Which bank is best for education loans?

Education loan providers in India

The desire for overseas education is developing among students of the younger generation. For our students, who approach higher education in a limitless and quick-paced manner, boundaries are still only a term. However, currency discrepancies make higher education comparatively more expensive at foreign educational institutions in terms of tuition and other relevant costs.

A student's education loan is the appropriate response to all of their financial concerns; it will assist them in consistent money management. It's like an investment that students are putting in their future that will pay off later. Students' self-confidence will increase as a result of being able to pay off their debts on their own and not having to rely on their families for financial support.

With an increasing number of students flying every year to pursue their education abroad, the number of foreign education loan providers is also increasing rapidly. Student loan to study abroad providers so far have changed, which has led to a change in the overall scenario of education loans in India.

As an individual, it's normal to have questions like which one to choose among banks and NBFCs:

Public Banks: Leading public sector banks in India, like the Punjab National Bank, the State Bank of India, and the Bank of Baroda, offer foreign education loans. When applying for a loan from a public sector bank, many students feel safe and secure doing so. Usually, loans applied from public banks are collateral-based. Residential property, LIC bonds, and fixed deposits can all be used as collateral for loans. Public banks will put this up as security to get the student loan to study abroad. Another thing to keep in mind is to ask the relationship manager if the countries and programmes that students are applying for meet the bank's requirements or not.

Secured Loan:

• Processing Fees and Time: Usually, the processing fees at public banks are 1.0% to 1.2%, and the time is 15–30 days.
• Documentation: Documentation work at public banks is more stringent, requiring various documents, including collateral documents.
• Interest Rates: For secured loans, usually, public banks charge competitive and lower interest rates.
• Loan Amount: A student can seek a loan amount of Rs. 1 crore in a secured loan by pledging collateral.

Unsecured Loan:

• Processing Fees and Time: The processing fees at public banks are usually 1.0% to 1.2%, and it can take around 15 to 30 days for processing.
• Documentation: Documentation work at public banks is more stringent, requiring multiple documents from students.
• Interest Rates: Unsecured loans typically have higher and more competitive interest rates than secured loans.
• Loan amount: In cases of unsecured loans, public banks provide loans up to 7.5 lakh.

Private banks: Just like public banks, private banks also provide overseas education loans to aspirants for overseas studies. Students planning to get the loan without collateral can also head towards private banks. The loan process is quite similar to that of public banks; factors such as rate of interest, moratorium period, and processing fees make a difference to a greater extent.

Secured loans:

• Processing time and fees: The processing time of secured loans at private banks usually takes 7–10 days, and the fees range from 1.0% to 2.0%.
• Documentation: Multiple documents are required when applying for secured loans at private banks, including the collateral.
• Interest Rates: The interest rate charged by private banks is slightly higher than that charged by public sector banks.
• Loan Amount: A student can apply for a 1.5 crore rupee secured loan by providing collateral.

Unsecured Loans:

• Interest Rates: The interest rate charged by private banks for unsecured education loans abroad is slightly higher than that charged by public sector banks.
• Processing Fees and Time: The processing period for secured loans at private banks is typically 7–10 days, and the fees range between 1% and 2%.
• Documentation: Standard documents are required when applying for an unsecured student loan to study abroad from a private bank.
• Loan Amount: When it comes to unsecured loans, private banks offer up to 7.50 lakh.

NBFCs (non-financial banking corporations): NBFCs are private organisations that make loans with or without security. NBFC offers many different loans, including student loans. In recent years, a lot of students have turned to NBFCs for their lending needs. They are becoming a popular choice for students seeking education loans abroad and are growing in popularity daily. In order to challenge banks' antiquated traditions of providing education loans to students, NBFCs successfully reinvented the processes for giving loans to students. As a major actor in helping students find educational opportunities overseas, NBFC has made a name for itself.

In order to help prospective students who want to study abroad get the best education loan, government and private banks, as well as NBFCs, give flexibility on international education loan programmes.

Secured Loan: 

• Processing time and fees: Generally, NBFCs are quick and do not take much time for the processing, and as far as fees are concerned, 1.0% to 2.0% of fees are charged by them.
• Documentation: The documentation required at NBFCs is flexible and differs depending on the student profile. However, collateral documents are a must in this case.
• Interest Rates: The interest rate that NBFCs charge is competitive and marginally higher than what banks charge.
• Loan Amount: By providing collateral, a student can obtain a secured loan of up to 1.5 crore rupees.

Unsecured loan:

• Processing Time: In general, NBFCs are efficient and do not require a great deal of time for processing, and they charge between 1% and 2% in fees.
• Documentation: The documentation requirements of NBFCs are adjustable and vary depending on the student profile.
• Interest Rates: NBFCs charge competitive interest rates that are slightly higher than those of banks.
• Loan amount: In the case of an unsecured loan, NBFCs offer up to Rs. 7.5 lakh.

When looking for an education loan abroad, it's important to consider a number of things: the type of courses and countries the financing institution serves; 100% financing of the loan amount; tax law relaxations; and the payback schedule.

Banks and NBFCs are the primary lenders that lend education loans, both on a collateral and non-collateral basis. In a collateral loan, students can avail of the loan up to 10 lakhs; it also depends on the case-to-case, whereas in non-collateral loans, students can avail of approximately 60 lakhs, depending on their profile and the requirements of the loan. In comparison to banks, NBFCs offer higher amounts of loans, whereas banks have a limited extent to which they can provide the loan.

Government Banks

Private Banks

NBFCs (Non-Banking Financial Corporations)

Additional Charges

Additional charges, such as any penalties or hidden fees, may be included in the loan application process. Check with your financing partner to ensure that there are no penalties or other hidden charges.

Penalty Charges: It is always better to check with your financing partner first about the penalty charges incurred by them in case of late payments so that you can prevent any misunderstandings later.

Hidden charges: If your financing partner is asking you to pay any extra charges other than the discussed ones, it is better to get clarity on this with them to avoid any confusion later.

The points discussed above are critical to remember when deciding on the best education loan provider for you. Still, it is largely dependent on the academic profile and loan requirements of the students.

In case you still have any confusion, you can consult Education Loan Guru for your abroad education loan queries.