With the number of prestigious institutes for higher education in India being few in number, many Indian students look to foreign countries for their higher studies. Countries like the United States of America, Canada, United Kingdom, Australia, and a few European countries are regularly opted for by Indian students. However, many-a-times, students are wary of the high fees that these Universities charge. Here, education loans serve as the solution.
In this article, we will discuss the various kinds of education loans available for Indian students. Education loans can broadly be defined into two categories i.e. Secured and Unsecured loans. Let us discuss them one by one.
Education Loan to Study Abroad – Secured Loans
Also called as Loan with collateral, these loans require the borrower to pledge an asset against the loan. This asset can include tangible items like house/land or intangible items like Life Insurance, Fixed Deposits etc. Though most banks, PSUs and other financial entities offer educational loans up to INR 4 lakh without collateral, most ask for collateral when the loan amount crosses INR 7.5 Lakh.
The collateral is seen as a backup means of repayment, in case the borrower fails to repay the loan. Banks such as The State Bank of India and Bank of Baroda offers secured education loan with interest rate between 9 to 10.5%. NBFCs, on the other hand, offer secured education loans at an interest rate of 11 to 13 %.
Students applying for an SBI Education Loan can apply for their SBI Global Ed-Vantage Scheme, which offers loans from Rs. 20 lakh to Rs. 1.5 Crore. SBI also has a Student Loan Scheme, where the maximum loan amount here is 20 lacs. Hence, most students apply for the Global Ed-Vantage Scheme. Eligible countries/regions for this include such as USA, Canada, UK, Australia, Singapore, Europe, Japan, New Zealand and, Hong Kong. The interest rate is currently 10.75% for men and 10.25% for women (additional discount of 0.5% for both men and women is easily possible) and the loan covers tuition fee, travel expenses, books, and other materials etc.
The borrower has to attach a tangible security as collateral for this loan. A very interesting feature of this loan is that it accepts collateral from Third Party too, i.e. from people other than the student’s parents. The borrower can repay the loan in 15 years, but there’s no downside to paying early. This loan is approved even before the i20/Visa and the borrower just needs to submit Admission Letter from the Institution along with other documents. The bank also considers Conditional admission letter for sanctioning the loan. Borrowers also get tax benefits under section 80(E) when repaying this loan.
Bank of Baroda also offers secured educational loans to students for studying abroad. The Bank’s Baroda Scholar (for study abroad) offers secured loans of 80 lakhs for Premiere Institutions and 60 lakhs for other institutions specified in their list. The rate of interest for studying at a premier foreign institution included in their list is 1 year MCLR ( currently 8.65%) + 1.25% Spread (Including SP) while for institutions not included in their list or Premiere colleges is 1 year MCLR + 2 % Spread (Including SP – Irrespective of loan amount). Girls are given a concession of 0.50% at BoB. This loan covers tuition fees, travel expenses, insurance premium for borrower, books and other materials etc.
Students must remember that the rate of interest for their education loan can change. You can check here to know how that happens. They must also take into account Margin Money when securing a loan. Also, there are times when a bank refuses to sanction a secured loan and students find themselves in a soup! Read here to know why a bank might reject your secured loan request.
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Education Loan to Study Abroad – Unsecured Loans
As the name suggests, these loans are offered without asking for collateral. The borrower does not have to attach any asset when securing this loan. As mentioned earlier, most banks offer unsecured loans up to INR 4 lakh. However, studying abroad costs much more than that and it is here that NBFCs enter the picture. NBFCs like Incred, Credila, Auxilo and Avanse and banks such as Axis Bank provides unsecured education loans to students for studying abroad. Both the bank and the NBFCs, however, require a co-applicant for sanctioning the loan.
Incred and Avanse offer unsecured loans up to INR 50 lakhs for study in ~200 colleges of The United States of America, while Axis Bank offers unsecured loans up to INR 40 lakhs for studying in ~ 50 colleges of the U.S. Note that unsecured loans above 10 lakhs are only available for STEM and MBA courses – which means that students looking at other courses need to have a collateral. Students can return these loans in 10 years time and have to pay a rate of interest of 11% – 13% to Axis Bank and 11.75% to 14% to NBFCs. Students applying for this loan should not have more than 4 backlogs and both should not have a defaulted on a loan in the recent past. Axis Bank requires a co-applicant – who must be an immediate family member of the borrower and have a monthly income of INR 60,000 for a loan of up to INR 40 lakhs. The two NBFCs require the co-applicants’ monthly income to be more than INR 35,000 per month for most colleges. For colleges not falling in their lists, NBFCs provide loans on an immediate EMI basis, i.e. the repayment starts the very next month, just as in a personal loan. In such cases, NBFCs also require that the co-applicants’ income must be adequate to pay full EMI immediately.
For study in Australia, Incred and Avanse offer unsecured loans up to INR 20 Lakhs. The rate of interest for this loan varies between 12% and 14% and students can repay the loan in 10 years. Both the NBFCs require that the student does not have more than 4 backlogs and has not defaulted in recent the past. For 11 colleges in their list, the NBFCs offer a moratorium period, i.e. the option of paying only simple interest during studies. For these colleges, the co-applicants’ net income should be sufficient to bear the Simple Interest. For other Australian colleges, NBFCs provide loans on an immediate EMI basis, i.e. the repayment starts the very next month, just as in a personal loan. Similarly, for Canada, unsecured loans with a moratorium period, are available for ~12 colleges. Note that unsecured loans with moratorium are only available for STEM courses and select MBA courses.
Now that we have come to know about the various kinds of loan, we are sure that you might want to apply for one of these. We, at GyanDhan, help you here. Since every lender has different requirements and products to offer, GyanDhan provides free loan counseling to students so that they can filter all the loan deals that suit their need, and choose the best deal available. We then initiate your loan request at relevant lenders and coordinate every step to ensure a quick decision. We have designed our process to be painless – you don’t have to visit bank branches to get your education loan sanctioned – you either upload documents on our website or our representative visits you to collect documents. We are the only agency authorized by SBI to collect documents from students’ home for education loans. Note that doorstep facility for public sector banks, such as SBI, is limited to 5 cities (Delhi, Mumbai, Pune, Hyderabad, and Bengaluru) at the moment. Finally, we do not charge students anything for our services.
Now that you know where to approach for your study loan, what are you waiting for? Get in touch and make your study abroad dreams come true.
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Ans. For applying for study abroad loan, you need to first complete Free Application for Federal Student Aid (FAFSA). If there is a financial aid office in the school, you can contact them.
Ans. There are many financial lenders that provide education loans to the students without collateral. According to RBI guidelines, banks have provision to provide education loans without collateral upto 7.5 lakhs when certain criteria are met.
Ans. Yes, you can get an education loan upto 20 lakhs, SBI had a scholarship loan program where certain listed colleges in management, engineering, and medical without collateral. So now you can get admission into the best colleges of management, engineering and medicine in India.
Ans. HDFC bank provides a maximum of INR 20 lakhs, while the processing fee for education loan is upto 1.5% of the loan amount with no fee.