09 Oct, 2024 
There has been a consistent increase in the percentage of Indian students choosing to continue their education overseas, and there are various reasons for this trend. First, since education has become more globalized, students have more chances to experience different cultures and foreign learning settings. In addition, many students look for educational possibilities abroad because they want to take specialized courses that might not be easily accessible in India.
There has been a notable increase in Indian students seeking higher education overseas in recent years. The need for education loans in India has significantly increased due to the surge in demand for international degrees.
Non-banking financial institutions (NBFIs), often referred to as nonbank financial companies (NBFCs), are financial organizations that provide a range of banking services but lack a banking licence. Generally speaking, these financial organizations are not permitted to accept typical demand deposits from the general public, which are easily accessible money like those in monitoring or deposit accounts. This restriction prevents them from falling into the traditional purview of state and federal financial regulators’ supervision.
According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, nonbank financial companies are defined as businesses that are “predominantly engaged in a financial activity” if over eighty per cent of their established annual net income or consolidated assets are related to finance. Investment banks, P2P lenders, insurance businesses, hedge funds, money market funds, investment banks, and private equity funds are a few examples of non-bank financial corporations (NBFCs).
There are various reasons why a student should choose NBFCs to finance their international education loans. Education loans from NBFC are both secured and uncollateralized. NBFCs provide education loans to students who want to study overseas or in India, both secured and unsecured (loans without collateral).
Most financial institutions need collateral as security if you want to borrow more than the lender has stated, which is one of the key benefits of applying for an educational loan from an NBFC.
However, if you match the requirements, you may even be eligible for a larger loan if you choose an NBFC educational loan with no collateral. If you have more money, you may aspire to attend one of the best institutions in the entire globe without worrying about your financial situation. Second, education loans are accessible for academic pursuits in India and outside, both with and without collateral.
Certain lenders provide student loans that exclusively pay for particular costs. For example, most lenders exclusively offer school loans for academic purposes. Popular NBFCs, however, will pay for significant educational expenses and tuition.
This implies that your higher education-related fees, including academic expenses, will be covered by the NBFC education loan. For example, Avanse Financial Services provides education loans that pay for all of the associated costs of school, such as these:
When students shortlist potential lenders for student loans, one of the most frequent mistakes they make is choosing the lender with the lowest interest rate. However, when searching for an education loan, you must take the following factors into account:
This is your portion of the overall schooling cost for people unfamiliar with margin money. The majority of financial institutions anticipate that you will cover a portion of the entire cost. For example, assume that your educational expenses total 60 lacs. The lender will provide a loan of 55 lacs if you deposit five lacs. But the majority of modern NBFCs won’t need any margin funding.
It is possible that students who graduate won’t immediately find a high-paying career. Because they are aware of this, NBFCs provide various repayment choices. Depending on your preferences, you can choose a short or extended tenure. Another option is to use step-up EMIs. Your monthly instalments with step-up EMIs will begin small and progressively climb over the term. In the process of repaying your student loan, this helps you stabilize your finances.
Indian students opt to pursue their studies overseas for the following reasons:
One of the main factors motivating Indian students to study overseas is the chance to receive a top-notch education. Numerous international colleges are well-known for their outstanding academic programs and the broad range of degrees they grant in different fields.
Studying overseas can greatly improve one’s employment chances. Students who have been abroad will have an advantage in today’s global employment market since businesses favour applicants with a variety of experiences and viewpoints. For Indian students, this creates more prospects for better jobs abroad. While studying overseas, they have access to international corporations.
Certain nations provide speciality majors that might not be easily accessible or available in India. This draws in aspirant professionals who want to specialize in particular businesses or pursue specialized disciplines.
Studying overseas allows Indian students to extend their horizons beyond the classroom and fully immerse themselves in a foreign culture. They also get the chance to socialize with individuals from other backgrounds, pick up new languages, and hone their international communication skills, all of which are beneficial for their personal development.
Several international institutions provide top-notch research facilities and possibilities for pursuing research-focused employment or further education. Students at some universities benefit from having access to cutting-edge research, technology, and resources.
In light of the growing demand for international education, non-banking financial institutions (NBFCs) in India anticipate that their education loan asset under management (AUM) will surpass Rs 60,000 crore this fiscal year, growing at a robust rate of 40-45%.
According to research by CRISIL Ratings, the education loan AUM of NBFCs reached Rs 43,000 crore as of March 31, 2024, following strong growth of more than 80% and 70% in the fiscal years 2023 and 2024, respectively. As of the previous fiscal year, the total number of Indian students studying overseas is believed to have quadrupled over the previous five years, reaching over 13.4 lakh.
These NBFCs only fund a tenth of it, and even with bank education loans included, the total amount financed is not significantly larger. That suggests that a significant amount of education received abroad is paid for by non-traditional ways, such as self-funding, informal finance, or other types of loans.
That demonstrates education lending firms have an enormous runway for development. Inflation, living expenditures, and growing ticket sizes due to rising tuition rates are all positive factors. The increasing demand for higher learning means that education loans, particularly those used to pay for courses abroad, will remain one of NBFCs’ fastest-growing product categories.
The research claims that NBFCs have established themselves as leaders in the higher education loans industry due to their robust micro-market knowledge and quick turnaround times. Due to their solid credit underwriting, these NBFCs’ portfolio performance has shown to be robust thus far.
Prepayment and foreclosure statistics are significant as 35 to 45 % of mortgage loans are prepaid within the first moratorium period of generally three years. Even when the contractual life is longer, most loans are returned in 5-7 years. However, a ban for almost 90% of the portfolio is presently in place due to the recent strong growth. Consequently, it is unclear how asset quality will perform in the long run.
