Education Loan Disbursement Process in Government banks and NBFCs


Education loan disbursement is the final stage in the process of studying abroad. The loan disbursement process is not uniform; you can easily find variations in the process among different lenders, like government banks and NBFCs. Government banks and private lenders like NBFCs are prominent in financing study loans in India, so it’s important to understand their disbursement process. Here, a brief is given about each and every step involved in the disbursement of education loan abroad.

Disbursement process of government banks

For collateral-based education loans, government banks are the most sought-after category. The disbursement processes for most of the famous public sector banks, like the State Bank of India, the Bank of Baroda, and the Punjab National Bank, are more or less similar. Once the loan is sanctioned, the disbursement phase of the education loan commences in the following sequence:

  1. Once the student's education loan for study abroad is approved, the bank will issue a sanction letter.
  2. After receiving the loan sanction letter, visit the nearest bank branch to complete the loan process. The main thing in this process is the creation of mortgages and signing the loan agreement, along with fulfilling the conditions of the necessary documents.
  3. Once the applicant and co-applicant fulfill all the requirements and sign the loan agreement, the loan amount is ready for disbursement.
  4. The next step involved is that students are required to submit a letter for education loan disbursement to their lending bank containing the payment method and details of the tuition fee preferred by their respected universities. Several international universities in countries like the USA and Australia accept payment from third-party payment services like Flywire and GlobalPay, etc.
  5. After signing the loan agreement, students can mention the payment method details in their education loan disbursement letters to their respective banks.
  6. After receiving the study abroad loan disbursement letter from students, the bank will release the payment either directly into the tuition fee account of the university. However, if payment is to be made through a third party, their software credentials are required to be mentioned in the loan disbursement letter.
  7. An important point to keep in mind is that the government bank does not transfer the entire tuition fee amount in one go. Banks release the tuition fee amount as requested by the student, either semester-wise or yearly.
  8. Study abroad loans are primarily required to cover the financial burden of tuition fees and living abroad costs. Most government banks transfer the amount of living expenses into the FOREX Card provided to students so that they can easily withdraw the money during their stay in the foreign country. Government banks issue the FOREX Card to students to facilitate easy money withdrawals; however, the card also has an expiration date.
  9. Government banks like SBI and Bank of Baroda lease the FOREX card to students for the duration of three months. Students within these three-month's timelines are required to open a savings account in their country of stay.
  10. After opening the account, we will disburse the study abroad loan into the student's account or according to the amount transfer details mentioned in the education loan disbursement letter for the remainder of their higher study course.

Education Loan Disbursement Process of NBFCs

The study abroad loan disbursement process at NBFCs is easier and faster than that of any public sector bank. NBFCs do not require the students to submit the education loan disbursement letter. You can simply discuss the convenient payment method with the lender, and they will comply with it. The process of education loan disbursement by NBFCs is way faster than that of any government bank. It doesn’t require the education loan disbursement letter, and it does not involve any collateral for the loan. The duration is also shorter in comparison to public-sector banks.

NBFCs will disburse the student loan for study abroad amount in the university account or in the student's account, as per their requirement. NBFC will disburse the loan amount as per the student’s convenience, unlike government banks. NBFCs are not bound to follow the restrictions laid down by the Reserve Bank of India on education loan disbursement. An NBFC lender can disburse the loan amount with a loan disbursement letter. However, they have higher interest rates on overseas education loans in comparison to the government, as they do not provide any subsidy on the interest rate.

Education loans abroad are easily and quickly disbursed by NBFCs as compared to public banks, as there is less documentation work required. Moreover, there is no necessity on the part of the student to showcase collateral. The education loan disbursement process is not that complicated; it's pretty much easier even for the common man to understand the complete procedure. There are lots of questions related to overseas education loan disbursement that often confuse the student; here we have enlisted some of the general queries of the applicants and problems they usually face during the process.

Issues encountered by students in the education loan disbursement process

Third Party Payment Services: Countries like Germany, Australia, and Canada prefer students submit their living expenses before the visa procedure. But they also accept payment through third-party payment services like Flywire and Global Pay. Many government bank officials are unaware of the financial obligations that students have to fulfil during their visa process.

Bank officials denying the request for early loan disbursement: It has been noticed that bank officials sometimes deny the request of students for early disbursement of their loan amount. This denial is made despite the fact that students have valid proof of their requirement for early loan disbursement.

Banks have issued several circulars in this regard, even for the local branch officials to accept the disbursement request of students. But due to a lack of awareness, local branch officials of leading public sector banks turn down the request of students to disburse their tuition fee amount to a third party.

To get an overseas education loan, then you can contact Education Loan Guru. They are ready to assist you with your education loan to study abroad.

By Education Loan Guru