’t fancy falling back on profits and charge partial or full interest during this period. It is generally advisable to start the loan repayment as soon as possible.
| Bank | Moratorium Offered |
| Private Banks | Charge partial or full interest |
| Public Banks | 6 to 12 months after course completion |
Margin Money Charged
Margin money refers to the downpayment the student makes for public vs private sector banks education loans in India. Most public banks will charge margin money for loans above INR 4 lakh. On the other hand, private banks offer flexible terms with full funding and no collateral or margin money in education loans for Indian students.
| Bank | Margin Money |
| Public Sector Bank | 5% to 15% for loans above INR 4 lakh |
| Private Sector Bank | 100% Financing |
Repayment Terms
While private sector banks have faster turnaround times and flexible terms, public sector banks typically offer extended repayment periods of 12-15 years. That said, the flexibility and larger loan amounts are why private banks are better than public banks in tertiary education loans in India.
| Bank | Loan Tenure |
| Public Sector Bank | 12 to 15 years |
| Private Sector Bank | Up to 10 years |
Types of Collateral
Private bank vs public bank may demand collateral for secured education loans in India. That said, public banks are more relaxed when asking for collateral. Private banks will ask for collateral for loan amounts above INR 7.5 lakh. Collateral is a vital consideration for private bank vs public bank which is better as some students may need more security. The types of collateral include:
- Immovable assets: A flat, house, or non-agricultural land.
- Liquid security: Fixed deposits, government bonds, insurance policies.
A qualified guarantor plus collateral may help you secure higher loan amounts from private banks. This flexibility is a top reason why private bank is better than government banks.
Countries Each Bank Caters To
Both public and private banks in India offer education loans for students in India, the USA, Canada, the UK, New Zealand, Australia, the Netherlands, Sweden, Germany, and France.
FAQs
Which Bank Is Better, Public Bank Or Private Bank?
This is subjective based on the students’ needs.
Which Bank Offers Better Interest Rates For Education Loans, Public Bank Or Private Bank?
Public banks generally offer more affordable interest rates.
Can You Compare The Processing Fees For Education Loans At Public Banks And Private Banks?
Some public banks offer no processing fees, while private banks charge 1%-2%.
What Is The Maximum Loan Amount Offered By Public Banks And Private Banks For Education Purposes?
Public banks offer a maximum of INR 20 lakh, while private banks have no maximum limit.
Are There Any Specific Eligibility Criteria That Differ Between Public Bank And Private Bank Education Loans?
Private banks cater to a broader age range as compared to public banks.
How Do The Repayment Terms Vary Between Public Bank And Private Bank Education Loans?
Public banks have longer loan tenures with a no-pay moratorium period, whereas private banks have shorter tenures with interest-charged moratoriums.
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