Education loan for MBBS Course: Know All The Details
It is a well-known fact that pursuing an MBBS course in India is not a cheap affair. The difficulty level of obtaining a medical seat in some of the prestigious medical colleges in India, coupled with the high tuition fees is what drives many Indian students towards overseas institutions to pursue their MBBS course. This is when students opt for an education loan for MBBS.
An education loan is the primary funding choice of a lot of students from India who wish to study abroad. Most of these students borrow an abroad education loan to fund their Masters courses in universities across the world. Keeping in mind the total duration of a typical MBBS course and the expenses involved, the best way of funding the course is an education loan for MBBS.
Since the number of universities that offer MBBS courses abroad is limited, students who have been accepted into such universities often find it difficult to find a reliable lender to borrow an education loan for MBBS courses from. So, does this mean that it is impossible for students to borrow an abroad education loan for MBBS in India? This article aims to shed some light on the education loan details of lenders in India who grant an education loan for MBBS.
Types of Abroad Education Loans in India
Collateral security is basically some sort of asset which is pledged with the lender by a borrower in order to obtain some kind of loan. Abroad education loans in India are divided into secured loans and unsecured loans, based on the need of this collateral security. In order to obtain a secured education loan to study abroad, applicants are required to pledge collateral security. On the other hand, an unsecured education loan to study abroad does not require applicants to pledge anything. In fact, students have a tougher time trying to secure unsecured education loans, as these loans are granted on the basis of a student’s academic profile and their co-applicant’s financial profile. In India, such unsecured education loans for abroad studies are provided by Non-Banking Finance Companies (NBFCs) and private banks such as the Axis Bank, ICICI Bank, etc.
Unsecured Education Loan Details
As the name suggests, unsecured education loans are granted without the involvement of any kind of collateral security. Lenders of unsecured education loans always take a good look at the loan applicant’s profile before making a concrete decision to grant the education loan.
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 vary 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%.
As there is no collateral security involved in the non-collateral education loan process, lenders, especially the NBFCs, pay close attention to the universities into which the students have been accepted for an MBBS course. This is why NBFCs and private banks maintain a list of universities and countries which are approved for an education loan by them.
Why Don’t NBFCs Grant Unsecured Education Loan For MBBS Courses?
Students with excellent academic records are often accepted into prestigious universities in countries such as the USA, UK, Canada, etc. Such students do not find it difficult to secure an education loan from banks. Now, the problem arises when students come to private lenders asking for unsecured education loans to fund their MBBS courses in countries like China and Ukraine, which are not present on their list of countries. This is why many NBFCs do not lend unsecured education loan for MBBS courses. This leaves most of the candidates with one choice to fund their MBBS course abroad – Secured education loans from government banks.
Secured Education Loan Details
Secured education loans are granted on the basis of collateral security. In India, a huge percentage of students tend to opt for a collateral education loan for abroad studies, as these are granted by government banks such as SBI, Bank of Baroda, PNB, etc. As the lenders are government-funded financial institutions, the trustworthiness of secured education loans outweighs those of unsecured education loans. In order to be eligible to borrow a secured education loan for abroad studies in India, students must possess the required collateral security.
Most students who seek an education loan for MBBS often tend to approach government banks like the SBI and Bank of Baroda as these institutions are governed directly by the RBI and also offer some of the most competitive offers on their education loan schemes for overseas studies.
Types of Collateral Security Required For Secured Education Loans
Collateral security can be of two different types; tangible and intangible.
Tangible collateral security refers to immovable properties which fulfil most of the requirements set down by the lending institution. Intangible assets are liquid assets such as fixed deposits, government bonds, etc. Here is a detailed list of the different categories of collateral which are accepted by government banks for an education loan for MBBS.
