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Bank vs NBFC for Education Loan: Which is Better for Students?

Post Date:- June 4, 2025
Author:- Shiva Krishna HR

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Table of contents

Education loan lenders: Banks vs NBFCs

Why Choose Banks for Your Education Loan?

Why Choose NBFCs for Your Education Loan?

Banks VS NBFCs

Conclusion

Studying abroad is a dream for many students and as we all know, dreams often come with a price tag. While it opens doors to global opportunities and long-term success, it also brings along costs like tuition, living expenses, travel, and insurance. For most families, arranging this amount isn’t easy, and that’s where education loans step in. They help you bridge the financial gap between you and your dream.

Now that you’re ready to take an education loan, the first question that naturally comes to mind is: What is the best choice Bank vs NBFC?

It’s an important decision because they work differently, from how quickly your loan gets approved to how much you end up repaying. Banks and NBFCs both offer education loans, but their processes, flexibility, interest rates, and eligibility requirements vary.

In this blog, we’ll breakdown everything from differences to processes and help you make an informed decision.

Education loan lenders: Banks vs NBFCs

When you’re ready to apply for an education loan, the big question is: Bank vs NBFC which one should you go for?

Understanding the bank vs NBFC difference can have a huge impact on your loan experience. Banks usually offer lower interest rates but come with stricter rules and longer processing times. NBFCs, in contrast, process loans faster and support more courses, but often charge higher interest.

So, if you’re planning to pursue a course, knowing the real Bank vs NBFC pros and cons and the exact bank vs NBFC difference can help you pick the right loan partner.

Why Choose Banks for Your Education Loan?

Banks are the go-to option if you want lower interest rates, longer repayment tenures, and other government benefits. If you have collateral to offer and a co-applicant with a steady income, banks provide more affordable EMIs and education loan tax benefits under Section 80E.

Banks are especially good if you’re enrolled in traditional, government-approved courses or universities and can afford to wait for their slower processing time.

Here’s a detailed list of leading public and private banks in India that provide education loans to help you compare and choose the right one.

Bank Name	Interest Rate Range (%)	Loan Processing Time	Collateral Requirement	Special Features
State Bank of India (SBI)	8.5 – 9.5	2-3 weeks	Required for >₹7.5 lakh	Long tenure up to 15 years, govt subsidies
Bank of Baroda	8.55 – 10.2	2-3 weeks	Required for >₹7.5 lakh	Covers foreign universities
Punjab National Bank (PNB)	9 – 10.5	2-3 weeks	Required for >₹7.5 lakh	Central govt subsidy available
Canara Bank	9 – 10.2	2-3 weeks	Required for >₹7.5 lakh	Govt interest subsidies
HDFC Bank	9.5 – 13.5	1-2 weeks	Required depending on loan size	Faster processing, flexible repayment
ICICI Bank	10.5 – 13	1-2 weeks	Required depending on loan size	Personalized EMI options

A government bank offers you lower interest rates but takes longer for loan approval whereas a private bank processes faster loans, but with slightly high interest rates.

Now that we’re clear with banks and their interest rates, processing time and key benefits, let us now get into NBFCs and their details.

Why Choose NBFCs for Your Education Loan?

NBFCs are a great option when you need your education loan quickly with flexibility. They’re perfect for students applying to unique or foreign courses that banks might not support.

Since most NBFCs don’t ask for collateral or margin money, they’re helpful for students who have a strong academic profile but may not have a solid financial background. The process is faster, and there’s less paperwork, which is a big plus if you’re short of time.

Here are some of the top NBFCs that offer education loans:

NBFC Name	Interest Rate Range (%)	Collateral Requirement	Processing Time	Key Benefits
InCred	11 – 14	Usually not required	5–7 working days	Fast disbursal, flexible eligibility
Avanse	11.5 – 13.5	Usually not required	5–7 working days	Covers niche courses, doorstep document collection
Auxilo	12 – 14	Optional	5–10 working days	Custom loan offers based on future earnings
Credila	10 – 13.5	May be required	7–10 working days	Tax benefits (CBDT-approved), flexible tenure

If you’re going for an unconventional course or your college isn’t on the government-approved list, NBFCs can be a good option. They approve loans faster and with less paperwork, but just remember, the interest rates are usually higher than the banks.

Banks VS NBFCs

Now that we’ve learned about the features, benefits of banks vs NBFCs. Here’s a comparison table of Banks vs NBFCs difference for Education Loans to help you understand better.

Feature	Banks	NBFCs
Interest Rates	8.5% – 11% per annum	11% – 14% per annum
Processing Time	2 to 3 weeks	5 to 10 working days
Collateral	Required for loans above ₹7.5 lakh	Usually not required
Margin Money	10–15% usually required	Often 0%
Moratorium Period	Course duration + 6 to 12 months	Usually 6 months post course
Repayment Tenure	Up to 15 years	Up to 10 years
Approved Courses	Limited to recognized, government-approved institutes	More flexible; covers niche & unconventional programs
Tax Benefits	Available under Section 80E	Only for CBDT-approved NBFCs
Disbursement Speed	Slower due to paperwork and verification	Faster with minimal documentation
Processing Fees	Usually nominal or waived	May vary; sometimes higher than banks

When it comes to education loans, the bank vs NBFC choice depends on what matters more to you. Banks usually offer lower interest rates but take longer and need more paperwork, while NBFCs are faster and more flexible with course options, though they often come with higher costs.

Conclusion

The debate between bank vs NDFC ends here. Choosing between a bank and NBFC for your education loan depends on your financial situation, course choice, and urgency. In short, if you’re opting for traditional courses and looking for low EMIs, long tenure and collateral-backed loans, then a bank is the best choice. And, if you’re opting for unconventional courses and looking for quick disbursal and flexible eligibility, then NDFCs are the right choice for you.

You don’t have to struggle alone to find the right fit for you. At QCKLoans, we help you weigh these factors carefully so you can pick the option that aligns best with your goals and circumstances. Contact us today for expert advice tailored to your educational journey because the right loan partner can make all the difference in achieving your dreams smoothly.

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