Bank or NBFCs? Which is the Best Option for your Overseas Education Loan?

Pursuing higher education from a foreign university surely costs a hefty amount but with the world-class quality of education and access to global opportunities, it is worth the investment. With the increasing number of students moving abroad for their higher studies, there is also an increase in the number of students opting for an overseas education loan. It serves as a convenient option for students as it does not require to be paid from the very first month it is availed. The equated monthly instalments (EMIs) begin at a later period when a student finishes the course and starts to earn. This is one of the major reasons why taking an education loan is a highly sought-after option among study-abroad aspirants.

Even though students are willing to apply for an overseas education loan to fund their higher education, the big question is still looming in their minds. Wondering what it is? Well, there is a lot of confusion in selecting the right financial lender. In our latest article, we are going to analyse two leading choices, which are Banks and NBFCs. Keep reading to decide on a suitable loan option to fund your foreign education.

Understanding the Difference Between Banks and NBFCs

Banks

Banks are financial institutions authorized by the Reserve Bank of India (RBI) to provide a range of services, including student loans for studying abroad. These include both nationalized banks (government-owned) and private banks (privately owned but regulated by the RBI). Banks generally offer more structured education loans, with benefits like government subsidies, interest rate concessions, and tax deductions.
NBFCs

Non-Banking Financial Companies (NBFCs) are financial institutions that provide services similar to banks, such as loans but do not hold a banking license. Though regulated by the RBI, NBFCs often operate with more flexibility, especially in terms of lending criteria. They are known for offering quick processing and more tailored loan products to suit different student profiles.

After having a brief understanding of these two leading loan providers, let’s have a glance at the key features and their education loan offerings.

Analysing the Key Characteristics of Banks & NBFCs

Understanding the differences is essential for selecting the best loan option. Given below is an in-depth comparison between Banks and NBFCs, enabling students to make an informed decision.

Features	Banks		NBFCs
Features	Nationalised Banks	Private Banks	NBFCs
Quantum of Finance	Nationalized banks offer Secured Overseas Education Loans up to INR 1.5 crores. Some banks have exclusive schemes for Unsecured Overseas Education Loans and provide loans up to INR 40 Lakhs.	Private banks offer Secured Overseas Education Loans up to INR 1.5 crores. For Unsecured Overseas Education Loans, Private Banks provide higher loan amounts, often going up to INR 75 Lakhs.	NBFCs are more liberal in offering large loan amounts, they offer 100% funding for Secured Overseas Education Loans. For Unsecured Overseas Education Loans, NBFCs provide loan amounts up to INR 75 Lakhs for premium institutions.
Interest Rate	Starts at 9.70%	Starts at 10.50%	Starts at 10.50%
Margin Money	Loan Margin requirement ranges from 10% to 15% of the loan amount	Loan Margin requirement ranges from 10% to 15% of the loan amount	NBFCs are known to offer loans with zero-margin money requirements
Processing Time	Up to 3 weeks	Up to 2 weeks	8-10 working days
Processing Fees	Ranging from INR 5,000 to INR 10,000 or a nominal 1% of the loan amount	Ranging from 1% to 2% of the loan amount	Ranging from 1% to 2% of the loan amount
Loan Tenure	Up to 15 years	Up to 15 years	Up to 10 years
Moratorium Period	Course duration plus 6 to 12 months	Course duration plus 6 to 12 months	Course duration plus 6 months
Disbursement Timeline	Tuition Fees - Remittance to University Account. Living Expenses - On-campus accommodation or 3 to 6 months of living expenses in respective bank Forex Card	Tuition Fees - Remittance to University Account. Living Expenses - On-campus accommodation or 3 to 6 months of living expenses in respective bank Forex Card	Tuition Fees - Remittance to University Account. Living Expenses – In the borrower's savings account or respective bank forex card under their tie-up.
Serving Simple Interest	Serving simple interest is optional	Compulsory to pay Simple or Partial Interest, once the loan is disbursed	Compulsory to pay Simple Interest or Partial Interest, once the loan is disbursed
Tax Benefits	Tax benefits under Section 80E of the Income Tax Act for the interest paid	Tax benefits under Section 80E of the Income Tax Act for the interest paid	Tax benefits under Section 80E of the Income Tax Act for the interest paid
Borrower's Age Limit	18 to 35 years of age	18 to 35 years of age	28 years of age
Acceptable Property (For Secured Loans)	Residential flat, house, open plot, shop	Residential flat, house, shop	Residential flat, house, open plot, shop, open plot, shop

These are the notable differences between banks and NBFC education loans.

Choosing between a Bank or an NBFC for your overseas education loan largely depends on your individual financial needs, loan preferences, and timeline. Ultimately, for your long-term financial relief, you must evaluate all the factors and decide accordingly. To know more about the best banks and NBFCs, you can reach out to team Élan Overseas Education Loans. Our Expert loan advisors will guide you through the best loan options including the education loan without collateral.

Get expert guidance today to secure the best loan for your dream education abroad.

FAQs

What are the essential documents required for an overseas education loan application?

To apply for an education loan, identity proof, address proof, income proof (for co-borrowers), admission confirmation from the institution, academic records, and collateral documents (for secured loans) will be required.
Is a co-applicant required for an overseas education loan from NBFC?

Yes, most NBFCs require a co-applicant (usually a parent or guardian) for the education loan. The co-applicant's income and credit history are often key factors in loan approval.
How is the interest rate determined for an overseas education loan?

The interest rate is determined based on multiple factors such as the applicant’s credit score, the course and institution, the co-applicant's financial stability, and the lender’s base rate.
Can one get a loan for part-time or online courses abroad?

Most banks and NBFCs offer education loans primarily for full-time courses. Loans for part-time, distance learning, or online programs are less common and often subject to specific eligibility criteria, particularly from NBFCs.
Is it possible to get an overseas education loan if one has a low credit score?

While a low credit score can make it challenging to secure a loan from banks, especially nationalized banks, NBFCs are often more lenient. They may approve loans based on the co-applicant’s creditworthiness or require higher interest rates and stricter repayment terms.