Introduction
When considering taking an unsecured loan from a non-banking financial company (NBFC), it's crucial to evaluate the reliability and reputation of the financial institution. This article provides a detailed comparison between HDFC Credila, InCred, and Avanse, highlighting their pros and cons in terms of reliability, interest rates, and overall borrower experience.
HDFC Credila
HDFC Credila is a leading player in the education loan sector. Unlike some other NBFCs, Credila offers a wide range of services, including loan sanction before admission and flexibility in collateral requirements. However, interest rates may be higher, and margin money is often required.
InCred
Launched in 2016, InCred is part of the Manipal Group. This relatively new player in the market provides collateral-free loans up to 40 lacs, with collateral required for amounts above that.
Avanse
Avanse is one of the most trusted NBFCs, known for its expertise in education loans. They offer customized loans at attractive interest rates, covering tuition and living costs. They also analyze a student's academic performance and entrance exam scores to determine their ability to repay. However, Avanse has faced numerous allegations of predatory lending practices, including high interest rates, insurance charges, and constant violations of RBI guidelines.
Key Considerations
Interest Rates
Avanse charges substantial interest rates that are compounded and floating. For instance, a student who borrowed at an interest rate of 11.25% might find their rate increase to 16% by the time they graduate. This practice is often described as 'daylight robbery.'
HDFC Credila also has higher interest rates compared to traditional banks, but they offer loan sanction before admission and flexibility in collaterals, which can be beneficial in certain situations.
InCred, on the other hand, offers competitive interest rates and collateral-free loans, making it a potentially attractive option for borrowers in certain situations.
Lending Practices
Avanse has a notorious reputation for predatory lending. They impose insurance and charge floating interest rates, which can lead to unexpected increases in loan amounts. The parent company, Warburg Pincus, is facing lawsuits in several states in the USA for similar predatory lending practices.
HDFC Credila, while also offering loans with higher interest rates, has a reputable stance and generally adheres to financial regulations and guidelines. They analyze the student's academic performance to ensure responsible lending practices.
InCred, as a newer player, has not faced as many criticisms regarding lending practices. Their service is more centered on offering flexibility and support to borrowers.
Customer Service and Response Time
Avanse has been criticized for its constant deficiency in service. Borrowers often report that they do not receive timely responses to service requests. The only recourse is the RBI Ombudsman, who is often reluctant to enforce guidelines strictly.
HDFC Credila offers a more comprehensive service, including loan sanction before admission and flexibility in collateral requirements, which can make the borrowing process smoother.
InCred, being a newer player, has had less scrutiny regarding customer service. However, their response times and overall service can be as effective as their competitors.
Conclusion
Based on the given information, while HDFC Credila and InCred offer more favorable conditions initially, Avanse's current practices and reputation pose significant risks to borrowers. It is advisable for potential borrowers to carefully evaluate their options and consider the reliability and practices of the NBFCs before making a decision. Always research thoroughly and consult with financial experts if needed.