In recent years, there has been a significant increase in Indian students pursuing higher education abroad. Students prefer popular international destinations like the US, UK, Canada, Australia, etc. for the excellent educational facilities and career prospects that international qualifications offer. A degree from a foreign University can be life-changing but can also be more expensive than a local education.
To pursue their dreams, many students go for study abroad loans as their funding choice. These loans help students cover their tuition fees and living expenses in foreign countries without having to rely on competitive scholarships or savings.
There are two major types of study abroad loans – secured and unsecured. Their major difference is that secured loans require applicants to use an asset like property as collateral against their loan amount. On the other hand, unsecured loans are processed on the basis of the applicant’s profile and credit score.
If the student decides they want to go for an unsecured loan, they may come across a variety of lenders and schemes in their research. It can be confusing to decide which lender to pick and which factors to look for.
In this article, let us look at some details to compare two types of lenders that provide unsecured student loans for studying abroad – namely, Non-Banking Financial Companies (NBFCs) and International Lenders.
Student Loans for Studying Abroad: Difference Between NBFCs & International Lenders
Before getting into the difference between study abroad loans from Non-Banking Financial Companies (NBFCs) and International Lenders, let us understand each lender briefly.
NBFCs are financial institutions that offer banking services without being linked to banks, they provide loans for all study destinations. On the other hand, International Lenders are foreign institutions that provide loans in US currency for specific educational Institutions in the US, UK, Canada, and Europe.
Now, let us see the major factors to consider when deciding between NBFCs and International Lenders in the table below.
| Factors | NBFCs | International Lenders |
| Quantum of Finance | Up to INR 75 lakhs | Up to $220,000 |
| Rate of Interest | Starts at 11.50% | Starts at 10.55% |
| Processing Time | 3-10 working days, depending on the lender | 5-7 working days |
| Loan Tenure | Up to 15 years including the course duration | Up to 20 years including the course duration |
| Processing Fee | 1-1.25% of the loan amount + GST | 2 to 5% of the loan amount |
| Moratorium Period | Course duration + 12 months | Course duration + 6 months |
| CIBIL Score | Requires a CIBIL score above 650 | Not required for co-applicant |
| Acceptable Sponsors | Parents/ Grandparents/ Immediate Family | Not required |
| Serving Simple Interest | Mandatory full or partial simple interest | Can be full, partial, or optional depending on lender |
| Top Lenders | Credila
Avanse Incred Tata Capital |
MPower Finance
Prodigy Finance US Cosigner Loan Leap Finance |
Now that we have understood the major differences between student loans for studying abroad from both NBFCs and International Lenders, let us also see the process to avail an unsecured loan from them below.
Steps to Avail of a Collateral-Free Education Loan for Abroad Studies
Whether applying for an NBFC education loan or one from International Lenders, it is good to have clarity on how the loan application process works. The four steps given below can help students briefly comprehend this process.
Step 1 – Shortlist options and contact the financial lender in-person or online.
Step 2 – Discuss the loan eligibility and share details for profile evaluation.
Step 3 – Collect the required documentations and commence the application process.
Step 4 – Upon verification, the loan is sanctioned and then disbursed into the applicant’s account.
Before the student starts the loan application process, they must be sure of the lender chosen. Both NBFCs and International Lenders have their pros and cons, which students must research carefully.
With 4 simple steps, students are ready to fund their education. A study abroad loan is a helpful tool to access one’s dream education, so the decision should be based on the student’s financial profile and their study goals.
Researching different schemes and benefits provided by lenders can be confusing for the student alone. For this, they can enlist the help of study abroad loan advisors to make the best possible decision. These advisors are dedicated experts who can guide students smoothly through the loan application process.