Join the surge in education loans by securing NBFC registration now and tap into the thriving market for financing international education.
Take a look at the following aspects:
In India, the cost of education increases every seven years. Inflation in education has increased by almost 12% in the last ten years, surpassing the 6-7% inflation in retail. For instance, an MBA from one of the best IIMs used to cost about Rs. 12 lakhs, but today, it costs about Rs. 28 lakhs.
The expense of schooling has skyrocketed, while income growth has been slow, with per capita income rising by just 9.3%. Thus, shortly, the state of the school system will resemble that of purchasing a home in Mumbai, which is out of reach for most people.
With a strong growth rate of 14%, the student loan industry in India is presently valued at $19 billion. In contrast, the US market is worth $1.73 trillion and is expanding at a rate of 6% while the country’s economy is increasing by 2%. This demonstrates the market’s enormous potential in India.
Indian students’ desire for an overseas education is fuelling this expansion. Overspending on international education was predicted to cost $37 billion in FY19 alone and is expected to reach $70 billion by 2025.
Banks, mostly in the public sector, currently control 75% of the student loan industry.
Public sector banks usually limit unsecured education loans to Rs. 7.5 lakhs since they are risk averse. Reputable universities charge far more for most of their courses. Certain NBFCs provide collateral loans for education up to Rs. 1 crore; however, they come with high interest rates.
The education loan category has the highest gross non-performing asset (NPA) rate among retail loans, which is 4.4% for public sector banks. This is explained by the lack of strong underwriting procedures specifically designed for school loans, considering their tiny proportion in the bank’s overall loan portfolio.
Amidst the heightened competition in the loan industry and the elevated cost of borrowing, all company stakeholders must adopt as many agile practices as feasible. Regarding credit facilities, contemporary borrowers have high-tech needs since they are tech-aware. A financial lending organisation may stand out by adopting customer-centric strategies such as technology advancements and integrations. Nevertheless, there are obstacles to the NBFCs’ present rate of expansion. Following is a list of a few of them:
Lending procedures can be laborious and time-consuming. A lot of documentation is involved, and manual verification and review might take several days. To satisfy the expanding demands of the business, organizations must provide a thriving staff, resulting in more costs.
One of the main drivers of NBFC expansion has been traditional banks’ decreased willingness to take risks. NBFCs focus on candidates who are turned down by traditional lenders, as well as the underbanked and unorganized rural population. To grow even further, NBFCs must understand their target market. Understanding the lending environment would enable them to meet market targets and generate more profits. Additionally, NBFCs struggle to guarantee growth and recruit new clients.
To set themselves apart from traditional lenders, NBFCs advertise that their services are highly tailored to meet the demands of individual consumers, yet this is still difficult to implement.
They frequently use new tactics to wow and connect with the target audience in response to growing competition. Deviating from conventional loan dispensing practices and providing consumers with creative and customized credit options is imperative.
NBFCs want to increase their market share by offering various credit disbursement options to applicants who traditional lending institutions turn down. They also target the unbanked and underbanked segments of society. Their customer service is appalling because of the massive number of loan applications they receive and their personnel shortage.
Regulatory bodies frequently have jurisdiction over NBFCs and closely monitor their collection procedures. All financial lending organizations must improve their debt collection tactics to ensure consistent income. Because of the rules, NBFCs frequently find it difficult to devise debt collection plans, negatively impacting their profits.
Nonbank financial institutions (NBFIs), often called nonbank financial businesses (NBFCs), offer services comparable to those of banks but lack a banking licence. As a result, they are governed by separate laws and, for the most part, by fewer laws than banks. NBFCs are numerous. NBFCs include, but are not limited to, investment companies, finance companies, money market mutual funds, insurance firms, private equity funds, hedge funds, and peer-to-peer lenders.
NBFCs have multiplied in quantity and variety since the start of the recession, and they have been essential in satisfying the credit demand that traditional banks could not supply. Their supporters contend they provide a vital, alternate source of money and credit, while their detractors claim they represent a danger to the US economy.
Ready to dive into the booming education loan market? Visit our website https://enterslice.com/ and secure your NBFC registration today to empower students to achieve their global academic dreams.
No collateral for education loans up to Rs. 40.00 lakh for the selected top universities is required. The maximum education loan ceiling for studies in India is Rs. 125.00 lakh; for studies overseas, it is Rs. 150.00 lakh.
When Avanse Financial Services was established in 2013, its only goal was to help students fulfil their academic goals. We are an education-focused NBFC that offers every worthy Indian student highly customized educational funding options.
All government banks impose a processing fee of almost Rs. 10,000 for education loans; however, you will pay 1% to 2% to NBFCs to execute your loan application. Before receiving a sanction letter from the Bank/NBFC, you must pay the processing charge, which is non-refundable.
An organization registered under the Companies Act of 1956 that engages in the following activities is known as a Non-Banking Financial Company (NBFC): lending and advances; purchasing shares, stocks, bonds, debentures, or other marketable securities issued by the government or local authority; leasing; and hire-purchase.
Eligibility-wise, HDFC Credila or Avanse may be a better choice. Both lenders provide education loans up to INR 75 lakhs for MS students in the US. Avanse charges an interest rate of 12% to 12.25%, whereas HDFC Credila offers education loans for MS in the US at an interest rate of 11.50% to 12%.
Obtaining credit from other financial establishments. Accepting deposits that are not chequable, primarily term deposits. It is important to remember, though, that not all NBFCs are permitted to take deposits since doing so requires adherence to the greater number of rules that the RBI has published.
Typically, banks maintain a list of recognized courses and universities on which they would not grant loans. On the other hand, NBFCs are frequently seen to be more accommodating when approving a loan. Ensure that the course you are applying for is offered by the institution where you submit your loan application.
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