As the number of students studying abroad has increased, many banks have started giving educational loans to these students with attractive schemes to study abroad. One such popular educational loan scheme was offered by Credila which is an NBFC (Non-Banking Financial Company) that was acquired by HDFC to form HDFC Credila Education Loan.
HDFC provides support through education loans to students seeking further studies both in India and abroad. While HDFC bank mostly takes care of other types of loans, HDFC Credila is dedicated to only education loans. HDFC Credila has customized its loan schemes for 35+ different countries.
HDFC education loan eligibility criteria
To avail an HDFC student loan, you and your co-applicant would need to deem eligible for one as per HDFC education loan eligibility criteria
- The applicant must be an Indian citizen.
- The co-applicant (Father / Mother / Brother / Sister (married) /Spouse) must also be an Indian citizen.
- The co-applicant must have an Indian bank account with a cheque facility.
- Proof of admission to the university before disbursement.
HDFC education loan interest rate
The aspect that needs to be taken into utmost consideration while applying for an education loan is its interest rate. HDFC education loan has a floating rate of interest linked to HDFC Credila's Benchmark Lending Rate (CBLR) plus spread, similar to Public banks' MCLR plus the spread.
HDFC varies the spread with your profile and can be as low as zero. It lies from 11% to 14.5%. Currently, it has a lending rate of 11.80% per annum. Beware that HDFC Credila's education loan interest rate is subject to change from time to time without prior notice.
Simple or Compound Interest- decoding the marketing gimmick?
Though they have used the term "Simple" interest multiple times in this paragraph to set up a misleading image as done in the movie "Drishyam". If you just read it carefully 2-3 times, you will realize it means "Credila doesn't encourage interest on interest because that is an additional burden for the applicant and parents, so, therefore they want you to make simple interest payments".
For eg., if You borrow Rs. 10 lakhs at an annual compounding interest rate of 10%, Rs. 1 lakh will be added to your principal amount at the end of the first year as the interest. Hence the interest on the 2nd year will be charged on Rs. 11 lakhs. But, here is the catch, if you are required to pay Rs. 1 lac every year (in monthly proportions) towards your simple interest, then how will it get compounded. Since there is no pending interest, nothing will compound. That's what Credila meant by these lines- "Therefore, HDFC Credila products require at least the interest payment on the loan during the study period" (as highlighted in the red box above pic)
But in case, you did not pay your simple interest every month, e.g. you did not pay complete Rs. 1 lakhs annually, instead, you only pay Rs. 30,000, then automatically the outstanding amount (Rs. 70,000) starts compounding.
But in Government banks, during the moratorium period that is course duration plus 6 months (extendable even to 12 months), the incurred interest doesn't get compounded. E.g. if you borrow Rs. 10 lakhs at an annual interest of 10%, then at the end of the first year, the total repayable amount becomes Rs. 10 lakhs + Rs. 1 lakhs. As you get the option of payment free moratorium period in Government banks, you are not required to pay that Rs. 1 lakhs (year 1 interest), even then for the 2nd year, the interest will be charged on Rs. 10 lakhs only, unlike Credila. Hence, at the end of the second year, the total repayable amount will be Rs. 10 lakhs + 1 lakhs + 1 lakhs = Rs. 12 lakhs instead of Rs. 12.1 lakhs as happens in an annual compounding loan.
The above example is considering that the compounding is done annually. But, as shown below in the case according to Credila's official website, they hold all rights to calculate the interest monthly or even at the worst on a daily basis. This means the repayment difference between a public bank and Credila drastically widens from year to year. (Both the pics have been taken from the official HDFC Credila website)
HDFC Credila charges a higher processing fee when compared to the public banks. The processing fee of HDFC Credila is a certain percentage of the sanctioned loan amount. It varies between 1%- 1.25% plus 18% GST.
For example, if you get a loan sanction of Rs. 40 lakhs from HDFC education loan for abroad, then the processing fee varies between Rs. 40,000- 50,000, plus an additional 18% GST on this, summing to Rs. 47,200- 59,000. At the same time, the processing fee of a public bank varies from no fee to a maximum of Rs. 10,000, independent of the loan sanctioned loan amount. (Speak with our team to know more about 0% processing fee options).
