While few years ago, there were lesser options for education loan applicants with stringent set of rules as they needed to provide some collateral against the loan or have a co-applicant in place with sound financial health. The going now gets much easier for those desiring funds for education as NBFCs too have ventured in this line of business and are offering relaxation on some of the parameters but these come at a cost.
NBFC companies generally offer education loan at a relatively higher rate of interest than banks. Banks charge any way between 10.25-11% whereas NBFCs offer it at 11-13%. In some of the cases, depending on the borrower's profile, eligibility and other parameters it even goes up to 15%.
The areas where NBFCs accommodate an education loan applicant are listed below:
1. NBFCs offer education loan for study in a foreign land even for unconventional courses: Though, banks prefer giving credit for foreign studies for mainstream courses such as engineering, management and medicine, the need for funds for foreign studies in other unconventional areas such as fine art, dance, music, online, diploma and even certificate course is well catered to by NBFCs.
Also the level of education for which funds are needed does not matter i.e. an NBFC company provides loan for undergraduate, graduate, doctoral programs. But the condition that remains is the institutions as well as the various courses offered should be well accredited and recognized from concerned bodies.
2. Loan amount: For foreign studies, few lakhs are always not enough. And while banks do have some pre-specified cap on the amount of loan they may disburse for foreign education, NBFCs are generally more flexible here too and lend a higher amount than banks. Banks such as Kotak Mahindra offer a conditional overseas education loan of maximum Rs. 20 lakh. Other banks including the likes of SBI offer a minimum of Rs. 20 lakh and at the higher end may lend Rs. 1.5 crore for foreign studies.
NBFCs also come in easy when it comes to margin money which is asked by banks and goes up to 15% of the loan amount. Thus, unlike banks NBFCs are better off and arrange for the overall cost of education and not just the more common expenses.
3. Offer loan for study in a less prominent institution: Some of the banks even have a pre-approved list of educational set-ups for study in which they easily sanction a loan. Nonetheless, they show reluctance when it comes to unconventional colleges or universities that are not so popular. And as not all pupil can land admission in a prestigious foreign institute or may even wish to pursue a niche course that is available only with lesser known university or college, you can always knock the door of an NBFC which do not mark any discrimination and easily lend funds.
4. Guarantees: Another important criterion when it comes to foreign education loan is the need for a collateral security as well as a co-applicant which in most cases is the parent who acts as a guarantor and in case of default by the primary borrower will clear off the outstanding dues.
For loans over Rs. 7.5 lakh for foreign studies, banks typically ask of a tangible collateral security as well as assignment of future income flow of the borrower for servicing the EMIs. NBFCs however basis the borrower's profile such as the co-borrower's creditworthiness, course opted, institute, job prospects etc. may even waive off the requirement of collateral completely in some of the cases.