Abroad Education Loan Without Security: Private Banks Vs NBFCs
A major percentage of students who do not have any collateral opt for an abroad education loan without security. However, with the rise in the number of lenders offering an abroad education loan without security, the entire process of getting an abroad education loan without security becomes all the more confusing. This article will give you a detailed comparison of the unsecured education loan details of both categories of lenders.
In India, there are two major categories of lenders who provide unsecured education loans to students – private banks and NBFCs. The policies set by both these organizations for study abroad education loan without security are based on different principles. You can learn all about the differences in the following paragraphs.
Abroad Education Loan Without Security: The Basic Difference Between NBFCs and Private Banks
Non-Banking Finance Companies
As suggested by the acronym, a Non-Banking Financial Company or NBFC is authorized to conduct the transactions similar to a bank, like lending abroad education loan without security, insurance policies, etc. However, they do not hold a banking licence. This means that they cannot perform the following activities that banks can.
- They cannot accept Demand Deposits.
- They cannot issue cheques drawn on themselves.
- They cannot indulge primarily in Agricultural, Industrial activity, sale-purchase, construction of an immovable property, etc.
- They can provide banking services to people without holding a banking licence.
All of the above points may have made it clear to you why NBFCs majorly provide unsecured education loans. Now let’s take a look at how NBFCs function with respect to education loans.
Private banks are essentially private financial institutions which offer banking services to the public. A major percentage of shares in private banks are owned by private companies rather than the government. Their way of functioning is more or less similar to public/government banks. In terms of unsecured education loans, private banks also offer benefits similar to those offered by NBFCs to students.
However, the plus point of applying for an abroad education loan without security through private banks is the fact that they are much more reliable than NBFCs when it comes to the repayment process of non-collateral education loans. The interest rates offered by private banks are also less as compared to those offered by NBFCs, for an abroad education loan without security. Further ahead, you can learn all about the education loan details of some of the prominent private banks which offer unsecured education loan for abroad studies.
Read more about Private Education Loan without Collateral – Must know basics
Unsecured Education Loan Details of Private Banks
Both NBFCs, as well as private banks offer unsecured education loan for abroad studies. However, the education loan details of both the types of lenders are different in a lot of ways. Here is a basic comparison of the education loan terms offered by ICICI Bank and Axis Bank, two prominent private banks that offer abroad education loan without security.
The ICICI Bank Unsecured Education Loan Details
ICICI Bank has come up to be one of the most prominent names in the education loan industry, what with their competitive interest rates and education loan repayment policies for unsecured education loans. The bank has categorised universities all over the world into different lists, based on their global ranking. The global ranking of the courses provided by these universities is also taken into consideration for an ICICI Bank education loan without collateral. Some of the basic education loan details of the ICIC Bank education loan without collateral are as follows:
|ICICI Bank Education Loan Terms||Exact Values|
|Maximum Unsecured Education Loan Amount||A1 universities: INR 40 LakhsA2 Universities: INR 20 Lakhs|
|ICICI Bank Education Loan Interest Rates||A1 Universities: 11.25%A2 Universities: 11.25%|
|ICICI Bank Unsecured Education Loan Repayment||Moratorium period consists of course duration + six months post thatRepayment tenure lasts for 10 years, post moratorium period|
|Loan Margin*||A1 Universities: 5%A2 Universities: 10%|
|Processing Fees||1% of the total unsecured education loan amount + applicable GST charges|
|Loan Insurance Fees**||1% – 1.5% of the total education loan amount|
*The loan margin is only applicable to unsecured education loan amounts of above INR 20 Lakhs in ICICI Bank.
** Purchasing loan insurance is a compulsory requirement for all students who plan on borrowing unsecured education loans from ICICI Bank for their higher studies abroad.
Get in touch with the financial team of WeMakeScholars today to know more about the eligibility criteria for unsecured education loans from ICICI Bank. With the help of our guidance and assistance, you will be able to secure some of the best deals on unsecured education loans.
Axis Bank Unsecured Education Loan Details
Axis bank is another private bank which offers unsecured education loans at competitive interest rates to students who wish to study in various universities abroad. The Axis bank also maintains two different university lists called Prime A and Prime B which is similar to the system adopted by ICICI Bank for abroad education loans. The terms and conditions of unsecured education loans of Axis Bank are, as depicted in the below table.
The unsecured education loan terms and conditions applicable to loan amounts exceeding INR 20 Lakhs is different in Axis bank. They have been mentioned in the below table.
|Axis Bank Education Loan Terms||Corresponding Values|
|Maximum Education Loan Amount||Prime A universities: INR 40 Lakhs
Prime B universities: INR 25 Lakhs
|Education Loan Interest Rates||Prime A universities: 11.75% to 12%Prime B universities: 12% to 12.5%|
|Moratorium Period||Moratorium period: Course duration + Six months|
|Repayment Tenure||For Education loans up to INR 40 Lakhs– 10 years excluding the moratorium period
For Education loans exceeding INR 40 Lakhs – 15 years including moratorium period
|Processing Fees**||For loans upto INR 20 Lakhs : INR 15000 + GST charges
For Loans greater than INR 20 Lakhs: 0.75% of amount above 20 lacs + GST (non-refundable)
|Loan Insurance Fee||1% to 1.5% of the total loan amount|
Important points to note about Axis Bank Unsecured Education Loans
- *Loan Margin: Unsecured education loans from Axis bank covers about 85% of the total expenses. The margin of 15% is fixed and it rarely varies.
