It is that time of the year when lakhs of students start planning and preparing for their education abroad, from taking tests to applying for a visa. One of such preparations is arranging funds for your tuition fees and living expenses abroad. And we all know how expensive abroad education could be, a minimum of 20 lakhs is required for any program in any abroad country. Since every student can not fund the entire program on their own, they head to all the lenders from public banks like SBI, BOB, etc to private lenders like private banks and NBFCs, hoping to get the cheapest education loan in India.
But because of the pandemic and with restrictions on movement, a student alone can't visit each bank, and thus couldn't compare the deals offered by different lenders. Besides, it consumes a lot of time checking with each lender. But you can take help from the WeMakeScholars an organization funded and supported by the Ministry of IT, Govt. of India, and as this initiative comes under the Digital India Campaign, we do not charge any service charges, hence it's free of cost. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile.
Cheapest student loan options for Indian students
When it comes to getting the cheapest education loan, it all boils down to the rate of interest offered by lenders. And Public banks not only provide the cheapest student loan interest rate but an overall better deal compared to Private banks and NBFCs.
Here are some of the parameters to consider while comparing public banks and private banks to get a clear picture of which one is better.
Rate of Interest
Starting off with every student's concern, the rate of interest can make a huge difference in the future. Even a 0.5% difference in the rate of interest can help reduce the huge burden off the student's shoulder considerably.
The rate of interest for public banks is around 8% to 9%. And this is the cheapest student loan interest rate option available for students.
For private lenders like private banks and NBFCs, the rate of interest is around 10% to 14.5%. It may increase or decrease by 0.25 to 0.5 during the loan repayment years as it is a floating interest.
Clearly, public banks like SBI, BOB, etc are offering a much lower rate of interest on education loans than those offered by any private banks or NBFCs. A lower rate of interest could save you lakhs in the future.
The processing fee is the charge students pay to banks for an education loan. It is around 10K plus GST for public banks and it is also refundable for some public banks. Since students have to pay this processing fee at the start, if for some reason the bank rejects the application, students get back the processing fee of 10K. And if students withdraw their application then it won't get refunded.
Students pay the processing fee to private banks and NBFCs in the last stage because the processing fee of private banks is 1% of the sanctioned loan amount, and the processing fee of NBFCs can be 1% to 2% of the sanctioned loan amount. And Private lenders don't refund processing fees.
Note that public banks don't charge any processing fee of amounts up to 7.5 lakhs. So if you take an education loan of 40 lakhs from a public bank, you pay 10K but to a private lender, you have to pay 40K. Straight away it is a 30K difference.
If we are looking for the cheapest education loan in India, then loan insurance is also something we need to keep in mind. It is to safeguard the co-applicant, where if any mishap happens to the applicant in the future, your co-applicant won't have to bear all the remaining loan amount.
Though it is not mandatory with public banks, getting your education loan amount insured is prudent. It is barely 0.5% to 1% on the loan amount.
Loan insurance is compulsory for private lenders. It is 1% to 1.5% of the loan amount for private banks and 2% and more for NBFCs.
Loan insurance is optional for public banks but it is compulsory to get your education loan insured for private lenders. It can add additional costs to your loan amount.
Public banks can offer only up to 7.5 lakhs unsecured loans. And for an amount of more than 7.5 lacs, students have to pledge collateral. Depending upon your collateral value and your total loan requirement you can get anywhere from 10 lakhs to 1.5 crores. It is always preferred to initiate the process with public banks for a secured loan and private lenders for an unsecured loan.
Private banks can at max offer up to 40 lakhs unsecured loans depending upon your university and country. They might offer 45 lakhs but only if you get a very strong (earning) financial co-applicant.
NBFCs offer varies from county to country. They can offer up to 60 lacs for the US, 40 lacs for the UK, 25 lacs for Canada, 20 lacs for Germany, 15 lacs for Australia, Ireland.
A feature of the cheapest education loan should not just be limited to the rate of interest but more.
Like public banks give this grace period to students where for a course period plus 6 months to 12 months, students need not pay any interest to banks. Though simple interest will be charged which you can pay if you want to.
Whereas private lenders do not give a no-payment moratorium period, students are required to start paying either full interest or partial interest during their course period.
Public banks like SBI, BOB, PNB, etc provide the cheapest student loans to students with all the additional benefits like a lower ROI, fixed processing fee, higher loan amount, etc but since public banks are renowned for their delayed processes, it could take months, so plan beforehand and start your loan process early with WeMakeScholars, we can help you get a secured education loan from public banks within 15-20 working days.
Since it's not wise to just rely on public banks, as they do secure loans, what if for some reason they reject your application, you need to have a backup plan. Backup plans are your unsecured loans and there too you need the cheapest education loan option. WeMakeScholars can help you get the cheapest education loan option both for a secured loan and an unsecured loan. We try our best to get students the best deal they can get. So do reach out to our financial officers by requesting a callback.
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 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.