Top Education Loan Lenders: How To Choose The Right One?
What is the first thing that comes to mind when you think about borrowing an education loan? If your answer is ‘finding the right education loan lender’, then you are probably thinking along the right way. Finding a reliable education loan lender can be a challenging process, given the attractive terms offered by numerous education loan lenders; both private and public. If you are confused about deciding on an education loan provider, this article will give you a much needed relief from the same.
Today’s article will educate you on certain aspects of the education loan process which should be taken into account before deciding on any education loan lenders in India. It is common knowledge that education loans in India are divided into two different categories based on the need of collateral security; secured education loans and unsecured education loans. One of the fundamental aspects which differentiates these two education loans is collateral security. The presence of collateral plays a significant role in helping education loan lenders determine their terms and conditions.
Coming to the topic at hand, there are several factors that are to be considered while finalizing an education loan lender. Most students often commit the mistake of only looking at the education loan interest rate and then deciding on the education loan lender. The first factor that you must consider is which type of education loan to borrow.
Which Type of Education Loan To Go For?
As mentioned in the previous paragraph, there are two different types of education loans in India. The first step towards a successful education loan process is determining the type of loan you wish to fund your higher education with.
When to Go For a Collateral Education Loan?
A government bank education loan or a collateral education loan involves the pledging of assets as collateral security. It is true that most government banks offer some of the best benefits. However, a lot of students fail to notice that borrowing a collateral education loan requires them to pledge some form of asset as collateral security. The value of this asset has to be greater than the education loan amount you need. If you do, then it is fair to consider a government bank education loan to fund your higher education.
However, a lot of students are left confused when terms like loan margin, fair market value, etc are thrown at them when they directly try to approach these government banks for an education loan. This causes them to give up on the process altogether. This is when the services of WeMakeScholars come in handy. So, if you are someone who is still confused about the education loan terms of collateral education loans, do get in touch with the WeMakeScholars team.
When to Go For An Education Loan Without Collateral?
Now, if you are someone who doesn’t have any assets to pledge as collateral, or are not able to manage a third-party’s assets for the same purpose, you may consider funding your studies with the help of an education loan without collateral. The education loan terms of NBFCs and private banks may make it seem like the whole process is going to burn a hole in your parents’ pocket. However, the fact that it does not involve any collateral security is what makes it attractive.
Now, similar to government banks, NBFCs and private banks also have a tendency to quote higher education loan interest rates.
When you apply through WeMakeScholars, you get to avail an additional 0.5% off on the education loan interest rate. So request a callback today. Now that the fundamental concern has been addressed, let us take a look at some of the other important aspects of a typical education loan.
Education Loan Lender: Interest Rates
Every applicant considers the interest rates offered by education loan lenders before everything else. Sometimes, it is the only factor which is taken into account by students and their guardians alike while zeroing in on an education loan lender. But they aren’t wrong altogether. You should always consider the interest rates offered by education loan providers when you begin your education loan journey. This is one of the basic parameters of a typical education loan scheme.
Most government education loan lenders offer lower interest rates that fall in the range of 8.5% to 10%. The interest rates of education loan without collateral are in the range of 11.5% to 14.9%.
Education Loan Processing Fees
Although this aspect of the education loan process is seldom the talking point of discussions, processing fees is a very important part of the education loan process. Education loan lender decide the education loan processing fees depending on the services opted by loan applicants. Government education loan lender have a fixed processing fee while those of NBFCs and private banks differ. NBFCs and private education loan lender charge a certain percentage of the total education loan amount as processing fees. This percentage falls in the range of 0.9% to 2% of the total loan amount.
Education Loan Repayment Policies
Another factor which is highly underestimated by loan applicants is the policies of education loan lender regarding the repayment of abroad education loans. Repayment is one of the primary things that should be considered by every education loan applicant before deciding to borrow a loan to fund their studies. The education loan repayment policies of government banks are more feasible to students who do not have financially stable co-applicants. Government banks grant a moratorium on education loan repayment. This moratorium period lasts till candidates finish their courses and get employed. This is one of the highlights of government bank education loans. Interest charged during the moratorium period can be paid along with the EMI, later.
The repayment policies of NBFCs and private education loan lenders require students to begin their education loan interest payment a month from the date of the first disbursement of education loan. So if you are opting for an education loan without collateral, do keep this point in mind.
Education Loan Insurance
Education loan insurance is another term which is often overlooked by students. More often than not, many applicants fail to understand the importance of an education loan insurance in the entire process. Most education loan lenders, especially those which provide education loan without collateral, require students to purchase an education loan insurance.
An education loan insurance issued by your education loan lender ensures that in the wake of an unfortunate event, for e.g, the candidate facing a medical issue or death, the burden of the education loan repayment does not fall on the family. If something of the sort should happen, the education loan insurance money can be used against repayment to the education loan lender.
Government education loan lenders offer additional waiver on their interest rates when students purchase an education loan insurance. NBFCs and private education loan providers have made it compulsory for students to purchase education loan insurance as an education loan without collateral does not require students to pledge any asset as collateral security.
Education Loans Acceptability In Embassies
A lot of countries do not accept private education loan lenders to be trustworthy sources of funding. Hence, if you are planning to borrow from a private education loan provider, do check whether an education loan from your respective lender is considered to be acceptable by that country’s embassy. Proceed with the application process only after confirming the same.
All of the above mentioned factors are significant in the decision making process of choosing an education loan lender. So do keep these in mind when you decide to borrow an education loan to study abroad. Do stay tuned for the next article.
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