Abroad Student Loan Process: How to Get a Second Education Loan
Loanflix, an informative web-series which explains the various aspects of the abroad student loan process, has a number of episodes which explain the regular abroad student loan process. But have you ever wondered about what happens when a student who had already borrowed one for their previous studies needs a second loan for their further studies? A lot of students who have borrowed an education loan to fund their undergraduate studies with the help of an education loan and wish to further pursue their postgraduate studies abroad with the help of another one are often faced with one major question: What is the abroad student loan process to fund their postgraduate studies with the help of a second education loan? This article will elaborate on the various terms and conditions that students need to fulfil in order to begin their abroad student loan process for a second education loan.
By now, you must be familiar with the two basic types of education loans which are mainly lent in the abroad student loan process. For those of you who are yet to understand the abroad student loan process broadly, here is a short description of the two types of education loan in India.
Abroad Student Loan Process: Types of Education Loan in India
In the abroad student loan process, education loans are categorised into two different types based on the requirement of collateral. In order to borrow an education loan in India, it is essential to have sufficient information on both types of abroad education loans.
Secured Education Loan: Secured education loans are lent on the basis of collateral. The typical abroad student loan process for secured education loans requires students to pledge any of the three types of assets as collateral against their education loan. These loans are lent by all prominent government banks in India. One of the biggest benefits of secured education loans borrowed from government banks is the moratorium period which is a loan holiday granted to all candidates before the repayment period begins. This moratorium period buys enough time for students to find employment and begin their education loan repayment.
Unsecured Education Loan: Unsecured education loan is basically an education loan without collateral. These loans do not require any form of collateral. They are mainly lent by private financial companies called NBFCs (Non-Banking Finance Companies) and a few other private banks.
Government banks lend unsecured education loans of up to Rs.7.5 Lakhs too. Unlike government banks, NBFCs and private banks do not offer the benefits of a moratorium period to the loan applicants.
The entire abroad student loan process for both types of education loans has been described in great detail in previous blogs as well as Loanflix episodes. The WeMakeScholars team believes that no student who is in need of an education loan should be denied or unable to borrow one under any circumstances. To know more about how we help students with the abroad student loan process, do reach out to our financial officers at the earliest.
Borrowing a Second Education Loan: Secured Education Loans
Secured education loans are preferred by a lot of students for a second education loan. This is because government banks offer some of the lowest interest rates on education loans, in addition to the various benefits.
One of the only major factors that cause a lot of such students to hesitate from borrowing secured education loans is the requirement of collateral.
Let us take a look at two different scenarios in which candidates are likely to borrow a second education loan for their higher studies:
Borrowing a Second Education Loan From the Same Bank as the First:
When candidates apply for an education loan from the same government bank as the one from whom they had borrowed their previous education loan, they need to keep in mind a few things. While borrowing a secured education loan for the second time, there are two situations that may arise.
- Borrowing an education loan when the repayment of the previous education loan has not yet begun: For example, you have just finished your undergraduate course for which you had taken an education loan and wish to take another one for your postgraduate course which is due to begin immediately, within a month or so. In this scenario, it is recommended that you don’t begin the repayment process of the first education loan.
When you apply for a second loan immediately post your undergraduate course, six months of your moratorium period from the first loan is still applicable. By the time your second education loan from the same bank is sanctioned, the moratorium period of the second one becomes applicable and hence, you get up to 5 years of loan holiday in this way, depending on the total duration of both the courses.
Borrowing an education loan when the repayment of the previous education loan has already started: In this scenario, if your loan repayment has already begun then you will be required to make the EMI payments regularly, according to the schedule.
Value of the collateral being pledged: This is one of the most important factors to consider while applying for a second education loan with government banks. If your collateral was already pledged for the previous education loan, then you need to ensure that its total value is sufficient to cover the second education loan. The abroad student loan process to get another education loan on the same collateral can only be possible if its value is significantly high. However, here is the good news, government banks allow candidates to pledge a third-party’s (anyone other than the family members) assets as collateral for the second education loan.
For example, if the collateral pledged for your previous education loan was valued at Rs.1 Cr. and you took a loan amount of Rs.50 Lakhs, then during the abroad student loan process of borrowing a second education loan on the same exact collateral, the bank will estimate its cost to be at Rs.50 Lakhs and the final amount of your second loan and your loan margin will be estimated by the bank accordingly.
Borrowing the Second Education Loan From a Different Bank/Lender
It is also possible for candidates to opt for a second education loan from a different lender. In order to borrow it from a different lender, candidates need to ensure that they have completely repaid their previous education loan and once they have received a NOC (No Objection Certificate) from their previous lender, the abroad student loan process for the second education loan can be started.
Borrowing a Second Education Loan: Unsecured Education Loan
An education loan without collateral is an excellent choice for candidates who do not possess assets whose value could cover a second education loan from government banks. NBFCs and private banks often consider the financial records of co-applicants before processing an education loan for abroad studies application for the second time. Hence, having a co-applicant with a sound financial record and the right documents is a mandatory requirement for unsecured education loans for abroad studies.
Another important point to note while applying for a second education loan from NBFCs is that candidates need to ensure that their previous education loan has been repaid in full and that there are no more EMIs pending.
If you plan on getting another unsecured education loan for abroad studies, you need to ensure that your co-applicant’s financial capacity will be able to cover both the education loans.
A lot of students who had previously taken an education loan often hesitate to borrow another education loan for abroad studies, due to a lot of constraints. One of the constraints is the widespread misconception that it is not possible to borrow a second education loan.
The WeMakeScholars team has helped many such students get their abroad education loans for a second time by trying to explore every possible way of making it possible for them to fund their dreams. Do request a callback with us if you are in need of assistance in borrowing a second education loan from both types of lenders. The next article will give you the complete information on the benefits of borrowing an education loan to fund your higher studies abroad.
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 is 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.