International players in the lending market are spreading misinformation in favour of USD loans by taking advantage of the loan aspirants who are not very well informed about the intricacies of the financial industry.
However, this is not the case. Educational Loans taken from Indian banks or lenders has a number of benefits and are still cheaper than the USD loans. To know more about the issue in details, check this video by COO of GyanDhan @jainesh.sinha where he lucidly explains why INR loans are cheaper than the USD loans.
@Salil_Singh
Thanks, quite informative.
I have a query. These income tax benefits will be available, if we take education loans from NBFCs as well.I read somewhere there are no income tax benefits if we take ed loan from NBFCs. And will it still be cheaper or beneficial than USD loans?
Oh wow…
this is insane. I was watching a video on you tube on this particular issue. They were using all sorts of jargon, APR and what not. I am still trying to understand what is APR exactly.
Why would they do this, misguide students!
So let me get this straight.You are suggesting in spite of so much high rate of interest, still taking education loan from Indian banks is cheaper.
I guess I should have taken finance during my masters. I am still not able to understand…
Not only money…Unethical as well… instead of giving right direction …they are squeezing money out of us…and I am still trying to understand why so many contradictory videos are there …Yocket is producing videos in which they are promoting USD loans…
Hi @Akram. Apologies for the late reply. @Vandana here is right. Even in the absence of Tax benefits and high interest rate of NBFCs. It will still be cheaper and beneficial to take education loan in the INR (Indian Lenders)
@shyamal
According to Investopedia " APR includes not only the interest expense on the loan but also all fees and other costs involved in procuring the loan. These fees can include broker fees, closing costs, rebates, and discount points. These are often expressed as a percentage whereas Interest rate is the cost of borrowing the money, that is, the principal loan amount, it doesn’t include miscellaneous charges incurred into account.
I wouldn’t necessarily say that international players / their partners are spreading misinformation, but that they are only showing partial information at times to suit their objective.
Tax benefits are not highlighted as there aren’t many options to avail of tax benefits in international loans. This has a significant effect on the effective interest rates, and why taking a loan from an Indian bank is cheaper.
The currency depreciation and the currency-interest rate depreciation is something that has been explained in the video above but is still hard to grasp at times. If we are talking of a short-term loan (say a personal loan for 6-9 months) you can ignore the currency. However, for longer term loans, the underlying economics will eventually catch up.
One of the disadvantages is the cost of currency conversion when it comes to repayments. These costs have come down significantly with alternatives like TransferWise, and do not really add to the overall cost as much as they would have had 5-10 years ago.
In my opinion,
If you have a property go for a loan from an Indian bank.
If you are getting a no-collateral loan from an Indian bank, go for it
If you are getting a no-collateral loan from an NBFC (ex-Credilla), you won’t get the tax benefit. In this scenario, you need to compare the difference in interest rates offered by the Indian and the international lender. If the rate difference is <4%, NBFC should be the better choice and if the difference is >6.5%, the international lender is the obvious choice. The area in-between is the grey zone.
If you do not have a co-applicant, and require financing for higher studies you should opt for the international lenders.
Indian lenders are definitely worse-off when it comes to processing of loans in general. That is where we, the team at GyanDhan, come in to help you with the process.
You are right. Sec 80E does not cover loans from NBFCs (with the exception of Credilla). Loans from NBFCs can still be cheaper than USD loans but it depends on the differential in the interest rates. If the interest rate differential is
<4%, NBFCs should be a preferred option
+6.5%, international lender should be the preferred option
4%-6.5%, it will be a toss-up
This is obviously assuming that you are not going to repay the loan in a really short time (say 2 years)
