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Non-collateral Loan Landscape In India

Non-collateral Loan Landscape In India

Obtaining an MS degree in the US is a costly business, but still, millions of students throng to the US owing to the excellent quality of education offered there. Another reason that capacitates the student to pursue an expensive Master’s in the US is the presence of various lenders who can help them with the financing bit.

Even though most of the students opt for an education loan, not all of them have a pleasant experience while borrowing and repaying them. This is mainly attributed to the poor service they encounter during the process. The requirement of collateral and the fleecing mentality of the lenders in India are two main culprits in turning your loan procuring experience a sour one. If you think you will have a better experience with the US or the international lenders, you cannot be more wrong. Procuring loans from the US lenders and the international lenders are equally cumbersome, and they have their own set of challenges that are quite different from their Indian counterparts.

Let us dive deeper into each of these lending players and look into the various challenges associated with procuring loans from them.

Indian lenders are dominated by two major players viz. Banks and Non-Banking Financial Company (NBFC). HDFC Credila, Avanse, and InCred are some of the examples of Indian lenders. All the banks have a strict policy of lending amount based on the collateral you put up while the NBFCs offer loans without security.

However, the biggest challenge associated with the Indian lenders (both banks and NBFCs) is their inability to lend the entire loan amount to the students. They provide only up to a maximum of 40 lakhs which often doesn’t even cover the total Cost of Attendance in many universities.

Some of the other challenges that students constantly face while procuring loans from the Indian lenders are the high-interest rates and the compulsory need for a co-signer. Besides this, they also face issues like a fairly high origination fee, and the presence of hidden charges such as disbursement fees, currency conversion fees, etc.

US lenders are better than the Indian lenders, especially in the department of interest rates which are much lower than their Indian counterparts. The interest rates offered by US lenders range in between 6–9%. Some of the popular lenders in the US are Sallie Mae, Earnest, Ascent, etc. US lenders offer collateral-free loans and that too for the entire tuition amount. They also do not need a cosigner for the loan and deposit the loan amount directly to the university’s account.

Even though procuring loans from US lenders seem advantageous, it is almost close to impossible for Indian students to source loans from these lenders. This is because US lenders need a US Credit score that tells the lending history of the student in the US. Since the chances of an Indian student having a loan history in the US is almost nil, procuring a loan from US lenders is undoubtedly out of reach for most of the Indian students.

International Lenders such as MPower Financing, Prodigy Finance, etc. provide education loans to international students coming to the USA. They are similar to US Lenders since they offer loans at an affordable interest rate of 9–12% without the need for a collateral or a co-signer. The best part is that they source the loan within 10–15 days, which is lower than what you would experience with the US lenders or the Indian lenders.

However, they have a high origination fee, which is the same as the US. But, the biggest disadvantage of sourcing loans from international lenders is that they do not sanction the loan for the entire tuition amount which becomes quite a challenge for those who can’t afford the rest of the amount.

Leap Finance scores over all the above lenders in all the departments. They have the upper hand over all types of lenders. Here are some of the reasons why you should opt for Leap Finance over other lenders

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Leap Finance over Others

1. No collateral requirement

In comparison with Indian lenders, it provides you with the complete loan amount without the requirement of collateral. This is quite useful for those borrowers from the lower-income group who do not have the luxury of collateral or a co-signer.

2. Funding the entire loan amount

Leap Finance betters the Indian and the International lenders by sanctioning the entire loan amount instead of the partial amount, which is the norm with the Indian and International lenders.

3. Affordable Interest Rates

Leap Finance offers loans at an extremely affordable interest rate of just 8–10% and that too completely fixed. The loan rates in India are much higher while the loans with the US lenders and the International lenders are floating, adding to the uncertainty in the interest rates.

4. Time to process the loan

The best part about Leap Finance is that the entire process takes less than three days, which might be nearly a month for Indian lenders or at least 2–3 weeks for the US and the International lenders.

5. Direct credit to the University account

Similar to the US and international lenders, the loan amount is directly credited to the University’s account. This is not possible with the Indian lenders who credit it only to your account. So, the added responsibility of transferring the loan to the university lies on you.

6. Non-requirement of Credit score

One department where Leap Finance scores above US lenders is the ability to sanction loans without the need for a US credit score, like a FICO Score. Since Leap Finance operates from India, where the loans originate, it has a better understanding of high potential customers and assesses the risk involved in lending to borrowers better.

7. Low origination fee

As a bonus, the origination fee of 1–5- 2% in Leap Finance is nearly half of what you would pay to the US lenders or the international lenders who charge anywhere between 4–5%. Even the Indian lenders have an origination fee that is higher than 2%.

Leap Finance is arguably better than all the major players in the lending landscape. The facts are laid right on the table. Few parameters that shift the scale significantly towards Leap Finance are better interest rates, lower origination fees and direct transfer of loan amounts to the University’s account. To add to these, few more points like quicker processing and no collateral and cosigner loans favour Leap Finance.

So, go ahead and finance your MS education from Leap Finance which places its customers on top of everything else.

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