In recent years, students have been understanding the importance of education loans, and how they benefit them, especially when they are planning their higher studies. For students who plan to go abroad, an education loan is a boon that covers major expenses that they will incur in the duration of their course.
However, if you are to apply for study loans at a financial institution like bank, then you will be required to provide collateral. This might not be possible for every student. The alternative is a collateral-free loan, i.e., an unsecured loan. But, what are the benefits of it? We have listed a few of them below:
- No collateral is required
The main benefit of unsecured loans is that you do not have to provide any collateral at all. Private banks and NBFCs are the main financial institutions that deal with providing unsecured loans. One of the advantages of unsecured loans is that it provides you with a higher loan amount without a collateral. This would not be possible if you were to apply for a loan at PSB. There, you will be required to provide some form of collateral to be able to get a higher loan amount. However, you can get collateral-free education loans at NBFCs. Keep in mind that the ROI that you will be charged will vary from one NBFC to another. So, select the one as per your needs.
- Easy repayment options
The main worry for many students when they borrow education loan is the repayment of the loan. It is a misconception that you are required to start repaying your loan when you are completing your course. That, however, is not true. When you apply for study loans, you get a moratorium period of at least 1 year. You get a greater moratorium period when you go for unsecured loans compared to a shorter moratorium period when applying for secured loans. You also get a holiday period of between 3-6 months after the completion of your course, before the repayment begins. Please do note, however, some NBFCs will require you to pay a partial interest during the moratorium before you start for the full repayment the loan. Discuss about this in detail with your loan provider before applying for the loan.
- Quick sanctioning of loan applications
The great thing about going for unsecured education loans is that the paperwork is less. Since you do not have to provide collateral for the loan, this reduces the amount of paperwork and the verification required. You are only required to provide yours and your co-applicant’s required documents for the loan. NBFCs have a quick sanctioning mechanism that sanctions your loan application instantly when compared to banks. So, if you are looking for a loan, then an NBFC is the better choice.
These are some of the benefits of unsecured study loans. Please be sure to discuss everything with your lender, be it about the ROI charged, or about the options of repayment before you apply for your loan. To get a better idea about what your EMI would be if you take a loan, you can use the education loan calculator on the website of a leading financial institution.
Related Article - Need an education loan? Ask lenders these 4 questions