Planning for abroad education? Education loans are an incredible source of funding for your higher education abroad. Well, you might have done your part of research on the same and must have worried that banks may ask for collateral to offer education loans. 

You are not alone; over 2.3 lakh Indian students faced the same challenge last year. But worry not, we have got you covered. The good news is that education loans without collateral are possible. You heard that right, and these loans have become a preferred choice for 68% of students studying abroad.

Many lenders, including public banks, private banks, and NBFCs, offer education loans abroad without collateral. Students can get up to 1.25 CR of loan amount without any collateral. However, there are certain terms and conditions to be followed to get these education loans without collateral in India. This guide covers everything about education loans without collateral, including the eligibility requirements, application process, available lenders, along how to secure these loans without pledging any collateral.

What is an Education Loan Without Collateral?

An education loan without collateral, also known as an unsecured education loan or non-collateral education loan, is a type of credit offered by financial institutions, such as banks and NBFCs, to help students cover their educational expenses. An unsecured education loan, unlike secured loans, doesn’t require the applicants to provide any collateral as security for the loan amount. 

Financial institutions offer these loans based on the income and credit score of the applicant and their financial co-applicant. Lenders also assess the eligibility based on the academics, the country, the course, and the university the student chooses to study. This is done to evaluate the future earning potential of the student and to check the loan repayment capacity of the student, as no collateral is involved.

Key Features

  • No collateral (an asset, property, liquid assets such as fixed deposits, Insurance, etc.) is required.
  • Co-applicant is mandatory to get these loans.
  • The interest rates are higher compared to a secured education loan.
  • Known for fast loan approvals.

Also Read:  Collateral Education Loan for Abroad Studies

Differences Between Collateral and Non-Collateral Education Loans

 Loan Parameter  Education Loan with Collateral Education Loan without Collateral
 Loan Amount Offered Up to 3 Cr (Based on the value of the collateral) Up to 1.25 Crores 
Interest Rates Starts from 8.15% Starts from 10.15%
Lenders Both Public and Private Lenders Both Public and Private Lenders(Mostly offered by Private banks and NBFCs)
Processing Time  15 to 25 working days (if all documents are ready) 7-10 working days
Maximum Loan Amount Possible based on the collateral Limited loan amount
University Recognised University Premium Universities Only
Eligibility Criteria  Relaxed(as security is involved) Strict(no security is involved)
Risk to Borrower May lose the asset (if defaults) Impacts CIBIL and Future loans
Best Suited for Students with assets who seek lower interest rates. Students with a good educational background who cannot pledge collateral.

The above-mentioned interest rates can vary based on various factors, including the repo rate, creditworthiness, and the lender. To know the exact interest rate you can get on an education loan, get in touch with us so that one of our experienced financial officers can connect with you to analyze your profile and provide you with the information. 

Can We Get an Education Loan Without Collateral?

  • Yes! You can get an education loan without collateral by meeting the lender's eligibility criteria.
  • Students planning to pursue higher education from reputed universities in India or abroad can apply for an education loan without collateral in India.
  • Lenders such as Public Banks, Private Banks, and NBFCs offer unsecured loans to students, who can get study loans without collateral.
  • Students can get these Loans to pursue a diploma, undergraduate, graduate, postgraduate, and other programmes. Each lender has different eligibility standards, students must meet to get these loans.
  • A good academic background with good scores in entrance tests such as GRE, CAT, MAT, TOEFL, etc, is to be demonstrated to get these loans.
  • A co-applicant or a financial co-applicant with a stable income and a good credit history can help students get these loans. 
  • As we previously discussed, lenders also consider the country, the course, and the university the student is going to. Based on these factors, lenders evaluate the future earning potential of the students upon which the loan is being offered, even without collateral.
Request a callback from our education loan experts for personalized assistance.

Market Trends

Education loans in India have exponentially grown by 50% in FY 2023-2024, which shows the increasing demand for education loans. According to the official data, public sector banks disbursed approximately INR26,502 CR compared to the previous INR 17,668 CR.

