Education loans are a saviour for students who want to complete their education or pursue higher studies but who do not have enough financial support to do so. Financial lenders in India provide education loans for studies in India as well as overseas. According to UNESCO Institute for Statistics 2016, a total of 181,872 Indian students pursued their higher education abroad. That’s a whopping number of students. Essentially, the utmost important aspect to achieve the feat of studying overseas is arranging finance. Since the number of people studying abroad has been steadily increasing, the number of banks providing education loan for abroad studies has been increasing. If you are looking for some help on education loan for abroad studies, then you are at the right place!
Education loan for abroad studies
Benefits of applying for an education loan
- Easily available
- Repayment tenure usually starts 6 months after course completion
- Entire education-related expense coverage – tuition fee, admission fee, living expenses etc.
- Available for a wide range of courses.
- Income tax benefits can be claimed- check out more about this
Different aspects of an education loan for abroad studies
An education loan for abroad studies essentially contains the following features:
- Interest Rate
- Loan Margin
- Repayment tenure
- Moratorium period
- Processing Fee
Let’s look into each of these aspects so that you can make an informed decision on which education loan you should choose:
Interest rate- education loan for abroad studies
It is the cost of borrowing money, expressed as a percentage of the loan’s principal amount. Different banks charge different interest rates on education loan for studies abroad. For more information refer to education loan interest rates provided by different financiers.
Collateral education loan for abroad studies
Collateral is an Immovable property (House, Flat or Land) or any other asset, preferably liquid asset, such as FD, shares, bonds, gold etc. that a borrower offers to a financier to secure the loan.
Whether you should opt for collateral-based (secured) loans or not depends if you have an asset that has a value equivalent to the loan amount you want to avail. Education loan without collateral (unsecured loans) are preferable if you don’t own any security and are not eligible for scholarships.
There are two reports involved if you avail a loan with immovable property as collateral. They are:
- Legal Opinion or search report: This report is given by the bank’s approved lawyer. The lawyer states whether the property can be mortgaged or not. For this, you need to provide original property papers and a lot of supporting documents. Lawyers visit the property to inspect it.
- Valuation Report: This report is given by the bank’s approved engineer. The value of the property to be considered for the loan is mentioned here. The report has 2 values: Market value and Deferred value. Deferred value is the lowest possible value of the property which the bank can get if they mortgage it. For old constructions, the deferred value will be much lower than the market value.
If you do not own any security – property; liquid security, then check out applying for a non-collateral education loan.
Loan margin- education loan for abroad studies
Generally, Banks don’t offer 100% expense coverage. Loan margin is the amount that the student/borrower needs to incur in order to cover the entire education expenses. Public sector banks such as SBI provide 90% expense coverage, the remaining 10% is the margin. Private Banks and non-banking finance companies (NBFC) provide 100% expense coverage.
Moratorium period- education loan for abroad studies
The moratorium period refers to a time period during the loan term when the borrower is not required to repay the loan amount or EMI. Usually, the moratorium period is course duration plus 6 months or a year.
Repayment tenure- education loan for abroad studies
The period during which you are allowed to make payment via EMI in order to repay the loan amount. The average repayment period is for 5 to 7 years as per our market survey. However, most of the banks that provide education loan for abroad studies have 10 to 15 years as the repayment tenure.
Co-applicant- education loan for abroad studies
A co-applicant is a person who will qualify for repayment of the loan, in case, the primary borrower of the loan is unable to do so. Parents; Spouse; Parents-in-law or Guardian; Siblings are accepted as co-applicants. SBI accepts third party co-applicant (friends, neighbours etc.) if required.
Processing fee- education loan for abroad studies
Banks charge an application processing fee which is at times refundable, depending on the bank you will avail a loan from. It is between INR 5000 to INR 10,000 for public and private banks but for NBFCs, it is usually 1% to 1.5% of the loan amount.
You can go through the detailed webinar on the topic "Securing a collateral/ non-collateral education loan for abroad studies" for knowing more about this topic. It was presented by Damini Mahajan, CoFounder & CEO of WeMakeScholars. The session is embedded for you below. If you have any doubts/ issues, feel free to ask the speaker by commenting on this article or in the YouTube comments section.
Procedure- education loan for abroad studies
Depending on collateral-based education loan for abroad studies and collateral-free education loan, the procedure varies slightly.
Procedure for collateral-based education loan for abroad studies:
- Fill the online application form
- WeMakeScholars provides the list of documents and connects you with the nearest bank branch.
- Go to the bank branch with required documents and acquire details of the lawyer and valuator.
- Obtain Legal Opinion from the lawyer and Valuation report from valuator
- The lawyer and the valuator will submit the reports to the bank branch
- Complete documents are sent to RACPC or RBO.
- Processing officer verifies the application and sanctions the loan.
- After the loan is sanctioned, you will be required to sign the documents.
- Post visa approval, student visits the bank and completes the property mortgage process (Students prefer to complete this process after visa approval in order to avoid risk.)
- Disbursement agreement is signed and disbursement of loan amount takes place.
WeMakeScholars will guide and assist you till the disbursement of the loan. Apply here for WeMakeScholars assistance.
Documents required- education loan for abroad studies
This is a list of the documents required by banks for education loan for abroad studies:
- Filled Application Form
- Photos – Applicant and Co-Applicant
- Photo ID (Applicant and Co-Applicant)- Provide any one of the following
- PAN card, Aadhaar card, Driving license, Passport or voter’s ID
- Proof of Residence
- Proof of Admission to a university
- Documents related to your Academics
- Financial statement
- Co-Applicant’s Income Proof
- Immovable Property Documentation, if the collateral is needed
There are many banks, private banks, public banks and non-banking finance companies (NBFC) that provide education loan for abroad studies. Some of the renowned public sector banks are State bank of India (SBI), Canara Bank, Bank of Baroda, and Punjab National Bank. Some private sector banks – Axis, ICICI. Some known NBFCs – Incred, Avanse, HDFC Credila, Mpower, Prodigy Finance.
Choose the best option and be a content loanee! :)
NOTE: WeMakeScholars is an organisation supported by the IT Ministry, Govt of India. Their motive is to offer unbiased education loan support to students who are planning for studying abroad. They are associated with 14+ banks (Public/Pvt/NBFC) in India and help you get the best education loan matching your profile, either with/ without collateral. If you are an aspiring student applying for an abroad education loan, you can request a callback from the WeMakeScholars team. The financial officer will get back to you and guide you until sanction. Please note there is NO fee charged by WeMakeScholars. Being a Digital India campaign supported organisation, all the services are at free of cost.