{"id":316598,"date":"2023-09-06T07:41:16","date_gmt":"2023-09-06T07:41:16","guid":{"rendered":"https:\/\/popularindinews.com\/?p=316598"},"modified":"2023-09-06T07:41:16","modified_gmt":"2023-09-06T07:41:16","slug":"banks-or-nbfcs-where-to-go-for-student-loans","status":"publish","type":"post","link":"https:\/\/popularindinews.com\/celebrity\/banks-or-nbfcs-where-to-go-for-student-loans\/","title":{"rendered":"Banks Or NBFCs? Where to Go For Student Loans?"},"content":{"rendered":"

While both provide financial assistance, there are significant differences between them in terms of what they offer, their eligibility criteria, interest rates and other crucial factors, points out Prashant A Bhonsle.<\/strong><\/p>\n

It is important to shed light on the disparities between banks and NBFCs when it comes to student loans and helping students make informed decisions about their educational financing options.<\/p>\n

Higher education is becoming more expensive as time passes and many students and their families are turning to loans to ease the burden of tuition fees and other educational expenses.<\/p>\n

Banks and Non-Banking Financial Companies are the two primary sources of student loans.<\/p>\n

Banks vs NBFCs<\/strong><\/p>\n

Banks are traditional financial institutions that offer a wide range of services and various types of loans, including student loans. They are known for their stability and long-standing presence in the financial industry.<\/p>\n

NBFCs are non-banking entities that provide financial services like loans and advances. They do not hold a banking license.<\/p>\n

Since they are not as heavily regulated as banks and have more flexibility in their operations, NBFCs often have more room for innovation in their loan offerings.<\/p>\n

They may cater to specific niche markets, including student loans.<\/p>\n

Eligibility Criteria<\/strong><\/p>\n

The eligibility criteria for student loans can vary significantly between banks and NBFCs.<\/p>\n

Banks usually have stringent requirements that may include academic performance, admission to recognised educational institutions and collateral for higher loan amounts.<\/p>\n

They may also consider the credit history and financial standing of the borrower or their co-applicant.<\/p>\n

On the other hand, new age fintechs and NBFCs — who are armed with modern technological tools — have a more relaxed eligibility criteria and less stringent collateral requirements which makes it easier for students from diverse backgrounds to secure funding for their education.<\/p>\n

Interest Rates<\/strong><\/p>\n

Interest rates are a critical factor in any loan and the rates offered by banks and NBFCs can differ significantly.<\/p>\n

In general, banks offer more competitive interest rates on student loans due to their access to low-cost funds from deposits and their lower risk perception.<\/p>\n

Since NBFCs are non-banking entities, they may have slightly higher interest rates to compensate for their higher cost of capital and risk appetite.<\/p>\n

However, NBFCs may also provide more competitive interest rates compared to banks for borrowers with less-than-ideal credit histories.<\/p>\n

It is essential for borrowers to compare all terms and conditions, and not only interest rates, to determine the most suitable option.<\/p>\n

Collateral Requirements<\/strong><\/p>\n

Banks typically require collateral for higher loan amounts, especially for unsecured loans. Collateral serves as a security measure for banks to mitigate the risk of default.<\/p>\n

In the context of student loans, banks may require collateral or a co-signer for substantial loan amounts. <\/p>\n

NBFCs may offer unsecured student loans which means they do not require collateral or co-signers. This can be beneficial for students who do not have valuable assets to pledge as security.<\/p>\n

Loan Amount and Flexibility<\/strong><\/p>\n

Banks are likely to cover the entire cost of education, including tuition fees, accommodation and other expenses.<\/p>\n

NBFCs may offer more flexible loan amounts. Moreover, some NBFCs might offer additional benefits like customised repayment plans or top-up loans for further studies, providing more options for students.<\/p>\n

Loan Disbursement Process<\/strong><\/p>\n

Banks generally have a well-established loan disbursement process with predefined stages, including verification of documents and direct payments to educational institutions. This structured process ensures transparency and efficiency in the disbursement of funds.<\/p>\n

In contrast, NBFCs might have a more streamlined and a fully digital faster approval process, leading to quicker loan disbursal. This could be accompanied by slightly less rigidity in the application and verification procedures.<\/p>\n

Moreover, NBFCs may provide more flexible repayment options, including shorter repayment terms, which can drastically reduce the overall interest burden for the student.<\/p>\n

Conclusion<\/strong><\/p>\n

Both banks and NBFCs play crucial roles in providing financial assistance to students pursuing higher education.<\/p>\n

Banks offer lower interest rates while NBFCs provide greater accessibility to loans for individuals with limited credit history.<\/p>\n

NBFCs may have more flexible loan terms and disbursement options.<\/p>\n

Students should carefully evaluate their financial situation, creditworthiness and loan requirements to make an informed choice that aligns with their educational aspirations and future financial goals.<\/p>\n

Prashant A Bhonsle is the CEO & Founder, Kuhoo Technology <\/strong>(external link<\/em>).<\/strong><\/p>\n