A major portion of which contributes to the disbursement of unsecured education loans. This surge is driven by the government initiatives and increased demand for unsecured education loans.

Lenders Offering Abroad Education Loan Without Collateral

Bank/ Financial Institution

Max Loan Amount

Interest Rate(p.a)

Processing Time

Processing Fee

Co-Applicant Requirement

State Bank of India(SBI)

Up to ₹50 lakhs

9.15%(girls), 9.65%(boys)

15 to 25 working days (if all documents are ready)

INR 10k, plus GST

Yes

ICICI Bank

Up to ₹1 crore

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

Axis Bank

Up to ₹1 crore

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

IDFC Bank

Up to ₹75 lakhs

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

Credila

Up to ₹75 lakhs

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

Avanse

Up to ₹1.25 crores

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

Auxilo

According to the requirement

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

Incred

Up to ₹80 lakhs

Starts from 11.5%

7-10 working days

Up to 1% of the Loan Amount, plus GST

Yes

International Lenders

Up to USD 1,00,000

Starts from 12%

7-10 working days

Up to 1% of the Loan Amount, plus GST

No

Key Conditions

  • Co-applicant Income, minimum 3 INR-4 lakhs per annum
  • A minimum CIBIL score of 700 and above
  • An average score of 60% in previous academics
  • The university must be on the lender's approved list

Success Stories

Case Study 1: Aakash from Hyderabad secured a 45-lakh education loan without collateral from the State Bank of India(SBI) to pursue an MS in Computer Science at the University of Texas. His father's 9 lakh income and his 88% in engineering were the key factors considered by the bank to offer this loan.

Comparison of Lenders Offering Unsecured Education Loans

Here is a comparison of unsecured student loans from different lenders:

Loan Parameter Public Banks Private Banks NBFCs Foreign Lenders
Loan Amount Up to ₹50 lakhs Up to ₹1 crore Up to ₹1.25 crores Up to USD 1,00,000
Interest Rate Starts from 8.15% Starts from 10.5%  Ranges from 11%  12% to 14%
Processing fee  ₹10,000 plus GST 1% to 2% of the loan amount, plus GST 1% to 2% of the loan amount, plus GST 5% of the loan amount, plus GST
Repayment Tenure Up to 15 years  Up to 15 years  Up to 15 years  Up to 20 years 
Moratorium Period Course duration plus 6 to 12 months Course duration plus 6 to 12 months Course duration plus 6 to 12 months  Course duration plus 6 to 12 months
Co-applicant requirement Yes  Yes  Yes  No 
Currency INR INR INR USD

Eligibility Criteria for Abroad Education Loan without Collateral

The following is the eligibility criteria required to get a foreign education loan without collateral.

1. Citizenship:

  •  Both the applicant and the co-applicants have to be Indian citizens.

2. Academic Requirements:

  •  Minimum 60% in previous academics, such as 10th, Inter, Graduation, etc.
  • A good score on standardized tests such as the GRE, GMAT, etc.

3. Co-applicant Profile:

  • Annual income must be above 3 lakhs per annum
  • CIBIL score of 700 and above
  • Must demonstrate a stable income source
  • Age - below 60 years

4. University and Course Requirements:

  • The university should be on the lenders' approved list
  • STEM(Science,Technology, Engineering and Mathematics) courses are preferred
  • Usually, studying in top countries is preferred

4. Age:

  •  Students should be aged between 16 to 35

6. Additional Requirements:

  • Valid passport
  • Admission Letter
  • No existing Loan default

Documents Required for an Education Loan Without Collateral

Since collateral is not involved in the loan, lenders thoroughly assess the documents required for unsecured education loans. The documents required to process a non-collateral education loan can vary by lender. The following are the required documents for an education loan without collateral.

