A Student’s Guide to Education Loan for Abroad Studies
Quality education is an essential investment that helps secure your future. However, it might not be easy for everyone to afford higher education because of the high cost. This is where an education loan for abroad studies can help bridge the gap between quality and affordable education.
Education loans help students looking to pursue a course from a foreign university. This blog provides all the details you need to know if you are thinking about financing your abroad education through a student loan. Read on!
What is an Education Loan?
An education loan helps finance higher education and related expenses. Education loans cover the costs of books and supplies, tuition, living expenses and other expenses. Monetary assistance in the form of an education loan helps students to pursue their studies and meet all their expenses at an affordable price.
These loans do not require immediate repayments since most education loans come with a moratorium period and the repayment starts only after the moratorium period is over. The repayment periods and the interest rate for these loans can vary for each lending institution.
What is an Education Loan for Abroad Studies?
Monetary sums borrowed to sponsor higher education in foreign countries are termed an education loan for abroad studies. It takes off the immediate burden of financing foreign education. Several banks and non-financial organisations offer student loans to fulfil foreign educational dreams. The loans can be secured or unsecured, depending on the lender’s policy.
Unsecured loans or loans given without collateral are given to several aspiring students from top-tier institutions in the USA, Canada, Australia UK, European countries, etc.
What Does an Education Loan for Abroad Studies Cover
Tuition or Academic Expenses
- Registration Fee
- Tuition Fee
- Examination Fee
- Counselling Fee
- Study visit and Industrial Trip Fee
- Laboratory Fee
- Library Fee
- Food Expenses
- Transport or Commute Expenses
Non-academic expenses
- Student Welfare Contribution
- Building and Maintenance Expenses
- Stationary and Project Expenses
- Exam fee for entrances like LASTs, SATs, GMAT, TOEFL, etc.
- Medical Insurance Expenses
- Student Insurance
- Flight Expenses
Types of Education Loan for Abroad Studies
The two major types of student loans for abroad are:
a) Secured
Collateral loans are where the borrower is required to pledge collateral of equal or higher value as security for getting a loan. Collateral loans do not require you to liquidate your financial investments. The loan is granted against the asset pledged as collateral for the loan. The collateral is released by the lender when you finish repaying the loan. Collateral loans can be categorised as follows:
- Loans against property, deposits and security: Any asset like gold, mutual funds, agricultural land, stock investments, property, recurring deposits, etc., can be placed as collateral to secure a loan for educational purposes.
- Third-party guarantees: A security letter from a bank employee or a home bank can largely help a student secure a loan to pursue higher education.
However, remember that you might lose your collateral asset if you cannot repay the loan borrowed. The procedure to acquire this type of loan is also cumbersome and time-consuming as the documentation and verification are complicated.
b) Unsecured
An education loan for abroad studies without collateral is termed an unsecured loan. These loans do not entail the borrower to pledge for security. The loans are given out to the students after evaluating the borrower’s creditworthiness and are thus free from providing collateral. Upon applying for such loans, the lender verifies the eligibility criteria of the individual and only then issues the loan. Here are some of the major benefits of an abroad education loan without collateral:
- Quick, efficient, and hassle-free loan sanction
- Flexible repayment policies and terms
- No collateral needed
- Simple and minimal documentation requirement
- Higher interest rates than secured loans
Banks that offer Education Loan for Abroad Studies
| Bank Name | Interest Rate | Maximum Amount (Rs.) | Repayment Time |
| IDBI Bank | 15-18% | 20 Lakh | 10-15 years |
| State Bank of India | 15% | 30 Lakh | 1-15 years |
| Axis Bank | 16.5-17.5% | 20 Lakh | 10-15 years |
| Canara Bank | 15% | 20 Lakh | 15 years |
| Bank of Boroda | 15% | 20 Lakh | 15 years |
| Oriental Bank of Commerce | 15-17% | 30 Lakh | 10-15 years |
| ICICI Bank | 11.5-18% | 40 Lakh | 8 years |
Eligibility Criteria for Education Loan for Abroad Studies
The general eligibility parameters for study-abroad education loans are:
- The loan applicant or student must be an Indian resident
- The student must possess a confirmed admission in a recognized institute either in India or abroad for loan procurement
- The candidate should be between 18 to 35 years old when applying for the loan
- The loan applicant must intend on pursuing a graduate or postgraduate degree or diploma
- The loan applicant must also possess a secured admission to any university affiliated with University Grants Commission (UGC)/All India Council for Technical Education (AICTE)/Govt. etc
- Those applicants pursuing full-time courses must have a co-applicant mandatorily that can either be a parent, spouse, in-laws, or guardians
- In the case of a collateral loan, the applicant must possess all the necessary documents and proofs required
Documents Required to Apply for Education Loan for Abroad Studies
Certain documents are needed for proof and verification of your foreign education loan. Most commonly requested documents include the following:
- Properly filled and signed application forms with necessary photographs affixed
- Passport size photographs 2 or 3 as per requirement
- All educational certificates like 10th or 12th certificates or bachelor’s degree
- Course expense statements and other related expenses’ statement
- Aadhaar Card/ PAN Card/ passport of the Student and Parent/ Guardian
- Age proof like a birth certificate or Adhaar card
- Identification proofs like Aadhaar card, Voter ID, Passport, etc.
