A financial company that operates outside of banks and provides a range of loans, including student loans, is known as a non-banking financial company (NBFC). For a number of reasons, students are becoming more and more familiar with new age NBFCs. NBFCs have been successful in redefining the standards for student loan lending by vetting the students' academic profiles prior to granting study loans.
Secured and Unsecured education loans from NBFCs
NBFCs provide education loans to students who want to study abroad or in India, both secured and unsecured (loans without collateral). One of the main advantages of applying for a student NBFC education loan is that most financial institutions will require you to give collateral as security if you wish to borrow a certain amount of money that the lender has specified. However, if you meet the requirements, you may even be eligible for a larger loan amount if you choose an NBFC education loan without collateral.
Well, the choice of best NBFC for education loan depends on an individual’s profile. To select the best NBFC for education loan can be a tedious task. However, what if we tell you that there are online platforms like GyanDhan that can help you select the best lender and help you select the best NBFC for education loan for your abroad education journey.
When a government bank rejects a student's application for an education loan, NBFCs step in to help. The most typical explanations are listed below.
1. Government banks are only allowed to provide up to 7.5 lacs in unsecured education loans under the RBI mandate, which is insufficient for studying overseas.
2. A lot of students lack collateral that they could use as security for a loan.
3. The value of the collateral is insufficient to pay for the costs of studying overseas.
Even though NBFCs provide enormous uncollateralized education loans (up to Rs. 75 lakhs), their interest rates tend to be a little higher. NBFCs evaluate a number of factors before approving a candidate for an education loan. The following elements of a candidate's resume are taken into account:
1. The academic background of the applicants (10th, 12th, degree certificate, TOEFL, IELTS, GRE, GMAT, SAT grades)
2. The supporting documentation for the co-applicant's income profile (pay stubs, income tax returns, CIBIL score, etc.)
3. The higher education course of choice.
4. The nation of choice for postsecondary education.
Expenses covered in education loans from NBFCs
There are lenders who only provide student loans for a limited range of costs. For example, most lenders' education loans are limited to academic purposes. Nonetheless, well-known NBFCs will pay for significant educational expenses in addition to tuition. This implies that the NBFC education loan will pay for other higher education-related costs in addition to your tuition.
- Tuition fees
- Accommodation expenses
- Travel expenses
- Living expenses
- Study related expenses
Students may find it difficult to land a well-paying job the day after they graduate. NBFCs provide flexible repayment options because they recognise this. Whatever your preference, you can choose between a short and long tenure. Step-up EMIs are an additional option. Your monthly installments will begin small with step-up EMIs and progressively increase as the tenure goes on. This aids in financial stabilization as you repay your student loan. Therefore, since these are some of the best qualities of NBFCs, it makes sense that so many students choose them when applying for student loans.
Benefits of best NBFC for education loan
- Rapid application processing and payment
NBFCs process loan applications, verify and approve them, and disburse funds faster than banks do. When offering a study loan or a personal loan for education, NBFCs offer customized, multi-purpose services because they are less strictly regulated. These services could include adjustable loan terms, adjustable monthly installment plans, etc. Additionally, you can customize the loan to meet your specific needs in order to pay for books, tuition, hostel fees, and other expenses.
- High loan amounts
NBFCs have the power to set the maximum loan amount or total loan amount in accordance with each student's needs. Usually, they base the loan amount on the particular course requirements and the submitted collateral. Plus, some NBFCs, like Tata Capital, don't need a tonne of paperwork, which streamlines and expedites the application process.
- Flexible Repayment Options:
Repayment periods of 10-15 years, providing students with ample time to repay the loan according to their financial capacity.
- Customizable Loans:
Loan products are designed to cater to the unique requirements of students, offering flexibility in loan terms to accommodate diverse financial needs.
- Pre-approval of Education Loans (Selective):
Selective pre-approval of loans is available before admission, saving time for students and providing financial assurance, streamlining the admission and funding process.
- Merit-Based Loans:
Academic performance and the chosen course's employability prospects are considered when approving education loans, allowing deserving students to access financial support based on their achievements and future potential.
Education loans provided by Non-Banking Financial Companies (NBFCs) present an alternative financial solution for students seeking higher education. These loans are designed to address the financial requirements of individuals who may not meet the eligibility criteria for conventional bank loans or government-backed educational funding. When evaluating education loan choices, it becomes crucial to carefully examine the terms and conditions associated with NBFC loans.
This involves gaining awareness of supplementary charges like processing fees, prepayment charges, and penalty fees. A thorough comprehension and comparison of these elements empower borrowers to make well-informed decisions, enabling them to select the loan option that aligns most effectively with their individual needs.
Here are some things to keep in mind before starting the application process for an unsecured education loan if your only plan is to use it to pay for your further education.
- A processing fee is assessed by NBFCs and must be paid following the loan's provisional approval. This cost is approximately 1% of the approved loan amount plus GST. It could increase to 1.5% to 2% plus GST.
- The applicant is required to purchase loan insurance. The loan amount is modified to account for the loan insurance fee. This is a one-time payment fee that ranges from 1% to 2% of the approved loan amount.
- Students at NBFCs are not eligible for a payment-free moratorium period.
Education loans from NBFCs may have different repayment terms based on the loan amount and the lender's policies. Depending on the applicant's income and other factors, certain NBFCs may offer flexible repayment options, and the repayment period may extend up to 15 years.