Studying abroad is a dream for many students, but it comes with a high cost. Most parents and students look for education loans to manage expenses. Banks and NBFCs (Non-Banking Financial Companies) offer different loan options, each with its benefits and conditions. Understanding these options can help students and parents make the right choice.
How Education Loan Amount is Decided
The loan amount depends on several factors:
- The country where the student is going for studies
- The reputation of the university or college
- The course and job opportunities after completion
- The financial background of the student’s family
Banks and NBFCs analyze these factors before approving a loan.
Loan Options: Banks vs NBFCs
Government and Private Banks
- Lower interest rates (8.60% to 13.70%)
- Loan approval takes time due to paperwork
- Higher loan amounts for well-known universities
- Requires collateral (property, fixed deposits, insurance policies)
NBFCs (Non-Banking Financial Companies)
- Faster loan approval process
- Higher interest rates compared to government banks
- Offers loans without collateral
- Suitable for students who need urgent loans
Why More Students Prefer NBFCs for Education Loans?
Many banks require collateral before approving a loan, which is difficult for some families. NBFCs have become a popular choice because they provide loans without demanding property or fixed deposits as security.
Foreign Banks Offering Education Loans
Some students also consider taking loans from foreign financial institutions. However, there are risks:
- Currency exchange fluctuations can increase the total repayment amount
- If a student takes a loan in dollars and earns in Indian rupees after returning, the repayment becomes expensive
- Foreign loans may have different repayment terms and conditions
Impact of Currency Exchange Rates on Education Loan
For example, if a student took a loan of $50,000 when the exchange rate was ₹75 per dollar, the total loan in Indian rupees would be ₹37.5 lakh. If the exchange rate rises to ₹87 per dollar, the repayment amount increases to ₹43.5 lakh, creating a financial burden.
How to Choose the Right Education Loan?
Before selecting an education loan, consider:
- Interest rates and repayment period
- Collateral requirements
- Loan processing time
- Additional charges and hidden costs
Key Takeaways
- Government banks offer lower interest rates but require more paperwork and collateral
- NBFCs provide quick loans without collateral but have higher interest rates
- Foreign banks offer loans but come with currency exchange risks
- Compare all options before making a decision
By choosing the right education loan, students can study abroad without financial stress and focus on building their future.
