Italy is famous for its amazing food and its people are known across the world for their love of the arts. However, it is also home to a lot of universities which provide world-class learning opportunities to students all over the world. Every year, thousands of international students flock to these universities to study in Italy. This article will provide you with all the information about how candidates can get an education loan to study in Italy.
Education Loan Options to study in Italy
An education loan is one of the most prominent sources of higher education funding for most Indian students who wish to study in Italy. In India, student loans are divided into two different categories. This categorization is based on the need of collateral security.
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.
Since unsecured education loans are not based on the pledging of collateral security, the lenders pay close attention to factors such as global ranking of the universities in Italy into which the applicants have been accepted, the overall financial capability of their co-applicants to repay their education loan, etc. An important factor to be considered here is the fact that most lenders of an education loan without collateral do not lend education loans to study in Italy when approached directly, as it is not present on their list of eligible countries for an abroad education loan without collateral.
Students who had applied for an education loan to study in Italy through WeMakeScholars, however, did not face this problem. In order to get an unsecured education loan to study in Italy through WeMakeScholars, students have to fulfill certain requirements;
- They must have an excellent academic background which includes the clause of having no backlogs.
- They must have received a letter of confirmation from a well-ranked institution amongst the numerous prestigious universities in Italy
- Their co-applicants need to meet all the requirements placed by the respective NBFCs/Private banks.
Unless and until all three of the above criteria are not met, it is not possible to get unsecured education loans to study in Italy. That leaves students with only one funding option; secured education loans from government banks.
Secured Education Loans To study in Italy
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 to study in Italy 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.
Some of the salient features of government bank education loans are:
Lower interest rates: As of 2022, the education loan interest rates offered by prominent government lenders vary between 7.65% to 9%. These figures are variable from time to time. Hence, it is recommended that interested students should get in touch with the financial team of WeMakeScholars to get to know the exact values.
Education loan repayment tenure granted to students is of 15 years.
- The processing fees of government bank education loans do not exceed INR 10,000.
- Female candidates are eligible for an automatic deduction of 0.5% in their interest rates for almost all the government banks.
- Students from economically backward sections are eligible to apply for an education loan interest subsidy under various government schemes. They are also eligible to apply for an income tax exemption under Section 80 E of the Income Tax Act.
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 fulfill 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 to study in Italy.
- Immovable Property: An immovable property is one of the most frequently pledged categories of assets as collateral against an abroad education loan to study in Italy. 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 to study in Italy? 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.
Interest Rates of Government Education Loans To study in Italy
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 interest rates to study in Italy.
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 loans to study in Italy 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 vary between 7.65% and 9%. 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, depending on the value of collateral security being pledged, as well as the applicant’s funding requirements.
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