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HomeEducationHow financial barriers are fading

How financial barriers are fading

Based on the creditworthiness and requirements of the students, companies today offer a wide range of loan offers that can cover up to 100 percent of the financing requirements

Archive image of Indian students returning from Ukraine after the Russian invasion on February 24, 2022. Courtesy: PTI

In a country of nearly 1.3 billion people and a significant young population, financial barriers must not erode the hope of pursuing higher education. There are many reasons that stand in the way of easy financing of higher education for students in India. In fact, the education loan approval rate of major public sector banks in India had shrunk to 24 percent by 2020, despite a steadily increasing demand for student loans.

There are several reasons that make getting a student loan from traditional institutions difficult and at the same time daunting.

First, meeting eligibility criteria is challenging and rejection rates are high due to many reasons, the most common of which are lack of collateral, poor CIBIL or credit scores, insufficient earning capacity of the applicant, average academic performance of the applicant, and gaps in the documentation. Moreover, the process is complicated for reasons such as: student loans can only be applied for through specific branches of the public sector banks, physical documentation and visits are involved and the whole process can take up to 3 months or more. At the same time, the cost of higher education has risen in both domestic and international markets, re-emphasizing the need for education loans.

New age technologies have opened up new possibilities, removing these barriers and making loan availability more inclusive and accessible, helping millions of people realize their dreams.

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Against this background, some of the key benefits of digital education lending facilities are discussed as follows:

Simple and fast loan application and disbursement process

Applying for and paying out money via online procedures is faster and more efficient. There are no middlemen or agents involved in the whole process. The approach of new-age technology companies is completely transparent and leaves little room for error.

Removing the pressure on parents to be co-applicants

Parents and guardians can be sure that they no longer have to be a co-applicant or guarantor for the student grant. Digital lenders provide student loans by evaluating an applicant’s creditworthiness, course assessment, and future earning potential. They do not depend on the parent’s ability to pay off debt.

Flexible Refund Options

Flexible repayment options further reduce the financial burden for applicants. This includes an adequate moratorium, reduction of EMI, lower foreclosure costs, extended loan terms and refinancing options.

Experts as advisors who provide excellent post-payout services

This critical factor contributes to the overall reliability of modern businesses over conventional lenders. In addition to an excellent and transparent application and payment process (as discussed earlier), these organizations offer a wide range of post-payment services. For example, visa assistance, tips for new foreign travelers and advisory services are part of the relationship. The cooperation between students and lenders is therefore not only based on a loan.

Financing 100 percent cost of education

Based on the creditworthiness and requirements of the students, companies today offer a wide variety of loan offers that can cover up to 100 percent of the financing requirements. The lenders take care of all the financial worries that usually bother students during higher studies.

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No collateral requirements

The need to hold a tangible asset as collateral for taking out education loans is irrelevant in the context of these modern digital lenders. Loans and financial assistance are provided solely on the basis of a student applicant’s creditworthiness and predictive analysis of repayment ability.

Other Critical Deals

There can be a plethora of other deals such as providing health and travel insurance and forex services which are vital for a student who is staying abroad for a significant period of time. The digital lenders’ partnerships with reliable suppliers in the respective domain help students get the best possible offers that save money and cover a wide range of future obligations.

Moving forward

Traditionally, students have faced various challenges while taking advantage of education loans and the chances of getting loans for higher education have been relatively poor. Without proper guidance and transparency, students were often saddled with financial obligations that affected their study-related goals.

However, with the rise of advanced technology borrowers, student loans are becoming more accessible. Loan disbursement has become infinitely more flexible and transparent than ever before. The ability to choose the right financial partner to avail the student loan opens a wide spectrum of possibilities for Indian students to pursue their higher education dreams at an institution of their choice.

The author is founder of Kuhoo Fintech. Views are personal.

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