Education loans have become a necessity in today’s world, with more and more students desiring to study abroad. Most financial institutions offer these for aspiring students, and students can choose to avail it either from an NBFC or a bank.
The education loan on property offered by the commercial lending institution and NBFCs can differ in terms of interest rate, eligibility criteria, processing time, etc.
Differences between NBFC and commercial lending institution
Financial institutions extend a loan against property on education, depending on the course type, its fees and other related expenses. It is best to choose as per one’s educational needs. One must go through the below points to understand the difference between both:
- Lenient eligibility criteria
The eligibility criteria of NBFCs are lenient when compared to commercial lending institutions. However, an applicant has to meet specific parameters such as:
- He/she must be between 25 and 70 years of age.
- If one is a salaried individual, he/she must be working at an MNC or a private company and have a minimum of 3 years of experience.
- Self-employed individuals must have a business continuity of 5 years.
- The applicant must have filed Income Tax Return for a minimum of 1 year.
Furthermore, minimal documentation is required for the same. Ideally, borrowers must have these documents handy:
- Address proof- KYC documents, ration card, passport etc.
- Identity proof- Pan card, Aadhaar card, Voter card, license etc.
- Financial documents- Income Tax Returns, salary slips, bank statements of six months
- Business ownership proof- sole proprietor registration document, Article of Memorandum, etc.
- Interest rate
The interest rate differs between NBFCs and commercial lending institutions. The latter charges a higher amount as it is linked to the repo rate or Marginal Cost of Funds based Lending Rate. On the other hand, the former tend to charge an affordable rate. However, it depends upon the borrower’s credit profile and repayment capacity. This gives him/her the leeway to negotiate with the financial institution.
- Substantial loan amount
One can avail a considerable loan amount with an NBFC. This is one of the primary benefits of such a financial institution. This can be utilised to fund big-ticket expenses. Moreover, the loan’s repayment tenor can extend up to 20 years, which aids a borrower to maintain equilibrium between expenditure and savings.
Moreover, economically backward students who dream of studying abroad can turn to the Vidya Lakshmi Scheme. It helps in enabling Indian students to find out about scholarships or education loans for higher education. It provides information on various available loan schemes. Students have the flexibility of approaching 34 banks on this portal.
On the other hand, the Padho Pradesh Scheme offers interest subsidies on education loans for students belonging to minority communities. The Government aims to promote higher education among minority students.
However, if the education loan amount does not suffice and they feel that the eligibility criteria are stringent, they can avail a loan against property. Individuals can avail loan against property tax benefits, which includes:
- Section 37 (1)
One can avail of tax deductions if the loan amount is utilised for business purposes. In addition, individuals can claim tax benefits on interest, processing and documentation fees that one has incurred for his/her business.
- Section 24 (B)
This is applicable for salaried individuals. If one uses the loan against property funds to finance his/her residential house, then one can get tax deductions up to Rs.2 lakh. It is applicable to the interest paid.
As evident, availing an education loan on property from NBFCs comes with many advantages compared to that of a commercial financial institution. Furthermore, the availability of pre-approved offers by leading financial institutions further streamlines the application process.
Financial products like home loans, loans against property are included in this offer and individuals can check their pre-approved offer by providing their essential detail. However, it is best to be aware of the tax benefits of a loan against property. f