1. Student Documents: 

  • Duly Filled Loan Application Form
  • Identity proofs such as Passport, Aadhar card, PAN card, etc.
  • Previous academic records, such as the 10th,12th, and UG marksheets.
  • Applicable test scores, such as CAT, IELTS, TOEFL, and GRE.
  • University admission letter
  • Caste certificate for government schemes
  • Passport-sized photographs

2. Co-Applicant Documents

  • For Salaried Co-applicants
    • Last 3 months' salary slips
    • Form 16 or IT returns of the last 2 years
    • Bank statements(last 6 months)
    • Identity and address proofs
  • For Self-Employed Co-applicants
    • IT Returns( last 2 years)
    • Business Registration Certificate
    • Bank Statements
    • Business address proof
    • CA certificate

These are the basic documents that lenders require to process an unsecured student loan. And as we have mentioned, the financial documents of the co-applicant vary depending on whether they are working or self-employed. 

Expenses Covered Under Education Loans Without Collateral

These loans are designed to help students afford higher education by covering various expenses associated with their education. The expenses covered can vary by lender. The various expenses covered under the education loan without collateral include:

1. Tuition Fees:

  • Unsecured education loans help students cover their entire tuition fee, sometimes partially covered based on eligibility.

2. Living and Accommodation Expenses:

  • Non-collateral education loans cover the living expenses of the student, including their accommodation costs, such as hostel fees or rent, and food costs.

3. Travel Expenses: 

  • These loans can cover travel costs such as flight tickets and transportation, depending on the lender.

4. Purchase of Course-Related Books and Equipment:

  • They also cover the cost of purchasing study materials and course-related equipment, such as a laptop and other academic tools.

5. Insurance:

  • When you take a foreign education loan without collateral to study abroad, it is mandatory to take health insurance. Hence, many lenders include health insurance in the expenses as part of an unsecured education loan.

6. Exam and Miscellaneous Fees: 

  • Education loans without collateral also cover the various additional costs, such as payment of exam fees, caution deposits, and other miscellaneous expenses.

NOTE: The exact coverage varies from lender to lender, depending on the lender's policy and the eligible loan amount.

How to Apply for an Education Loan Without Collateral

The following is a step-by-step guide on how to get an unsecured education loan:

  1. Initial Research: First, choose a bank according to your needs and requirements. 
  2. Check the eligibility: It is recommended to verify if your chosen university is on the bank's approved list or not. Use the Loan eligibility checker to check your loan eligibility.
  3. Apply for the Loan: Go to the website of the bank and fill out their application form for an unsecured education loan.
  4. Submit the Documents: Prepare and submit the necessary documents for the loan application, such as proof of admission, KYC documents, and the co-applicant’s income proof documents.
  5. Pay the Processing Fee: You must pay the processing fee to get your unsecured education loan sanctioned on time. Post the payment of processing fees, the sanction letter will be granted to you.
  6. Loan Sanction: After successful verification, the bank will approve the loan and issue a sanction letter with loan details such as the Loan amount, Interest rate, Repayment terms, and Moratorium period.
  7. Sign the Loan Agreement: Carefully check all the terms and conditions mentioned in the loan agreement and sign it.
  8. Disburse the Amount: After the loan agreement is signed, funds are disbursed to the university or the student's account, accordingly.

Education Loan Processing Timeline

Lender Type

Documentation

Verification

Approval

Total Time

Public Banks

3-5 days

7-10 days

5-15 days

15-30 days

Private Banks

1-2 days

3-5 days

3-8 days

7-15 days

NBFCs

1-2 days

2-3 days

2-5 days

5-10 days

International Lenders

1-2 days

1-2 days

2-3 days

5-7 days

Benefits of an Education Loan without Collateral in India

1. No Need for Collateral: 

  • These loans do not require the applicants to pledge their properties, such as a house, land, fixed deposits, etc, to secure the loan amount.

2. Broad Range of Applicants: 

  • These loans cater to the needs of students from all backgrounds, and are available for both studies in India as well as abroad.

3. High Loan Amounts:

  • Many lenders offer higher loan amounts for abroad education loans without collateral. These funds can be used to cover various expenses associated with education, including tuition fees, living expenses, the purchase of books, and a laptop etc.

