Interest rate plays a very important role in any loan process. The overseas education loan process is no exception in this case. Most loan applicants make the final decision of borrowing an education loan by taking into account the abroad education loan interest rate of the respective lender. Oftentimes, the abroad education loan interest rate could be the only factor on the basis of which students decide on a lender. However, one thing which everyone needs to remember is that the abroad education loan interest rates of various lenders depend on a lot of factors. This article aims to shed light on these factors, as well as list out the latest values of the education loan interest rates charged by the various types of lenders in India.
You can find all the latest interest rates by watching the latest episode of Loanflix Inshorts below.
A typical abroad education loan interest rate in India greatly depends on the type of lender. Education loan lenders in India can be bifurcated into three distinct categories, based on the type of abroad education loan provided by them. Government banks, NBFCs and private banks and finally, foreign lenders.
How Are The Values Of An Abroad Education Loan Interest Rate Decided?
The abroad education loan interest rate in India is determined by lenders on the basis of something called the MCLR, or Marginal Cost of Funds-Based Lending Rate. This figure is often considered to be the benchmark on the basis of which most Indian lenders of education loans calculate the abroad education loan interest rates. The MCLR is calculated by taking into account various factors such as the tenure premium, the marginal cost of funds, the operating cost, etc.
Government Bank Education Loan Interest Rate
Although the MCLR is the basis of all the abroad education loan interest rates fixed by lenders in India, most government bank education loan interest rates are calculated as MCLR plus spread. This spread refers to a premium amount levied by banks, in addition to the basic MCLR value. The abroad education loan interest rate of government banks varies between 9% and 10%. Since they grant education loans on the basis of collateral security, the final education loan amount sanctioned by government banks could go up to INR 1.5 Cr. Moving ahead, let us take a look at the abroad education loan interest rates of private banks.
Interest Rate of Education Loan Without Collateral From Private Banks
NBFCs and private banks are some of the major providers of unsecured education loans in India. Since these loans do not involve collateral security of any kind, the interest rate of education loan without collateral is higher as compared to those of government bank education loan interest rate. The education loan interest rate charged by private banks and NBFCs varies depending on numerous factors. One of them is the country of study chosen by loan applicants. Here is an overview of the estimated education loan interest rate levied by NBFCs and private banks for the following countries:
- USA : 11.5% to 12.75%
- Canada: 12% to 13%
- Germany, UK, France, Ireland, etc: 13% to 14.5%
Overall, the interest rate of education loans without collateral from NBFCs and private banks may roughly vary between 11.5% to 14.9%. The next category of lenders is that of foreign lenders. Let us take a look at the education loan interest rates charged by them.
Abroad Education Loan Interest Rate of Foreign Lenders
Foreign lenders follow a different set of education loan policies. The same applies to their foreign education loan interest rates. The foreign education loan interest rates of foreign lenders are calculated on the basis of something called LIBOR or London Inter Bank Offered Rate. LIBOR values vary almost every two months and this variation affects the final abroad education loan interest rate of foreign lenders. The difference in currency values also plays a significant role in determining their foreign education loan interest rate.
Foreign lenders levy education loan interest rates that vary between 8.5% to 11%. However, since the abroad education loan amount is in USD, this 8.5% is interpreted as 13.5% when you convert it in terms of the INR. This concept is clearly explained in the 10th episode of Loanflix. So do make it a point to watch the same.
When students directly approach lenders in India for an abroad education loan, various factors of the education loan schemes such as the abroad education loan interest rates, the education loan repayment terms, etc are often lost in translation.
This is when the guidance and assistance of organizations like WeMakeScholars come in handy. Students who apply for their unsecured loans through the financial team of WeMakeScholars get to avail an additional 0.5% waiver on their existing abroad education loan interest rates. So do request a callback at the earliest possible instance.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others