- Address proofs like Voter ID, Aadhaar card, Passport, etc
- Rental agreement or Bank statement of the last 6 months of the student or co-borrower inkling expense statement like electricity bills
- Recent salary slips and Form 16 of the parent or guardian
- Updated passbook and bank statements
- Updated ITR (Income Tax Return with income computation) of the parent or guardian
- Documents that act as proof for the assets and liabilities of the parent or guardian
How to Apply for an Education Loan for Abroad Studies?
Here is how you can apply for an education loan to pursue higher education abroad:
- Choose the type of loan (secured or unsecured) you would like to apply for
- Study the education loan offers from different banks and financial lending institutions. Compare the terms and conditions, features, inclusions, exclusions, moratorium and other aspects
- Check the eligibility criteria for the loan offer you like. Ensure that you qualify for the loan you have selected. Choose an education loan offer that meets your requirements
- Fill out the lender’s application form and submit it along with all necessary documents and statements for the lender to complete due diligence. The lender will contact you at the earliest to discuss your requirements
- When the loan is sanctioned, the lender will disburse it to the University or Institute’s account
Things to Remember While Choosing a Provider for Education Loan for Abroad Studies
Here are a few things you should keep in mind while applying for a student loan:
- Loan amount
Determining the amount you need for your studies helps you borrow only the amount that you actually need instead of going overboard and availing of a loan amount that may be higher than your requirement. Note that the EMI value increases with a higher quantum of loan.
- Understanding the fine print
Reading the fine print and understanding the legality that binds the loan agreement is vital. Getting an expert to help you decode the technical details will help you understand if you can afford the loan and what are the norms you are bound by. Reading the fine print helps you stay on top of things while making the repayment process easy.
- Choosing the right lender
The interest rates, grace period, lending amount, etc., are dynamic and depend upon the lender’s discretion. You will be entering a long relationship with your financier. Thus, it is important to understand and consider even the minutest details. Ask and clarify even the smallest of doubts before you settle on a lender to finance your foreign education.
- Tracking loan repayment
The grace period might be a blessing for the students. However, it is important to stay on top of this to ensure that you repay your loan on time. The interest amount only increases with time, so it is important to have control over your repayment plan.
Final Word
Student loans are a blessing and are perfect when handled properly. Foreign education loans are the best way to pursue your academic dreams without the financial burden on your shoulders. Check the eligibility criteria and do thorough research before applying for an education loan with a financial institution.
In case your loan application gets rejected or takes time to process, you can apply for a cash loan with Navi to finance your education abroad. Its 100% paperless and instant disbursals make Navi Cash Loans one of the best lending apps. Just download the Navi App and apply!
FAQs
Ans: Banks and other lending agencies set no predefined limit for offering education loans to students wanting to study abroad. The lending amount is dependent on the lending institute. Most banks and lending agencies offer loans up to Rs.40 lakh. In case a greater amount is lent, a higher interest rate may be charged.
Ans: Student loans for abroad studies are offered for both undergraduate and postgraduate programs in almost every subject.
Ans; The best banks for student loans depend on your requirement. It is important to understand that every lending institution has certain advantages. All the loan offerings must be studied and the best- fit must be chosen based on the convenience of the borrower.
Ans: Yes, they may have higher interest rates. Non-collateral loans are unsecured loans. Although these are easier to procure, they may come with a higher interest due to the lack of collateral. 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.
Ans: Generally, study loans are not interest-free. However, you can apply for various scholarships, check for government subsidies, or even private scholarships to get an interest-free education loan. However, there is a certain section in the Indian Income Tax Act that allows education loan borrowers to claim a rebate on the interest amount paid.
