An education loan without collateral is one of the two major types of abroad education loans in India. Private lenders like the HDFC Bank, ICICI Bank, Axis Bank and NBFCs like Incred, Auxilo, Avanse Financial Services are some of the prominent names that pop up when candidates search for an unsecured education loan to fund their studies. Although a lot of information on the education loan schemes of these private lenders is avail able on the internet, not many sources focus on the individual phases of an unsecured education loan process. This article aims to provide you with a glimpse of one of the most important phases in the education loan process of private lenders.

The Three Phases of an Education Loan Process of Private Lenders

Before you try and understand how private lenders disburse non collateral education loans, it is important to have an idea about how these education loans work. The following paragraphs will give you a glimpse of the three very important stages in the unsecured education loan process. This will greatly help you get a grasp on the topic of discussion of today’s article.

Phase 1: Application Process of Private Lenders

A typical education loan process takes place in three phases. The first phase is the application process which involves the borrower gathering all the necessary education loan documents and applying for an education loan. The application process of private lenders for non-collateral education loans is pretty simple as it is conducted online with very little paperwork. Non-collateral education loans are easier to get as borrowers are not required to pledge assets in order to obtain one. This makes the entire loan process easier for candidates as the number of documents which are to be submitted to the private lenders of unsecured education loans automatically goes down. The next step is the processing and verification of the application submitted by the borrowers. 

When it comes to unsecured education loans, private banks and NBFCs carefully scrutinize the borrower’s application for three important factors:

  1. Details related to the borrower’s university ranking, course ranking and future employment opportunities.
  2. Details related to the borrower’s academic performance in the past. This includes scores of qualifying examinations such as GRE, GMAT, IELTS, TOEFL, SAT, etc., their previous qualifications, gap years, etc.
  3. Details related to the co applicants financial records. When it comes to unsecured education loans, it is important to note that a co-applicant’s financial capacity plays a very important role in the process. Since private lenders grant these education loans without asking for any security, the co-applicant’s ability to repay the loan amount is a make or break deal in the unsecured education loan application process. Any problems in the co applicant’s CIBIL score may lead to the disqualification of loan application. Hence, it is important to ensure that your co applicant fulfills all the requirements placed by the private lender you plan on approaching for an unsecured education loan.

In order to know more about the various factors of your co applicant’s profile, watch the Loanflix web-series on YouTube. It is a one of its kind series of videos which relay important information on the education loan process.

Now that you got a glimpse of the education loan application process, let us move on to understand the next phase of the unsecured education loan process - disbursement.

Phase 2: Education Loan Disbursement of Non Collateral Education Loan

The disbursement of education loans by NBFCs is pretty simple and easy to understand. Unlike government banks that require loan applicants to submit an education loan disbursement letter to the bank, NBFCs do not require a disbursement letter. The education loan disbursement time of NBFCs is way faster in comparison to public banks. Since there is no involvement of collateral, the education loan disbursement time taken by NBFCs is way shorter. 

The third and the last phase of an unsecured education loan process is the repayment of education loan.

Phase 3: Education Loan Repayment of NBFCs

NBFCs offer a moratorium period on education loan repayment like government banks do. However, unlike government banks, this period is not payment-free for those who have borrowed unsecured education loans to study abroad. So, ideally, the education loan repayment of unsecured education loans borrowed from prominent NBFCs begins once candidates receive the first disbursement of their education loan.

NBFCs require students to make their interest payments during the moratorium period. The good news is that NBFCs accept the partial payments of interest during the moratorium period. Partial payment is when candidates are allowed to partially pay the interest charged during the moratorium period. This means that if you are being charged a monthly interest of Rs.10,000 per month during your moratorium period and you are unable to do so, NBFCs allow you to pay only Rs.4000 to Rs.5000, depending on their policies.  

Depending on your profile, NBFCs may even ask for full payment of interest during the moratorium period. This clause is entirely up to their education loan repayment rules. The loan EMI will be deducted from your account once the moratorium period is over.

The WeMakeScholars team is closely associated with prominent NBFCs. If you are looking for a concession in your unsecured education loan interest rates, or to negotiate the repayment terms, do not hesitate to contact our team for assistance. You get to avail an automatic 0.5% reduction in your loan interest rates when you apply through us. Request a callback today to know more about other details.

Let us move on to the topic of discussion - how are funds disbursed to borrowers by different private lenders in India.

