Educational Loan Without Collateral – Banks Offering and Eligibility
An educational loan without collateral is a hassle-free way for students to pursue further education either abroad or in India. In this type of loan, students do not have to pledge any security as collateral. There are several banks that offer a non-collateral educational loan up to a certain amount.
Read on to get detailed insights and information about loans without collateral for students.
What is an Education Loan Without Collateral?
An education loan without collateral is a loan that the borrower takes without pledging any security or collateral as a guarantee to the lender. Furthermore, students can take up to Rs.50 lakh in loans for their education. For students, lenders assess and rely on the students’ earning potential in the future when they have completed their education. Note that the need for pledging no security against the loan makes the interest rates on a collateral-free education loan higher as compared to secured loans.
List of Banks That Offer Education Loans Without Collateral
Here is a list of banks that offer educational loans without collateral:
| Banks | Type of Education | Loan Amount & Collateral |
| HDFC Bank | Domestic education – Up to Rs.30 lakhForeign education – Up to Rs.45 lakh | No collateral required for the amount of loan up to Rs.7.5 lakh |
| HSBC | – | No collateral amount required for the loan amount up to Rs.5 lakh |
| State Bank of India (SBI) | Domestic education – Up to Rs.15 lakhForeign education – Up to Rs.1.5 crore | No collateral is required for loans up to Rs.7.5 lakh |
| IDBI Bank | Domestic education – Up to Rs.20 lakh Foreign education – Up to Rs.20 lakh | No collateral required for the loan amount up to Rs.4 lakh |
| ICICI Bank | Domestic education – Up to Rs.50 lakhForeign education – Up to Rs.1 crore | No collateral required for or loans up to Rs.20 lakh (UG) and Rs.40 lakh (PG) |
| Bank of India | Domestic education – Up to Rs.10 lakh Foreign education – Up to Rs.20 lakh | No collateral required for loans up to Rs.7.5 lakh |
| Punjab and Sind Bank | Domestic education – Up to Rs.15 lakh Foreign education – Up to Rs.20 lakh | No collateral required for the loan amount up to Rs.4 lakh |
How to Apply for an Education Loan Without Collateral?
You must understand that you, as a student, are the primary borrower of the loan. While your parent, spouse, or siblings can apply to become the co-applicant for the loan.
Follow the below steps to apply for an education loan without collateral:
- Download or get the application form from a bank of your choice.
- Co-applicant is required to submit income documents such as income-tax returns (ITR), salary slips, or updated passbooks.
- Co-applicant’s age proof (birth certificate, PAN, Aadhaar, voter ID, etc.)
- The student must provide a copy of the offer letter provided by the University and other relevant documents along with two passport-size photographs.
- Once the lender has accepted the loan application, the loan amount shall be disbursed directly to the college, university or institution based on the given fee structure.
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Eligibility Criteria for Availing of an Education Loan Without Collateral
The eligibility criteria for a student loan without collateral are:
- The applicant must be a resident of India
- The applicant must have the confirmation of admission to recognized educational institutions in India
- The applicant for the loan must fall within the age bracket of 18 to 35 years at the time of applying for the educational loan
- Applicants applying for graduation, post-graduation, or PG Diploma program
- The applicant should be admitted to an institution affiliated with the University Grants Commission (UGC), All India Council for Technical Education (AICTE), the Government, etc.
- Students who are pursuing full-time courses must have a co-applicant for the loan. The co-applicant can either be a parent, guardian, or spouse/parent-in-law (in case the candidate is married).
Documents Required to Apply for an Education Loan Without Collateral
Documents required for a no collateral loan for educational purposes are:
- Properly filled and duly signed application form along with affixed photographs
- 2 passport size photographs
- Copy of exam mark sheets for 10th and 12th or the latest education certificate
- Statement of course expenses and total cost of study
- Aadhaar Card and PAN Card of the student and Parent or Guardian
- For identity and age proof, you can produce a copy of Aadhaar Card, Voter ID, Passport, or Driving License.
- For residence proof-
- Rental agreement
- Bank statement of 6 months of the student or co-applicant or guarantor
- A copy of Ration card, Electricity Bill, Gas Book, or Telephone Bill
- For income proof-
- Form 16 or most recent salary slips of the parent, guardian, or co-applicant
- Updated Income Tax Return (ITR) with income computation of 2 years or the IT assessment of 2 years of the co-applicant, guardian, or parent
- Documents aggregating the assets and liabilities of the co-applicant, guardian, or parent
Things to Keep in Mind
Below are some points you should keep in mind while applying for a loan without collateral for higher education:
- Carefully check the course and educational institution you are applying for
- You must also carefully check the eligibility criteria for applying for an unsecured educational loan
- Compare different banks for the criteria, policies, interest rates, and more before you apply for an educational loan without collateral.
- Additionally, you should thoroughly research the loan details such as the interest rate, repayment period, moratorium period, late payment fees and similar aspects
- You should regularly check for financial aid schemes offered by the government and universities
- Check other charges such as processing fees and foreclosure charges
A one-year moratorium on repayment is also granted to all students taking education loans under the CGFSEL educational loan scheme. Following the completion of your education, lenders can give you about a year to start repaying the loan.
Furthermore, education loans usually have a repayment period of up to 15 years. Since tax-saving deductions are only available for up to 8 years, it is recommended you repay the loan amount within 8 years.
Final Word
Applying for an educational loan is a hassle-free, straightforward process for students and carries several tax benefits too. Educational loans without collateral offer great benefits to students who want to further pursue their education, either in India or abroad. Weigh in all the pros and cons before applying for an education loan without collateral.
If your loan gets rejected or takes time to process, you can apply for a cash loan with Navi in a 100% paperless manner to finance your education. Download the Navi app now!
FAQs
Ans: Axis Bank, Canara Bank, Bank of Baroda, Federal Bank, HDFC Bank, State Bank of India, and Punjab National Bank (PNB) are among the top providers of educational loans if you want to pursue education abroad.
Ans: Secured education loans and collateral-free education loans (unsecured education loans) are the two types of educational loans offered by financial institutions. Apart from loans, scholarships and educational funding are common ways to get financial support for higher studies.
Ans: The lenders assess two major factors for providing an educational loan without collateral, including the potential income of the borrower after completing the education and the creditworthiness of the applicant and co-applicant.
Ans: Yes, lenders can levy a processing fee for providing an education loan without collateral. The processing fees vary from one lender to another. The processing fee is completely up to the discretion of the lender. The necessary documents and the fee statement are the mandatory requirements to procure this form of a loan.
Ans: Yes, the interest rates for an educational loan without collateral have higher interest rates as compared to secured loans. The risk factor involved is the major reason for a higher rate of interest. The eligibility for this loan is anyway dependent on the credit history of the borrower.
