In our previous articles, we have mentioned how Government banks offer great schemes for abroad education loans. However, Government banks require collateral for processing an education loan for abroad studies, which is something not every student has. 

Such students can approach private lenders for education loans without collateral. Private sector banks and NBFCs are two major unsecured education loan lenders in India, and this article is focused on NBFCs. 

You can also watch the 9th episode of our web series named LoanFlix on Youtube which is also on the same subject. 

Why choose an unsecured education loan from NBFCs?

NBFCs come to the rescue of students who are not deemed fit for an education loan by a Government bank. The most common reasons are below

1. Under the RBI mandate, Government banks can offer only up to 7.5 lacs of unsecured education loans, which is not enough for abroad education.
2. Many students do not have collateral to pledge to take a loan against it.
3. Collateral value is not enough to cover the expenses of abroad studies.

Although NBFCs do offer huge amounts as education loans without collateral (up to Rs. 60 lakhs), their interest rates will be on a little higher side.

Major NBFCs functioning in India

Primarily, there are four NBFCs (Non- Banking Financial Corporations) functioning in India. They mainly focus on lending educational loans. They are

1. HDFC Credila
2. Avanse
3. Incred
4. Auxilo

The above list has been compiled in the order of their age in the market. Our team at WeMakeScholars works with all of them.

Read More on Abroad Education Loan Without Collateral NBFCs, Processing time & More!

Factors considered by NBFCs for approval of unsecured education loans

Before clearing a candidate for education loan approval, NBFCs take certain factors into consideration. The following aspects of a candidate’s profile are considered:

1. The candidates' academic details (10th, 12th, degree certificate, TOEFL, IELTS, GRE, GMAT, SAT grades)
2. The co applicant’s income profile with proof (Salary slips, Income Tax Returns, CIBIL score, etc.)
3. Chosen course for higher education.
4. Chosen country for higher education.

All the above-mentioned factors have been covered in detail in our article titled, “Eligibility for Education Loan : Criteria for Loan Applicants”. 

Unsecured Education Loan Terms

Unsecured education loan interest rate: 

The Rate of Interest (RoI), the maximum amount for loan approval, etc. are the most researched aspects of any kind of loan. One needs to note that none of the above terms is constant when it comes to securing abroad education loans from NBFCs.

To understand what this means, let us take a look at certain cases undertaken by the WeMakeScholars team:

Until three months ago, our team was able to deliver unsecured education loans of amounts up to Rs. 40-50 lakhs, with a rate of interest of 10.5%, for candidates aspiring to go to the US for further studies. Meanwhile, the interest rate for those candidates who did not have a strong profile (in terms of academics, chosen university, country, parents’ income) was pushed to as high as 12%.

Current market scenario:

In recent times, due to revised RBI (Reserve Bank of India) norms, many NBFCs are struggling to raise capital in order to ensure their survival in the market. Due to this, the NBFCs that have managed to float despite the circumstances are monopolizing the loan market.

The interest rates for loans from NBFCs have also increased accordingly. Let us take a look at the country-wise interest rates charged by NBFCs:

• The US: Interest rates start at 11% to 12% for a loan amount of up to 60 lakhs.
• Countries Other than the US (Germany, Australia, Ireland, Canada): The former interest rate for a loan amount of Rs. 15 lakhs to Rs. 25 lakhs was 12.75%. As of today, the interest rates are at 12% to 13.5% with no guarantee of a successful loan sanction.

Additional information for a beginner

If you are only thinking of applying for an unsecured education loan to fund your higher studies, here are a few points which you must remember before beginning the unsecured education loan process.

• NBFCs charge a processing fee, which is to be paid after a provisional approval of the loan is granted. This fee amounts to about 1% of your sanctioned loan amount, plus GST. It may go up to 1.5% to 2% + GST.
• It is mandatory for the applicant to take loan insurance. The loan insurance fee is adjusted in the loan amount. It is a one-time payment fee, which is about 1% to 2% of the total loan amount sanctioned.
• Unlike Government banks, NBFCs do not grant a payment-free moratorium period to their students. They mostly ask applicants to start paying the partial or full interest on disbursed loan amount from the beginning of the course.

Why do applicants opt for NBFCs?

Applicants who choose NBFCs for their unsecured education loan needs are mostly the ones who are not deemed eligible by Government banks for loan approvals. However, this may not be the only reason that makes NBFCs a more attractive option for prospective candidates. The following reasons also compel candidates to turn to NBFCs, rather than approach Government banks.

• Faster processing time: If a student applies for an unsecured education loan to any NBFC through WeMakeScholars, the processing time will not exceed four to five days. This procedure can be done in the comfort of your home as it is to be done online.
• Easy disbursement of education loan: Unlike Government banks, NBFCs never ask for details on how the loan amount is going to be used. They will immediately disburse the loan amount.
• Less Paperwork: Most candidates who need to avail unsecured education loans approach NBFCs. As there is no collateral involved, there is minimal paperwork involved.
• No Loan Margin: NBFCs do not impose any loan margin on the total loan amount. Hence, the candidates do not have to provide proof of any funds. 

Why apply through WeMakeScholars?

Most applicants chose WeMakeScholars because of their trust in our ability to make procedures transparent. Every minute detail is explained to students by our financial officers from the beginning. Our main goal is to give a clear picture of any education loan scheme for our students.

You get an additional 0.5% discount in the rate of interest when you process your unsecured education loans via WeMakeScholars. Our financial officers will also negotiate the loan terms on your behalf. Many of our students have received their unsecured education loan at reduced interest rates. 

You can get an idea about the same when you go through various testimonials written by students, who sanctioned their education loan through us.