4. Quick Process: 

  • Unsecured loans are processed faster than secured loans, since there is no collateral in the loan.

5. Tax Benefits:

 Under Section 80E of the Income Tax Act, applicants can claim tax on the interest paid on education loans for up to 8 years.

Countries Accepting Unsecured Education Loan

Below are the top countries accepting education loans without collateral

Country

Key Lenders

Max Loan Amount

Special Requirement

USA

SBI, ICICI, AXIS, IDFC, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

Up to 1 CR

GRE, GMAT, TOEFL etc.

UK

SBI, ICICI, AXIS, IDFC, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

 Up to 1 CR

GRE, GMAT, TOEFL, IELTS strong academics.

CANADA

SBI, ICICI, AXIS, IDFC, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

 Up to 1 CR

GRE, GMAT, TOEFL, IELTS strong academics.

GERMANY

SBI, ICICI, AXIS, IDFC, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

 Up to 1 CR

GRE, GMAT, TOEFL, IELTS strong academics. German proficiency

AUSTRALIA

SBI, ICICI, AXIS, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

 Up to 1 CR

GRE, GMAT, TOEFL, IELTS etc.

NEWZEALAND

SBI, ICICI, AXIS, IDFC, KVB, CANARA, BOB, AVANSE, AUXILO, INCRED, CREDILA

 Up to 1 CR

GRE, GMAT, TOEFL, IELTS strong academics.

Loan Repayment Options and Moratorium Period

Students need to verify the loan repayment options and the moratorium period before signing the loan agreement. An overview of the repayment structure is given below for students on the motorarium education loans without collateral.

Lender type

Moratorium period

Interest charged

Loan Tenure

Public Banks

Course duration + up to 1 year

Simple interest is charged during this period and added to the principal amount. Students can get a repayment holiday. Repayment starts post-study

Up to 15 Years

Private Banks

Course duration + up to 1 year

Simple or partial simple is charged. NO repayment holiday.

Up to 15 Years

NBFCs

Course duration + up to 1 year

Simple or partial simple is charged. NO repayment holiday.

Up to 15 Years

International Lenders

Course duration + up to 1 year

Simple or partial simple is charged. No repayment holiday.

Up to 15 Years

Pro Tips for Smart Repayment

  • Paying interest during the moratorium period can reduce the overall interest burden.
  • Prepayment without penalty is available with most of the lenders. Research thoroughly and choose the right lender.
  • Choose low EMIs if not sure about job opportunities after studies.

Things to Consider Before Getting an Unsecured Education Loan

1. Moratorium Period:  

  • Lenders offer a moratorium period of the course duration plus 6 months to 1 year for education loans. Public banks do not charge interest on the disbursed amount during the moratorium period.
  • However, private lenders do not offer such an interest-free moratorium period to students. Yes, the EMIs start after the moratorium period, but during their moratorium period, students are required to pay either partial or full interest.

2. Processing Fee: 

  • Private banks charge up to 1% on the loan amount plus GST, or it is 15k plus GST. The processing fee can be 1% to 1.5% plus GST on the loan amount for the NBFCs and a minimum of 2% plus GST on the loan amount for the foreign lenders. 

3. Loan Insurance:

  • It is not mandatory to have loan insurance with public banks, but it is compulsory for private lenders. It ranges from 1% to 2% of the loan amount for private banks and NBFCS. 
  • It is important to keep in mind that the processing fees and the loan insurance with private lenders are negotiable. Students end up paying more when they approach these lenders on their own, and this can be avoided.
Request a callback to get accurate details on extra costs and hidden charges you can avoid.

Common Challenges and How to Overcome Them

Apart from failing the eligibility criteria set by the lenders, there are some unwritten rules based on which lenders sometimes reject students' loan applications. The following are the common challenges affecting the chances of approval for unsecured education loans.

