Education Loan Without Co Applicant: Possible or Impossible
An education loan is one of the most sought after sources of higher education funding by students in India. A co-applicant or cosigner is an indispensable part of any education loan process, regardless of whether it is a secured education loan or a private education loan without collateral. In the abroad education loan process, it is very essential to note that only an individual who fulfils all of the requirements set by the lending bank/private institution can be an education loan co applicant. However, there are many students who do not have parents or guardians who qualify to be an education loan co applicant. This article aims to shed light on how students can borrow an education loan without co applicant in India.
Importance of an Education Loan Co Applicant in The Education Loan Process
The education loan policies of most lenders in India mention that only an individual who is a parent or a nearby relative can be named as an education loan co applicant. Very few of them even consider the possibility of providing an education loan without co applicant. This is because when lenders provide education loans of higher amounts, it is crucial to their principles to ensure that the borrower can be relied upon to make the repayments regularly. When lenders mention that students should name a family member as an education loan co applicant, they ensure that this requirement is met and in the event of a mishap, the responsibility of repaying the entire education loan debt falls on this education loan co applicant.
When Do Students Opt For An Education Loan Without Co Applicant?
An education loan co applicant is required to meet numerous eligibility criteria before they can be named in any education loan application process, due to the reasons mentioned above. However, not all applicants who seek an education loan are fortunate enough to have parents or nearby relatives who can be named as an education loan co applicant. So what are the abroad education loan options available for such students? How do they apply for an education loan without co applicant when the rules of lenders staunchly advocate the presence of a co applicant as a criteria for eligibility? Let’s find out.
Types of Abroad Education Loans in India
As it is commonly known to all, education loan lenders in India offer two different types of abroad education loans. They can be categorized as secured education loans with collateral and private education loans without collateral. The abroad education loan process followed by lenders of both kinds of education loans vary because of just one component – collateral security.
Secured Education Loans
A secured education loan is basically used to refer to education loans which are granted on the basis of collateral security. All the government banks in India majorly provide secured education loans to students. When it comes to pledging collateral security, most of the banks have divided collateral security into three categories:
Immovable Property: An immovable property is one of the most frequently pledged category of assets as collateral against an abroad education loan. 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 in India? 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.
We hope that the above information has given you a rough idea of what secured education loans are all about. If you have any queries regarding the education loan process or wish to seek assistance in getting an abroad education loan in India, reach out to the financial team of WeMakeScholars.
Unsecured Education Loans
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. This is why NBFCs and private banks maintain a list of universities and countries which are approved for an education loan by them.
Now, the lenders of both types of education loans do not grant an education loan without co applicants who fulfill all of their eligibility requirements. However, there are alternative options available.
What are the Alternative Options for an Education Loan Without Co applicant?
When students hear the phrase ‘education loan without co applicant’, the very first thing that pops into their minds is the education loan schemes offered by international lenders like Prodigy Finance and MPower Finance. The biggest highlight of applying for an education loan with international lenders is the fact that they provide an education loan without co applicant, as well as collateral. However, the benefits are only limited to these two factors alone. Episodes 10.1 and 10.2 of the Loanflix web-series describes some of the shortcomings of the policies set by international lenders regarding their schemes which allow applicants to borrow a student loan without cosigner. Here is a brief summary of a few shortcomings that students might likely face if they plan on funding their higher studies with the help of an education loan without co applicant from international lenders.
One of the biggest factors that proves that the lending policies of Indian banks and NBFCs are better than those of International lenders is the concept of interest rate parity. Here is an overview of what interest rate parity is.
- Foreign money lenders generally lend loan in USD.
- An interest rate of 10%, applied on a depreciating currency like the INR, is not the same as a 10% interest rate applied on an appreciating currency like the USD.
- The thumb rule is that 10 % interest rate of a loan amount borrowed in the USD currency is equivalent to approximately a 15% interest rate on a loan amount borrowed in the INR currency. In other words, a 10% interest rate on an INR loan is equivalent to only 5-6% interest rate if the loan amount is in USD.
There are a few other important factors that prove the effectiveness of the lending policies of Indian lenders over those of international lenders besides interest rate parity. For example, the upper limit of education loans provided by international lenders is less as compared to that offered by Indian lenders.
Applicants from India also miss out on benefits like saving a certain percentage of their annual income tax under Section 80 E of the Income Tax Act and becoming eligible for an education loan interest rate subsidy, when they borrow from international lenders.
In order to know more about the different ways in which the abroad education loan policies of Indian lenders are more feasible as compared to borrowing an education loan without co applicant from international lenders, get in touch with the financial team of WeMakeScholars at the earliest.
Although their policies do not favour an education loan without co applicant, there are alternative ways for students whose parents do not fulfil all the criteria to be named as education loan co applicants. More often than not, the financial team of WeMakeScholars comes across students who wish to look for ways to borrow an education loan without co applicant. The abroad education loan policies of government banks do not allow students without an education loan co applicant to borrow one. However, all hope is not lost and there is a silver lining to it all.
Students whose parents do not have stable financial records can still apply for a government bank education loan by naming them as primary co applicants. Individuals having stable financial records can be named as financial co applicants for government bank education loans.
If you are stuck in a similar situation and are unable to decide on whether to go ahead with your abroad education loan process with a government bank, get in touch with the financial team of WeMakeScholars at the earliest possible instance. Let us move on to explore the possibility of borrowing a private student loan without cosigner from NBFCs and private banks in India.
Borrowing an NBFC Education Loan Without Co applicant
Most NBFCs also require students to name an education loan co applicant. However, not all lenders of a private education loan without collateral follow similar policies. The unsecured education loan scheme of ICICI Bank allows candidates having more than three-plus years of work experience to borrow an education loan without co applicant and any collateral security. The maximum ICICI education loan available for such candidates is INR 40 Lakhs.
So, candidates who need an education loan without co applicant and have the required work experience can apply for a private education loan without collateral with ICICI Bank. For further details regarding this particular provision of the ICICI education loan scheme, get in touch with the WeMakeScholars team.
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