Difference between NBFC & Bank

A loan taken out from governmental or private money lending institutions to pay for expenses associated with education is referred to as an education loan. In this situation, it is particularly challenging for parents to finance the funding of their children’s higher education because higher education costs are increasing every year. As a result, a lot of them are forced to use education loans as a form of financial aid to help pay for their studies and other expenditures associated with their education.

Top banks (public and private), including State Bank of India, Bank of Baroda, and NBFCs (Non-Banking Finance Companies), like Avanse,HDFC Credila Incred, etc., provide a variety of loan options for prospective students to pursue their further education at their desired colleges in India and overseas.

It might be difficult to compare and select from among these programmes because it depends on a number of different aspects, including the course, college costs, the interest   rate being offered, the borrower’s ability to repay, the need for collateral, etc.

The following are some key differences between the education loan programmes provided by banks and NBFCs:

• Course flexibility: The banks typically provide student loans to reputable Indian and international universities. Graduate, postgraduate, and diploma programmes all cover a different set of courses. NBFCs provide student loans for a wider range of unconventional degrees at various colleges. But the interest rate differs for various colleges. For the best universities, the interest rate is lower; for the others, it is higher.
• Expenses Covered: The banks typically cover 80-85% of all educational expenses, including tuition, test fees, travel expenses, lodging costs, etc., leaving a margin of 15-20%. The complete cost of education, including travel, tuition, exam, and other fees, is fully covered by NBFCs without the need for margin money.
• Loan procurement: It is highly monitored by banks, who will only provide educational loans for programmes that have clear career paths and high potential earnings in the future. NBFCs offer loans for many more courses on easier terms and are significantly more lenient and flexible when it comes to loan procurement.
• Processing time- Based on the borrower’s credit history, banks sanction and approve loans. They rapidly approve and issue loans for the reputable programmes with good career prospects. NBFCs, on the other hand, approve and authorise loans significantly more quickly, independent of the sort of course or the college.
• Processing fees: For their operation costs, banks impose a 0.5–2% processing fee. While the processing fees levied by NBFCs range from 1 to 2 percent.
• Security Collateral: For loans over Rs. 7.5 lakhs in the case of studying abroad, banks require collateral security. They are accepted based on the security that the borrower has given the bank. While NBFCs base their request for collateral security on the borrower’s credit history and the loan amount.
• Loan Amount: Depending on the course type and college ranking, banks typically have a maximum loan amount that can be borrowed. There is no maximum lending amount for NBFCs. Regardless of the college or course type, they organise and sanction their loans according to the borrower’s needs.
• Interest rates: Based on the bank’s current base rate, interest rates are calculated by banks. For loans taken out abroad, the range is typically 10.5-20% for secured loans and 10.75-14% for unsecured loans. Interest rates for domestic loans range from 9 to 14 percent. On the other hand, NBFCs provide interest rates for both secured and unsecured loans that range from 9 to 12%.
• Tailored services: Depending on the borrower’s needs, certain private banks offer specific customised services and loan packages. NBFCs offer specialised goods such fast-track loans, pre-admission, pre-visa, and doorstep services.

Visit the website of WeCareCapital (www.wecarecapital.in) for more details on the process for obtaining an education loan for studying in India or overseas. This fin-tech firm aims to make the loan application process easier by offering end-to-end service. It provides a single application form for applying to different banks and assists you in obtaining the best price without charging any fees.