HDFC education loan for abroad covers travel expenses, tuition fees, living expenses, and expenses such as examination fees, laboratory fees, etc.
Under the HDFC student loan scheme for education abroad, students can avail a loan starting from INR 1 lakh. It can offer an education loan of up to 50-60 lakhs depending on case to case basis.
Students would have to start repaying immediately after the disbursement of their first installment of the loan amount. They can repay the loan amount for up to 12 years after the moratorium period.
Collateral or non-collateral education loan
Depending on the loan amount that a student requires, they may need to pledge collateral security either in the form of immovable property such as, residential flat/house/non-agricultural land or in the form of liquid security such as a fixed deposit issued in favor of HDFC Credila. Usually, if you plan to take a loan of up to 7.5 lakhs, then it is collateral-free, and if the loan amount is more than 7.5 lakhs, then you are required to pledge collateral but in Credila for countries like the USA, Canada, Germany, etc you can get collateral-free education loan of more than 7.5 lakhs.
As per the terms of the HDFC Credila mentioned on their product profile, the co-applicant must be an earning individual in India – father/mother/brother/sister (married)/spouse. By an earning individual, it means that you need to provide proof of income preferably in the form of ITR. In addition, documented evidence must be presented to indicate the relationship that the co-applicant shares with the student. A student's maternal or paternal aunt or uncle; grandparents; first cousins; if they are married, then their in-laws are also eligible to be the co-applicant if any one of the aforementioned co-applicants is ineligible.
Once the students fill the online application form the HDFC Credila education loan team follows up with them. They have to submit the filled application form along with the supporting documents. The credit team will review their application and approve the educational loan. They will need to sign the education loan agreement and after that, the disbursement of funds will be done electronically.
Documents required- HDFC education loan
Following documents are required to apply for an education loan at HDFC bank.
- Filled Application Form
- Photos – Applicant and Co-Applicant
- Photo ID (Applicant and Co-Applicant)- Provide any one of the following
- PAN card, Aadhaar card, Driving license, Passport or voter’s ID
- Proof of Residence
- Proof of Admission (If available)
- Documents related to your Academics
- Financial statement
- Co-Applicant’s Income Proof
- Immovable Property Documentation, if the collateral is needed
Pros and Cons of choosing HDFC Credila for an education loan
- You can avail an education loan without collateral, as high as INR 50 lakhs for the US and Canada. While others require collateral.
- You can expect your sanction letter within 7-10 working days once all the required documents are submitted.
- You can avail up to 100% expense coverage. Other financial lenders that provide complete expense coverage, include NBFCs such as Avanse and Incred whereas there are a few public banks that do not have a loan margin. (Speak with our team to know more about the 0% margin options).
- HDFC education loan interest rate is quite high as compared to public banks like SBI, Bank of Baroda, Punjab National Bank, Canara which have interest rates ranging between 8% to 9%.
- You cannot avail an education loan if your co-applicant is retired.
- A co-applicant with an ITR of 2-3 years is mandatory for Credila whereas it is not necessary for nationalized banks, an income certificate will do.
- Credila does not accept third-party collateral security whereas all public banks do.
- As per HDFC Credila’s terms, you need to pay at least partial or full interest during your course of study.
- HDFC Credila charges a high processing fee which is equivalent to a certain percentage of the loan amount (usually 1%- 1.25% of the loan amount plus 18% GST on that). On the contrary, public banks have a fixed processing fee which is INR 10,000. Also, there are few public banks that refund the entire processing fee, after the sanction. (Speak to our team to know more about such 0% processing fee options)
If you are an aspiring student applying for an abroad education loan, you can request a callback from the WeMakeScholars team. The financial officer will get back to you and guide you until sanction and beyond. Please note there is NO fee charged by WeMakeScholars. Being a Digital India campaign-supported organization, all the services are free of cost.
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, New Zealand, France among others.