- **Axis Bank Education Loan Processing Fees: The Processing fees charged by Axis bank for unsecured education loans that exceed INR 20 Lakhs is calculated as 0.75% of amount above 20 lacs + GST (non-refundable)
- Purchasing loan insurance is compulsory for all unsecured education loan schemes. The loan insurance fee will be adjusted against the candidate’s total loan amount.
Education Loan Details of Abroad Education Loan Without Security Borrowed From NBFCs
NBFCs are the primary choice of many students who wish to borrow a non-collateral education loan to study in prestigious universities abroad. The terms on the basis of which NBFCs grant unsecured education loans to students is more or less similar, regardless of their brand. Some of the common abroad education loan terms which are applicable to abroad education loan without security are mentioned in the table below. The maximum education loan amount limits offered by NBFCs for different countries are different.
|Education Loan Terms||Corresponding Values|
|Country-wise Maximum Education Loan Amount||USA: INR 45 LakhsCanada: INR 25 LakhsAustralia: INR 15 Lakhs
Ireland: INR 15 Lakhs
Germany: INR 20 Lakhs
|Rate of Interest||US: 12% to 13.5%Canada: 12.5% to 14.5%For other countries: 12.5% to 14.5%|
|Maximum moratorium period||Course period + 1 year|
|Repayment tenure||10 years including moratorium period|
|Processing Fees||0.95% to 2%|
|Loan Insurance||Approximately 2%|
Candidates may secure the desired education loan amount only if their academic records reflect excellent performance. Terms which are important to the entire education loan process, such as the interest rates, processing fees, etc. may vary depending on the quality of a student’s academic profile and their co-applicant’s financial profile.
Basics of Applying for an abroad education loan without security from NBFCs
Procedure-wise, unsecured education loans provided by NBFCs are easy. Securing an abroad education loan without security from NBFCs is an easier process when you compare them with the education loan procedure of nationalized banks and PSUs.
Some of the factors that make obtaining education loans from NBFCs easier are:
- Faster & easy disbursement: Since an abroad education loan without security does not require students to pledge collateral security of any kind while applying, the disbursement process of a non-collateral education loan from NBFCs becomes much faster. This means that the additional procedures like obtaining the legal opinion from a lawyer and getting the property evaluated by a competent authority are skipped. To sum it up, the disbursement of a non-collateral education loan from NBFCs does not exceed more than a weeks’ time.
- Less paperwork: In case of an abroad education loan without security, where there is no security involved, the amount of paperwork which is to be done by the candidates and the NBFCs automatically comes down. Hence this speeds up the process as well.
- No Loan Margin: An abroad education loan without security from NBFCs generally funds 100% of a candidate’s higher studies. This means that there is no loan margin set for education loan applicants by NBFCs.
Read more about Applying for Non collateral education loan: Step by Step process
Education Loan Security: Private Banks Vs NBFCs
After going through the previous paragraphs, you may have come to the realisation that the terms and conditions offered by NBFCs, as well as private banks may seem similar. However, the benefits of borrowing an unsecured education loan from private banks are always higher as compared to NBFCs when it comes to the following points:
- Education Loan Interest Rate: The interest rates offered by NBFCs are slightly higher as compared to those offered by private banks. Also, the education loan interest rates of NBFCs for unsecured education loans are variable, depending on the quality of a student’s profile. Private banks, on the other hand, have fixed interest rates.
- Student visa process: The embassies of countries like New Zealand and Australia are particular about the proof of funds submitted by students who have applied for a student visa. If you show your proof of funds to be unsecured education loans from NBFCs, you might likely face issues in getting your student visa approved on time. On the other hand, unsecured education loans from private banks are accepted by most NBFCs as proof of funds, as embassies consider private banks to be reliable sources of funds.
- Variation in Terms and Conditions: The education loan terms of NBFCs can be varied depending on the quality of a student’s profile. However, since these organizations are not completely bound by RBI regulations, these terms can be changed without any prior intimation. In 2018, all the major NBFCs faced a major financial crisis and the interest rates of all unsecured education loans were hiked without any prior intimation. This is one of the major risks of borrowing an education loan from NBFCs. Private banks, on the other hand, are required to adhere to RBI regulations and hence, their terms and conditions remain constant.
|Education Loan Interest Rate||12.5% to 14.5%||11.5% to 12.5% (depending on the university & course ranking)|
|Age limit for education loan||Not exceeding 30 years of age||Age relaxation granted under certain circumstances|
|Possibility of getting a student visa||Less||More|
Possessing a thorough knowledge about the various education loan terms and conditions is a crucial part of the education loan process. The decision to fund your higher education abroad with the help of an abroad education loan without security is a risk in itself due to the inherent nature of unsecured education loans. It is very important to make an informed decision when you fund your higher studies with education loans. The financial team at WeMakeScholars understands this concept and accordingly provides assistance to all our students. So far, close to 3000 students have benefitted from our services.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others