Are you looking to pursue higher education abroad but cannot provide collateral for an education loan? You might wonder, ‘Can I get an education loan without collateral?’ Yes, you can! An education loan without collateral is a great way for students to finance their education without providing any security against the loan amount.

Student loans serve as great financial aid to students who want to pursue higher education abroad. If it weren’t for education loans, millions of students would never have made it to their dream universities. However, many students cannot pledge collateral as security to get a study abroad education loan. Hence, these students rely on unsecured education loans to fund their education abroad.

In this article, we will cover all about non-collateral loans, including the eligibility criteria, process, and how to apply for a foreign education loan without collateral. We have also covered the factors affecting unsecured education loan approval. 

What is an Education Loan Without Collateral?

An education loan without collateral, also known as a 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. 

Also Read:  Collateral Education Loan for Abroad Studies

Can we get an Education Loan without Collateral?

Yes! You can get an education loan without collateral by meeting the eligibility criteria of the lender. The eligibility criteria for an unsecured education loan vary from bank to bank, which we will discuss further in this article. Private Banks and NBFCs are more specialized in offering unsecured education loans. Lenders offer unsecured education loans offer both domestic and international studies.

Unsecured education loans for studies in India

These are non-collateral education loans offered by banks for students to pursue their higher education in India.

Abroad Education Loan without Collateral

Banks offer these foreign education loans without collateral to students who want to pursue their higher education abroad.

Both public and private lenders offer unsecured study abroad loans. However, these lenders offer varying terms for unsecured education loans. Request a callback from us or comment down your queries to know which lender would be perfect for your profile to take an education loan.

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, purchase of books, and 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.

How much Education Loan can I get without Collateral?

The maximum loan amount you can get for an unsecured education loan depends on the lender you are taking the loan from. The loan amount for unsecured loans varies by lender, depending on the eligibility criteria. Below are the loan amounts for unsecured education loans from various prominent banks in India:

Bank/ Financial Institution

Loan amount
State Bank of India Up to ₹50 lakhs
ICICI Bank Up to ₹1 crore
Axis Bank Up to ₹1 crore
IDFC Bank Up to ₹75 lakhs
Credila Up to ₹75 lakhs
Avanse Up to ₹1.25 crores
Auxilo According to the requirement
Incred Up to ₹80 lakhs

Education Loan without Collateral Eligibility Criteria

  1. Citizenship: To secure an abroad education loan without collateral, both the applicant and the co-applicants have to be Indian citizens.
  2. Admission Status: The student should have secured admission to the university.
  3. Academic History: Students are to have a good academic history with at least a 50% score in their previous academic records.
  4. Co-applicant profile: The co-applicant should meet the income and CIBIL score requirements of the lender. Since there is no collateral involved in the loan, lenders thoroughly assess the income and creditworthiness of the financial co-applicant.
  5. Recognized University: The university that the student is going to should come under the recognized list of universities of the lender.
  6. Course/Degree: Lenders consider the course you are choosing to study. Courses like UG and PG in STEM disciplines are preferred over courses like Public Policy or Aviation.
  7. Age: Students should be aged between 16 to 35. And, private banks typically don’t accept co-applicants aged more than 60 years or nearing their retirement age. However, these criteria differ from bank to bank.

 If you are still confused about the eligibility criteria for an unsecured loan, feel free to comment on your questions below.

What documents are required for an unsecured education loan

The following documents of the student and their co-applicant are required to process an education loan without collateral.

  • Proof of admission
  • Passport (For abroad education) 
  • KYC documents proving the identity and address of the applicant and co-applicant. (Aadhar, PAN, Driving license)
  • Academic Records of the student (S.S.C, H.S.C, and Graduation Result)
  • Income proof documents of the co-applicant. These documents can vary depending on whether the co-applicant is salaried or self-employed. 
  • Any entrance exam results or test scores (e.g., CAT, GRE, TOEFL, IELTS, etc.)
  • Passport-size photographs of the applicant and the co-applicant

As said earlier, the financial co-applicant profile is very important in applying for an unsecured education loan, especially their earnings. A co-applicant can be salaried or self-employed, and based on that, the lenders may ask for different documents from the co-applicant. 

Also Read: Countries that do not require IELTS

Things to Consider before Getting an Unsecured Education Loan

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 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.

Processing fee:  

Private banks charge up to 1% on the loan amount plus GST, or, it is 15k and 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. 

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 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. Reach out to us by requesting a callback, so that we can provide you with accurate information about all the additional costs and hidden charges that you can avoid.

Factors Affecting an Unsecured Education Loan Approval

Apart from failing the eligibility criteria set by the lenders, there are some unwritten rules based on which sometimes lenders reject students' loan applications.

  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 fund 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 are 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. 

How to Get 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. Apply for the Loan: Go to the website of the bank and fill out their application form for an unsecured education loan.
  3. 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.
  4. 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.
  5. 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.
  6. Sign the Loan agreement: Carefully check all the terms and conditions mentioned in the loan agreement and sign it.
  7. Disburse the amount: After the loan agreement is signed, funds are disbursed to the university or the student's account, accordingly. 

Applying for study abroad education loans without collateral 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 their 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 zero cost to students.