Nagpur News : Dewan Housing Finance Ltd, (DHFL), which is primarily into home loan business, has decided to foray in education loan business. Avanse, a non-deposit taking Finance company, will specialise in providing education loans for higher studies.
Wadhawan group will hold 51.5% stake in Avanse while DHFL will own 48.5% stake in the company. In a parallel development, International Finance Corporation (IFC), has agreed to acquire 20% stake in the education finance company which will result in capital infusion of Rs 10 crore while both shareholders – Wadhawan group and DHFL – diluting their stake in the company. The company will have an authorised capital of Rs 50 crore and would be required to maintain capital adequacy ratio of 15%.
Speaking to media about the new venture, Kapil Wadhawan, CMD of DHFL said, “These (home loans and education loan) are complimentary business and not competing. It is an untapped area with no players other then one private player and host of public sector banks. So there is tremendous opportunity here.”
The company would provide loan at interest rates over 11.50% – which is its prime lending rate. He said that the company expects to maintain spreads (difference between cost of funds and yield on advances) at 2.5 to 3%. On whether the company would provide loan with or without security, Wadhawan said that each case would be dealt with separately. “There is no internal norm on how much loan could be given without any collateral,” he said.
At present government owned banks do not seek any security for loans below Rs 4 lakhs. State Bank of India which has one-fourth of market share of education loans, charges 13.20% for Rs 4 lakhs education loan which is without any security. For loans between Rs 4 lakh to Rs 7.50 lakhs, it seeks third party guarantee and charges 13.45%. The bank charges 11.45% for loan above Rs 7.50 lakh since they are backed by collateral.
Wadhavan said that housing finance business would continue to be the core business for DHFL but Avanse will add to its strength. Going forward he said that the company would have to depend on loans from banks or raise bonds from market to expand their business.
Advantages of Educational Loans
The times have passed when students had to give up education, especially higher education due to monetary constraints. Educational Loans have emerged as a boon, helping different students of different backgrounds to fulfill their dreams of further education. There are different Educational Loans offered by numerous banks and financial institutions to the students who wish to study further. Educational Loans help in securing the future of many students and provide great financial support. These are particularly good for the families who cannot support their children financially for pursuing their studies further.
Students can nowadays apply for loans from various sources and these are obtained easily without much strain. The Government keeps aside certain funds for the education of children. Moreover, there are many private players as well that engage themselves in providing loans and other type of financial help for the students who cannot afford the money. Educational loan can be availed in various forms say scholarships, rewards, funds, financing, private way of borrowing money and bank loans with interest. Different types of Educational loans which are available nowadays are:
Loans for undergraduate courses or Undergraduate loans
Career development educational loans
Subsidized and unsubsidized Stafford loans
Students can apply for any type of loan as per their profile and get quick loans on easy terms and conditions. Financial support is being offered for the most expensive professional courses like MBA, MBBS, MS etc. Some other benefits of these loans are:
Easy repayment with flexible terms and conditions
Available with cover ups up to 20 lakhs from various banks
Loans cover education in India as well as abroad
Loans for studying abroad are secured by medical supports and safety
Expense coverage includes tuition fee, book fee, hostel charges, travel expenses and many more depending on the type of loan that has been taken.
Educational loans offer several benefits to students, the major one being good amount at lower interest rates. Besides, the easy availability of the Educational loans has motivated various students to take up further education.