1. Field of Study:

  • Private lenders do fund a UG program abroad if the university falls under the list; they prefer funding a PG program more, due to the course duration being shorter compared to a UG program.
  • NBFCS, on the other hand, rarely funds a UG program abroad. They consider funding a UG course only if a student's financial co-applicant has an exceptionally good income source. Foreign lenders do not fund UG programs altogether.

2. Age of the Applicant and Co-applicant: 

  • Yes, age matters for NBFCS. For students older than 30 years, NBFCS is hesitant to offer education loans. NBFCS won't accept the profile if your co-applicant is retired (pensioner or not) or about to be retired in 3 years. 

3. FOIR Norms:

  • A fixed obligation to income ratio or FOIR norm is followed by the banks while lending loans. Private banks reject the loan if your co-applicant does not meet the FOIR norm, which means that the co-applicant's obligations, i.e., the EMIs, are higher than how much they can afford. 

4. Missing Documents:

  •  This is one of the main reasons why many loans get rejected. Proper documents are essential to assess the loan eligibility. Students can ask the respective lender to provide the documents checklist. This will ensure students have all the necessary documents and make the loan process easy.

Which is the Best Lender for Education Loans without Collateral?

The best lender for education loans without collateral depends on various factors, such as the student's profile, interest rates, repayment terms, etc. However, an expert recommendation based on the previous loan sanctions is given below; students can compare and make an informed decision.

Public Banks

  • They offer lower interest rates
  • Repayment holiday during Moratorium
  • Longest repayment tenure
  • Lower Loan amounts and slow processing

Private Banks

  • Higher Loan amounts
  • Faster Processing
  • Higher interest rates than public banks

NBFCs

  • Highest loan amounts
  • Flexible eligibility
  • Fast approvals
  • Higher interest rates than all other lenders

International Lenders

  • No co-applicant requirement
  • Fast processing
  • International currency
  • Higher interest rates, currency risk

An education loan sanction is crucial for funding the education of many students. However, students often struggle to get their loans sanctioned without the right guidance. WeMakeScholars can help you in such situations. Our team is dedicated to assisting students in receiving education loan approvals on time. We provide complete education loan assistance to students applying through us. Get in touch with our team today to get expert guidance and complete support for your education loan.

Get your Education Loan Approved today with WeMakeScholars

WeMakeScholars is an organization funded and supported by the Ministry of IT, Government of India. Our team is dedicated to providing support to students applying for an education loan. We are partnered with more than 15 public and private lenders to help students get the best education loans according to their profiles. Here are the reasons why you should apply for an unsecured study abroad education loan through WeMakeScholars:

1. Easy Application Process: Applying for an unsecured education loan through WeMakeScholars is very simple because of its online document portal, where students can upload all of their documents in one place. 

The online education loan application procedure provides students with the power of digitization to offer an easy application for the loan.

2. Personalized Solutions: Our team of financial officers is well-experienced to give you the best guidance while processing your loan. They are dedicated to helping students get the most suitable loan according to their profile.

Our services don’t just end with loan sanction; we have a dedicated post-sanction team to help students resolve any issues they may face after their loan is sanctioned. 

3. Fast Process: Getting an unsecured education loan can usually take a month or even more. However, when you apply via WeMakeScholars, you will get your loan processed within 7 days from private banks and 15-20 days from government banks after all the required documents are submitted.

4. Customer Support: Even after your loan has been approved, we will assist you with the disbursement and repayment process right up to the last EMI payment.

5. Negotiation Support: When you apply for an unsecured education loan through us, we can negotiate on your behalf to bargain with the banks & lenders' team to get you the best interest rate and other loan terms.

6. Free of Cost: As WeMakeScholars is a government of India-funded initiative, supported by the IT Ministry under the ‘Digital India Campaign’, we offer our services free of cost to all the students.

Applying for unsecured study abroad education loans can be quite confusing, as various lenders offer diverse loan options. Get in touch with WeMakeScholars for a fast and simple loan process for abroad education, so that our team of experienced financial officers can help you obtain the best education loans for your studies. As WeMakeScholars is funded and supported by the Ministry of IT, Government of India, they offer their services at no cost to students.