Now, score high marks in exams to get low interest rates on loans
Rachel Chitra| TNN | Updated: Dec 17, 2017, 10:54 IST
Can 90% in your college exam get you an iPhone? It could as a number of online student lenders are scrutinising marksheets to assess credit worthiness, and hand out loans for consumer durables.
Students are a fairly large market as they want to be seen with the latest gadgets. Little wonder that lenders are using unorthodox ways to woo them.
"Adults can show their I-T returns, salary slips or credit scores to get a loan. But students don't have such documents. In the absence of such credit metrics, we take unusual steps for credit assessment," says Madhusudhanan, CEO of KrazyBee, a student credit platform. Of KrazyBee's 4.5 lakh student customer base, about 50% take student loans for laptops, mobile phones and hard disks.
Lenders also look at the other criteria such as the reputation and graduation rate of the educational institution that the student is from and placement numbers. "We look at the type of college and individual performance," says Madhusudhanan. A few colleges have automated the scoring process so loan approval is faster. Visvesvaraya Technological University, Bengaluru, for instance, generates marksheets online, so the lenders just check the portal with the student's permission. For other institutions, they ask students to bring their score cards. Apart from consumer durables, online lenders also give loans for two wheelers and fees though the terms are stiffer.
Nagaraju T, a 21-year-old student at Malla Reddy College of Engineering in Hyderabad bought a Lenovo i5 laptop for Rs 36,000 in 2016. "I got my dad to make the down payment of Rs 10,000, and I paid the EMIs of Rs 2,000. I closed the loan in 13 months, and then bought a MINote 4 for Rs 14,000 and paid monthly installments of Rs 850," says Nagaraju.
Students also take such loans to reduce the burden on their parents. "I heard about student loans for mobile phones on social media. I bought one, and was impressed by the speed of the loan processing," says Chaitanya Koneru, a student at GITAM University, Bengaluru. When his father found it hard to pay his semester fee of Rs 1.85 lakh at one go, Koneru decided to take a loan of Rs 1 lakh. "My father agreed primarily because he saw the online lender's interest rate of 9-10% was lower than what banks charge (12-17%) for educational loans," he says.
Student lenders are careful not to give students cash directly. All lenders pay the educational institution, the vehicle dealer or the e-commerce website. "Lending to students has its risks. We don't credit any money to their accounts directly. Instead, we pay to the college or merchant," says Rajat Gandhi, co-founder, Faircent, a peer-to-peer lending platform.
KrazyBee places a cap of Rs 15,000 for consumer durable loans, Rs 50,000 for two-wheeler loans and Rs 3.5 lakh-Rs 4.5 lakh for educational loans. "For loans for fees, we would need the parent as a guarantor and traditional credit metrics like CIBIL score," says Madhusudhanan.
KrazyBee, Faircent and Buddy.com say their non-performing asset (NPA) levels are under 3%, which is below the industry norm. The low default rate, they say, is due to risk assessment and screening of applicants. "Students take pride in possessions like a new phone. So they're fairly prompt with payments," says Madhusudhanan.
Online lender Deal4Loans' Rishi Mehra says the use of proxies such as marksheets instead of CIBIL scores needs to be viewed with caution. In the early 2000s, a rash of NBFCs lent based on such proxies for credit scores, he says. "They used the individual's mobile bill payment pattern, insurance premium payments, and PPF fund deposits. The experiment did not turn out well," he says. So Deal4Loans only lends to students who work. "Our loans ranging from Rs 50,000-Rs 2.5 lakh are for working professionals, who want to pursue online courses on sites like Coursera," says Mehra.
Rachel Chitra| TNN | Updated: Dec 17, 2017, 10:54 IST
Can 90% in your college exam get you an iPhone? It could as a number of online student lenders are scrutinising marksheets to assess credit worthiness, and hand out loans for consumer durables.
Students are a fairly large market as they want to be seen with the latest gadgets. Little wonder that lenders are using unorthodox ways to woo them.
"Adults can show their I-T returns, salary slips or credit scores to get a loan. But students don't have such documents. In the absence of such credit metrics, we take unusual steps for credit assessment," says Madhusudhanan, CEO of KrazyBee, a student credit platform. Of KrazyBee's 4.5 lakh student customer base, about 50% take student loans for laptops, mobile phones and hard disks.
Lenders also look at the other criteria such as the reputation and graduation rate of the educational institution that the student is from and placement numbers. "We look at the type of college and individual performance," says Madhusudhanan. A few colleges have automated the scoring process so loan approval is faster. Visvesvaraya Technological University, Bengaluru, for instance, generates marksheets online, so the lenders just check the portal with the student's permission. For other institutions, they ask students to bring their score cards. Apart from consumer durables, online lenders also give loans for two wheelers and fees though the terms are stiffer.
Nagaraju T, a 21-year-old student at Malla Reddy College of Engineering in Hyderabad bought a Lenovo i5 laptop for Rs 36,000 in 2016. "I got my dad to make the down payment of Rs 10,000, and I paid the EMIs of Rs 2,000. I closed the loan in 13 months, and then bought a MINote 4 for Rs 14,000 and paid monthly installments of Rs 850," says Nagaraju.
Students also take such loans to reduce the burden on their parents. "I heard about student loans for mobile phones on social media. I bought one, and was impressed by the speed of the loan processing," says Chaitanya Koneru, a student at GITAM University, Bengaluru. When his father found it hard to pay his semester fee of Rs 1.85 lakh at one go, Koneru decided to take a loan of Rs 1 lakh. "My father agreed primarily because he saw the online lender's interest rate of 9-10% was lower than what banks charge (12-17%) for educational loans," he says.
Student lenders are careful not to give students cash directly. All lenders pay the educational institution, the vehicle dealer or the e-commerce website. "Lending to students has its risks. We don't credit any money to their accounts directly. Instead, we pay to the college or merchant," says Rajat Gandhi, co-founder, Faircent, a peer-to-peer lending platform.
KrazyBee places a cap of Rs 15,000 for consumer durable loans, Rs 50,000 for two-wheeler loans and Rs 3.5 lakh-Rs 4.5 lakh for educational loans. "For loans for fees, we would need the parent as a guarantor and traditional credit metrics like CIBIL score," says Madhusudhanan.
KrazyBee, Faircent and Buddy.com say their non-performing asset (NPA) levels are under 3%, which is below the industry norm. The low default rate, they say, is due to risk assessment and screening of applicants. "Students take pride in possessions like a new phone. So they're fairly prompt with payments," says Madhusudhanan.
Online lender Deal4Loans' Rishi Mehra says the use of proxies such as marksheets instead of CIBIL scores needs to be viewed with caution. In the early 2000s, a rash of NBFCs lent based on such proxies for credit scores, he says. "They used the individual's mobile bill payment pattern, insurance premium payments, and PPF fund deposits. The experiment did not turn out well," he says. So Deal4Loans only lends to students who work. "Our loans ranging from Rs 50,000-Rs 2.5 lakh are for working professionals, who want to pursue online courses on sites like Coursera," says Mehra.
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