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 surely worthwhile. 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. An Education loan 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 installments (EMIs) begin at a later period when a student finishes the course and starts to earn. This is one of the major reasons for an education loan being a highly sought-after option for the students who apply for an overseas education loan.
Even though students are willing to apply for an overseas education loan to fund their higher education, there is a lot of confusion as to which option to choose between banks and NBFCs. In this blog, we are going to discuss about various factors relating to banks and NBFCs so that by the end of the article you will be able to decide a suitable loan option to fund your foreign education.
Let us first understand the functioning of banks and NBFCs
Banks: To give education loan to the aspiring students, bank utilizes the invested money in various forms deposited by the customers and gives it to the applicants as a loan amount. The bank charges interest rate on the given loan amount. Rate of Interest (ROI) varies from one bank to another in terms of nationalized and private banks.
NBFCs: Non-Banking Financial Institutions borrows money from investors and lend it to the aspiring students for funding their overseas education. Since NBFCs borrow the amount from investors, the rate of interest is higher as compared to that of a nationalized or private bank.
Loans offered by Banks:
There are two types of education loans offered by banks - Secured Education Loan and Unsecured Education Loan.
A secured loan requires a student to offer a collateral in the form of a residential house, open land, government bonds, mutual funds etc while an unsecured education loan does not require to pledge any security against the loan amount.
Loans offered by NBFC's:
A Non-Banking Financial Company is an institution that is authorized to conduct the transactions like that of a bank. It can lend education loan to the students with and without pledging a security.
For better understanding, we have attached a table below for comparing the important aspects of banks and NBCs. It will help you in choosing a suitable overseas education loan option for your foreign studies.