Studying in a top university and that too in a foreign country is every student’s dream. If given a chance, students would definitely pursue their higher education in their dream university abroad and will pass with flying colors. But funding study abroad may cost an arm and a leg for the student. Students may have to do some penny-pinching or else take the support of scholarships to support their study. But what if you are unable to save money? Who will foot the bill for your education abroad? If you are dwelling on this, then do not worry. Here’s the solution - Students can avail an education loan to fund their studies abroad. 

Education loans act as a saviour for students who are willing to chase their dream of studying abroad but do not have sufficient funds to do so. Financial lenders in India provide education loans for studies in India as well as overseas. Since the number of people studying abroad has been steadily increasing, the number of banks providing education loans for abroad studies has also been increasing. Financial institutions fund millions of dreams every year. So, if you are looking for an education loan or are already processing one, then you’ve landed on the right place as this article aims to give insights on education loan for abroad studies with and without collateral. This article will also help you understand the loan jargons and terminologies that a student might encounter during their education loan process. 

Types of education loan for abroad studies

There are two types of education loans in India, namely;

  • Secured education loan for foreign studies: Secured education loans are only offered to the students who acquire a security to pledge as collateral in order to avail an education loan. These loans are mostly offered by Government/Public banks in India. 
  • Unsecured education loan for foreign studies: Unsecured education loans are only offered to the students who are unable to accommodate collateral to pledge. These loans are mostly offered by Private banks/NBFCS or international lenders in India. Here they follow stringent eligibility criteria. Students are required to bring a strong financial co-applicant i.e someone with a stable income source who files ITR to get an unsecured loan. 

Eligibility criteria for an education loan for abroad studies

Eligibility criteria may vary from bank to bank but there are a few basic guidelines that students are required to meet in order to be eligible for one. Students who are consenting or already processing through an education loan must understand these basic criteria laid by the banks. 

  • The applicant must be a citizen of India.
  • The applicant should have secured and got the admission letter from a recognized university.
  • The university student has applied to, should be recognized by UGC/AICTE/ Government etc.
  • The applicant must have opted for a full-time UG/PG program.
  • The applicant who is willing to  pursue full-time courses requires a co-applicant (parent/guardian or spouse/parent-in-law/ siblings/ first cousins)

These are the basic criteria set by the banks which students are required to fulfill in order to be eligible for an education loan.  If you are eligible for one, get in touch with our team at WeMakeScholars and our financial team will help you with the entire education loan process. 

Now, let’s learn a few terminologies which are used in the bank during the education loan process. These are very necessary for a loan applicant to understand.

Different terminology related to education loan process

There are some common terminologies which a student might come across during their education loan process. These few terms are very important to understand as it will help you understand the terms and conditions of the bank as well as will guide you to form the right decision during your education loan process. 

1. Collateral Security: An immovable property like house, flat, non-agricultural land etc or Liquid security like Fixed deposit, Insurance policy and government bonds which a student mortgage to the bank in order to borrow an education loan. 

2. Loan Margin: Many times the bank doesn’t provide 100% finance for your education instead they want the student to pool in a certain percentage of the money every time you ask for a disbursement. This is a bit more complex to understand for students and it is a very important part of the process for which you may connect with our team to get a clarity on this.

3. Repayment tenure: Repayment is defined as the action of paying back a loan. Repayment tenure is the duration period in which a student is liable to pay the entire amount with interest in the stipulated time frame. For eg: SBI gives repayment tenure of 15 years after moratorium, therefore student has to repay the entire loan amount in these 15 years.

4. Co-applicant/co-signer: A co-applicant or a co-signer or a co-borrower is the person who is responsible to repay the loan if a student won’t. Primarily accepted co-applicants are parent, Spouse, parents-in-law or Guardian.

5. Processing Fee: It is the upfront fees charged by the lender to the borrower. In Government banks it is generally 10k plus GST whereas in Private banks and NBFCs, it is around 0.95% to 1.5% of the loan amount.

6. Moratorium period: A moratorium period refers to a repayment holiday before the repayment tenure begins. During this time period, students are not expected or required to start their education loan repayment for their entire course duration, plus six months post the course. This period can extend upto 12 months. This provision gives students sufficient time to find employment or to arrange funds for their repayment. This advantage is particular only to Government bank education loans.

7. Legal opinion: 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.

8. 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 3 values: Market value, Realisable 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. The loan is sanctioned based on the realisable value.

There are other few terminologies which a student might come across during their education loan process. If you are failing to understand the context of the terms, connect with our team as they will explain these terms clearly. They will also throw light on the importance of these terms and how they will be applicable to you in the entire education loan process. If you are looking for an education loan in India, request a callback on our website and our financial team will connect with you soon. 