Education Loan Disbursement Process of Private Lenders

Due to very less paperwork, private lenders of an education loan without collateral release funds earlier than their government-funded counterparts. Private lenders like Credila, Incred, Auxilo, Avanse, ICICI Bank, etc have adopted a more or less similar framework when it comes to releasing funds to those in need. Here is a detailed take on these steps.

Step 1: Pay Processing Fees

If you go through the terms and conditions stated by private lenders for abroad education loans, you may come to realise that processing fees are an essential part of the process. Generally, most lenders like HDFC Credila or Axis Bank, charge 1% to 2% of the total education loan amount as processing fees. In order to obtain the education loan sanction letter, borrowers have to complete the payment of this amount. The sanction letter without which funds cannot be released can only be issued after borrowers have made the payment of the processing fees.

Step 2:Decide a Date of Disbursement

The date of disbursement is a very important part of the education loan process. One of the biggest highlights of getting an unsecured education loan from private lenders is the fact borrowers get to provide their inputs regarding the date of disbursement. All lenders of an education loan without collateral allow their borrowers to decide the date on which they would like to receive their education loan funds. The procedure of doing so may differ from lender to lender. In order to know the specifics, get in touch with the financial team of WeMakeScholars at the earliest possible instance.

Step 3: Decide Disbursement Amount

In this part of the disbursement process, borrowers are given the opportunity to inform their respective lending bank or NBFC about how much amount they would prefer to receive as the first disbursement. Borrowers are advised to consider factors such as the tentative date on which they would prefer to receive funding, the last date of their tuition fee payment, rent payment, etc. and then let the lenders know of a concrete decision. Decide the exact date when you would like to take the disbursement from Credila. This will depend upon when you get your visa (if applicable) or the last date of tuition fee payment.  You will also need to inform your lender exactly how much money you need them to release for your tuition fee and living expenses.

Step 4: Decide Disbursement Details

You would also need to provide exact details about how the fees need to be remitted to the University/ College, and to you by providing exact banking details, viz., method of payment such as bank wire transfer, demand draft (payable in which city) etc. All this information is easily available from the University / College in the admission package they have sent you.

Step 5: Collect the Final Loan Agreement Documents

After receiving all the above details, your respective lender will be able to prepare your final loan agreement documents. These loan agreement documents need to be signed by the Student, all the Co-borrowers, & Guarantor (if any) by visiting your education loan lender's office office. 

Step 6: Submit the Electronic Clearance System 

Certain NBFCs like HDFC Credila require borrowers to submit an ECS from their bank (Electronic Clearing System) mandate from HDFC Credila, which you will then need to get signed and stamped from your bank (from where you will be making the monthly repayment to your lender). One of the original copies of the ECS form needs to be given to the bank manager for their records. This can only be done after you have decided the exact date of disbursement. This step is specific only to HDFC Credila education loans. In order to know whether you would be needing an ECS, get in touch with the financial team of WeMakeScholars at the earliest.

Step 7: Providing Final Original Documentation

At the time of visiting your lender’s office for signing the education loan agreement documents you will also need to bring following documents with you:

  1. Original KYC Document of student, co-borrowers & guarantors, e.g. PAN Card,
  2. Passport, etc. to show it to HDFC Credila's loan officer to validate your identity.
  3. Two original copies of the completed ECS Mandate Form signed and stamped by your bank, as mentioned above. In case you are borrowing an HDFC Credila education loan.
  4. Cheques favouring your chosen private lender as security from the bank account from which the ECS Form is provided

Step 8: Visit Your Lender’s Office  For Signing The Loan Agreement

The final step to get your education loan money from private lenders is to visit their office to handover all the above mentioned original documents and sign the education loan agreement documents. Once the education loan agreement has been signed, you cannot make any changes to the clauses mentioned in the document. Hence, it is advised that you read the content carefully before signing the same. In order to know further about the other formalities that are specific to your lender, get in touch with the WeMakeScholars financial team.

Step 9: Getting Your Education Loan Funds

Your respective lender will transfer the education loan money to the bank account of the University/ College or hand over a Demand Draft as per the information provided by you to them. This marks the end of the education loan disbursement process from private lenders.

If you have any further doubts about the specific procedure followed by your lender, get in touch with the financial team of WeMakeScholars at the earliest possible instance. They have an excellent grasp of the current practices followed by most private lenders of an abroad education loan and will be able to guide you through the entire process.

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