Want to study abroad? Facts on Student Loans
Intelligent Overseas Education Student Loan Update: People cannot afford a college education because it is becoming increasingly expensive. To afford a good education, more people are taking out education loans. Most students start repaying their loans only after finding a job that pays them back. Many students need a student loan to finish their education and start their careers. Students often borrow money to study abroad, which broadens their horizons.
Prospective students have other options besides banks. Several non-banking finance companies (NBFCs) also offer student loans. A month to grant an education loan from a nationalized bank or finance education through NBFCs has left many people perplexed. For a long time, banks were the market’s leading lenders for prestigious university and college education, which later expanded to include study abroad. Most lenders offer 100% financing and no processing fees on education loans for studying in India. Large banks provide unsecured education loans up to Rs 7.5 lakh.
Overdraft loans require collateral. Banks waive the 7.5 lakh cap for colleges on their preferred college list. Borrowers must pledge collateral equal to or greater than the loan amount. For the uninsured, pledging collateral increases loan amounts lowers interest rates, and reduces processing fees. Students can borrow up to Rs 1.5 crore with no collateral and an 8.8% interest rate. Women get an extra 0.5 percent off. Remember that secured education loans have a 15-year maximum term. Comparatively, banks covered the primary education loan market, albeit imperfectly. For a long time, they were missing out on the growing study abroad market, as well as non-traditional programs.
NBFCs profited. Avanse and Credila, for example, started in the study abroad market before expanding into the domestic education loan market. NBFCs offered secured and unsecured education loans to students for vocational, diploma, and executive programs. In addition to a student’s profile, academic coursework, and college rankings, it includes the status of the co-financial applicant’s circumstances, such as their past and projected earnings. Co-income borrowers are the most critical factor because they must make interest-only payments during the study period.
The application process for a bank and an NBFC are very different. A bank education loan offers low-interest rates and tax benefits. However, getting a loan approval takes equal effort from the applicant. A long list of documents is required. The application process may take a month or longer. However, non-bank financial companies (NBFCs) charge a premium for flexible loan products. NBFCs charge a processing fee of 1.5 to 2 percent of the loan amount, depending on the country.
While banks can take up to a month to approve a loan after evaluating the collateral, student, and guarantor profiles, NBFCs often approve loans in three to four days. According to Section 80E of the Income Tax Act, borrowers are not required to pay any taxes. A bank’s education loan automatically qualifies the borrower and co-applicant for a tax deduction. That is, the applicant/co-applicant can deduct interest paid on the loan. This benefit gets discarded if one borrows money from a Non-Banking Financial Company (NBFCs).
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