Procedure- Education Loan for Abroad Studies

Procedure for education loan for abroad studies without collateral is slightly different as compared to collateral based loans. As secured loans involve pledging of collateral security, the procedure is a bit daunting as it involves documentation procedure. 

Here’s the procedure for collateral-based education loan for abroad studies:

  • First, fill the online application form
  • Your financial officer at WeMakeScholars will assign you the list of documents to be submitted by the loan applicant and connect you with the nearest bank branch.
  • Visit the nearest bank branch to submit the required documents and acquire details of the lawyer and valuator.
  • Acquire the Legal Opinion from the lawyer and Valuation report from valuator. The lawyer and the valuator will submit the reports to the bank branch.
  • After this, complete documents are sent to RACPC.
  • Your processing officer looks into your loan application and verifies the application.
  • Once the processing officer is done verifying the application, they will sanction the loan.
  • After the loan is sanctioned, you will be required to sign the documents for which you are required to visit the bank again
  • Post visa approval, students are required to visit the bank and complete 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.

This is the entire procedure of a study loan for abroad with collateral. Generally secured loans are provided by Government/ Public banks and they are known for their delayed processing of loans as they take around 45 days to 2 months time just to start the processing of the loan application. This delay may majorly affect a student’s study abroad plan. Therefore, we recommend you to connect with our team at WeMakeScholars as we share a professional affinity with the bank officials and we can process your loan in just 15-20 days. WeMakeScholars will guide and assist you till the disbursement of the loan. We also assign a dedicated financial officer who will assist you throughout your education loan process. 

Here’s the procedure for non-collateral based education loan for abroad studies:

Procedure for non-collateral based education loan for abroad studies

  • First, request a callback on the official website of WeMakeScholars
  • Your financial officer at WeMakeScholars will connect you with the best lenders providing education loan for abroad studies without collateral
  • As soon as your financial officer connects you with the the lending institutions, they will reach out to you directly for the further process
  • You will then be given a secured line to a portal by your financial officer, where you are required to upload the documents online. We request you to not send any documents on any other source as the confidentiality of the documents will be at risk. Therefore, only upload the documents on the portal provided to you by your financial officer.
  • Banks lay their terms and conditions, rate of interest, loan amount etc in front of the student. As per the convenience of the student, he/she may accept or reject the deal.
  • Our financial officer also tries to negotiate on the rate of interest offered by the respective banks and processing fee.
  • As soon as the student is ready with the agreement, he/she heads towards the payment of the processing fee. 
  • Tada! And your education loan is sanctioned. 

This is the entire education loan for abroad studies without collateral process. Therefore, if you are looking for an unsecured education loan, we recommend you to process through WeMakeScholars as students get an automatic 0.5% reduction on the education loan interest rates. Apart from that, our financial team will also assist you throughout the education loan process and negotiate on terms even further if needed.

Documents required- education loan for abroad studies

Here are the common documents required for education loan by Government and private banks :

  • Duly filled and signed loan application form with affixed photographs
  • 2 colored passport size photographs
  • Passport( mandatory for abroad education)
  • Any one Identity proof (Voter ID card, Driving License, Passport, PAN Card, Government department ID card, Aadhar Card or Aadhar enrolment number)
  • Any one Residence proof (Valid passport, Voter id card, Driving license, Gas bill and electricity bill, Updated passbook or bank account statement, Notarized rental agreement)
  • Academic Records(S.S.C, H.S.C, and Graduation Result)
  • Result of the entrance exam through which admission is being taken (e.g. CAT, GRE, TOEFL, IELTS, etc.)
  • Proof of admission

These are the few basic documents. Both secured and unsecured loans have different document requirements. Therefore, to know the latest checklist of the documents, connect with our team at WeMakeScholars. Our financial team will assist you with the entire education loan procedure. 

Benefits of applying for an education loan

Benefits of applying for an education loan

a. No requirement of liquidating valuable assets- Mostly parents liquidate valuable assets to bear education expenses which eventually disturbs long-term financial goals like buying a land or a flat, children’s marriage, etc. By taking a study loan for abroad, banks retain your liquid assets like FDs, insurance, Government bonds as security and grant you a loan against that security. Therefore, the loan taken for your education would not muddle in between your long term financial goals.

b. Wide range of expenses covered: Education loan for abroad studies covers almost every necessary expenses that a student might need. It includes living expenses, tuition fees, travel (tickets), house rent, university fees, food expenses, laptop, or any other apparatus required for your education.

c. Income tax benefits can be claimed: In Section 80E of the Income Tax of 1961, loan applicant or the co-applicant can avail of the education loan income tax exemption. In simple terms, the loan applicant or the co-applicant can proclaim a definite percentage of the interest paid towards their education loan as deductible from the total income. 

There are many other benefits of taking an education loan which can help lessen the burden from the students as well as parents' shoulders. To know more, read this article: Top advantages of education loan you need to know

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 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, New Zealand, France among others.