Immovable Property: An immovable property is one of the most frequently pledged categories of assets as collateral against an abroad education loan for MBBS. This category involves assets like a house, a residential flat, a plot with defined boundaries, an independent house, a non-agricultural land, etc. come under this category. The value of the property must exceed the total education loan amount required by candidates. This is a mandatory requirement and all candidates are required to meet this in order to get any government bank education loan.
Liquid Security: Did you know that government banks do accept liquid assets as collateral against an abroad education loan for MBBS? Assets such as Fixed Deposits, government bonds, life insurance policies from government-approved lenders, etc. are accepted by government banks like the SBI, BoB, etc. as collateral security.
Third-Party’s Assets: This provision is only applicable to government banks, especially SBI education loan and Bank of Baroda education loans. In case if a candidate does not possess any of the above assets or if their values do not cover the required education loan amount, then they can pledge a third party’s assets as collateral security against government student loans. This third-party essentially refers to individuals who are not part of the candidate’s immediate family. For e.g., uncle, aunt, friends of the candidate or the primary co-applicant, etc.
Read about Types of collateral for SBI education loan
Government Education Loan For MBBS Interest Rate
Before commencing an education loan process, it is a natural tendency for students to conduct thorough research on the interest rates of an education loan for abroad scheme. The interest rates of private lenders are higher as compared to the government education loan for MBBS Interest rate.
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.
Although the MCLR is the basis of all the overseas education loan for MBBS 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.
Read about SBI abroad education loan- An introduction
Education Loan For MBBS: Eligibility Criteria
If you are someone seeking an education loan for MBBS, it is very important to take note of one thing. Unsecured education loans are not granted to students who need financial assistance to pursue an MBBS course abroad. In this case, government banks offering secured overseas education loans are the only source of an education loan for MBBS. However, a government bank education loan comes with its own set of terms and conditions.
- The student’s academic profile has to reflect excellent performance throughout their academic career. This means that students having backlogs in their academic profile will not be deemed as eligible for an education loan for abroad studies from government banks in India.
- The value of the collateral being pledged as security for a Masters education loan should be higher than their actual education loan requirements.
- Individuals having a strong financial background only can be named as co-applicants for an education loan for Masters.
- For students who need an education loan for abroad to fund their MBBS courses in countries like China and Ukraine, there are special rules and regulations. For eg. SBI education loan which is considered to be the best bank for education loan in India requires students to take a country deviation to be able to fund their MBBS courses in such countries.
Get in touch with the financial team of WeMakeScholars to know further about how you can successfully get an education loan for MBBS courses in different countries abroad.
Chances of success in getting an abroad education loan for MBBS Courses
Lenders always go through the profiles of students who have requested an abroad education loan for MBBS courses and make a decision according to the rate of success of a particular course or university/college. For example, the success ratio of applicants who have applied to MBBS programs in the USA is almost 100% because the USA is one of the most preferred countries for higher education by Indian students and most lenders consider universities based in the USA to be reliable.
The same success rate cannot be guaranteed for MBBS courses in countries like China and Ukraine. This is because most universities located in these countries are not present on the list of many government banks in India. It also depends on whether the student meets the criteria mentioned in the education loan details of most of such government banks.
If you are stuck in such a situation and are tired of approaching lenders for the same, do request a callback with our team. If your profile meets all the criteria of the particular lender, our team will ensure that you get your education loan application approved.
How To Apply For Student Loan
Most of the episodes of the Loanflix web-series tell you all about the abroad education loan process. If you are looking for an explanation regarding the education loan process for different countries, the WeMakeScholars team has developed a series of Loanflix episodes which give you the complete details of the education loan process specific to certain countries.
All in all, it may be concluded that getting an abroad education loan for MBBS courses may seem like a long and never-ending process. However, collecting sufficient knowledge about the entire process significantly helps in making the whole procedure an easy one.
At WeMakeScholars, we have a team of financial officers who are dedicated to ensuring that our students get to avail their abroad education loans without any hassles. In order to apply for an abroad education loan for MBBS course abroad, request a callback today.
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