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Education loans are a great enabler for the future of students. The rising costs of education within the country for schooling or for acquiring specific skills that would help in one’s career and provide a better life, is forcing more students and their parents to seek student loans.

“Education loan is generally viewed as a facility provided by lenders to study abroad. But the trend is changing with more and more people seeking loans for studying in courses within India,” said Varun Chopra, CEO, Eduvanz, a digital finance company that provides Education Loans for students and skill seekers.

Chopra said that the Covid-19 pandemic has created a large demand for student loans through new age fintech companies due to their ease of processing and quick disbursal. “The pandemic, though unfortunate, has been good for us. As education has been digitised, it has helped digitized lenders. We grew 10 times in the last 12 months and the demand is only growing. Our total disbursals stand at Rs 500 crore,” Chopra said.

Ease of availing finance

Aditya Damani, Founder, Credit Fair, another fintech outfit that provides education loans, says that the ease of getting finance through the newer digitized outfits as compared to formal lending institutions is helping grow the business.  “Most formal lenders focus on the current or past situation of individuals.  Hence they often insist on collateral or have strict underwriting criteria.  The benefits of a fintech company are that they provide higher approval rates, faster turnaround times and minimal documents as compared to formal lenders.  These lead to a hassle free experience for the students and parents, allowing them to truly focus on education as compared to finance,” Damani said.

Target borrowers

Both Eduvanz and Credit Fair provide loans for K-12 schooling and for skilling and upskilling.  Credit Fair provides EMI based loans with amounts ranging from Rs 10k to 10 Lakh with tenure ranging from 3 months to 3 years. Besides school students, the borrower age group is between 22-35 years old.

On the other hand, Eduvanz provides loans of slightly higher ticket size ranging from Rs 2.5 lakhs to Rs 25-30 lakhs with repayment period ranging from 2 years at the lower end to 10 years at the upper end. The average age of Eduvanz borrowers is 22-24 year for non-K-12 loans.

The checklist

Though there is ease of getting a loan from the new age digitized lenders because technology enables speedy disbursals along with possible cost benefits over formal lenders, every borrower needs to exercise caution and do their own due diligence before signing the loan agreement. Here is a checklist:
Be sure of the credibility of the lender: Do not fall for fraudulent loan offers where you may be asked to pay fees and charges upfront.

Do a thorough assessment of the course: You should assess how the intended course will improve your employability. The lender too might help you on this. “As lenders, we check the institute’s placement record, course success rate. We measure the employment/borrower risk,” Chopra said.

Compare all the loan options available: You should try and check other loan options including those from formal lending institutions and compare their features to see which one is best suited.

Assess your ability to repay:  Your loan amount should be based on your ability to repay.  Do not take a loan beyond your repayment ability. Defaulting on loans could lead to your education being derailed, while the lender’s loan recovery team may chase you. “One way for borrowers to determine if the loan is suitable would be to check that the EMI amount is less than 30% of their monthly take home income or a fraction of their Average Bank Balance,” Damani said.

Know all terms: You must know all the terms and conditions including charges, fees, repayment schedule, EMI, interest rate, mode of payment and prepayment clauses.