Are you looking to pursue higher education abroad but are unable to provide collateral for an education loan? You might be wondering, ‘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 having to provide any security against the loan amount.

Student loans serve as great financial aid to students who want to pursue their higher education abroad. If it weren’t for education loans, millions of students would never have made it to their dream universities. However, not everyone is eligible to get a study abroad education loan without collateral. Many students might not have an immovable property or liquid funds to pledge as collateral and giving out a non-collateral education loan is a lot riskier for banks. So, is collateral required for an education loan? The answer is no! With the right documentation and eligibility criteria, you can get an education loan without collateral and pursue your dreams of studying abroad.

In this article, we will cover all about non-collateral loans like eligibility criteria, process, and some other factors on why lenders may have been rejecting the loan application form and also the entire information needed before applying for an education loan for abroad studies without collateral.

Here is the list of the key takeaways you get from this article for your collateral-free loan in 2024: 

  1. Upto Rupees 1 crore of education loan without collateral is possible with good academics and financial co-applicant profile.
  2. Public banks, Private banks, and NBFCs offer collateral-free education loans.
  3. Comparison of banks' unsecured education loan amount and their interest rates.
  4. There will be additional costs and loan rejections you need to be mindful of.

In case you have difficulty understanding the terms mentioned in this blog or any query related to education loans,  comment your doubts down below.

What is an Education Loan Without Collateral?

Education loan without collateral or non-collateral education loan is taken without putting any collateral as a guarantee to the lender. That means applicants can take a loan without any security such as a house, land, or anything. Students can take up to 50 Lakhs for their education loan without collateral.

Also Read:  Collateral Education Loan for Abroad Studies

Types of education loans

What are the eligibility criteria for an abroad education loan without collateral?

  • Academic Profile: The applicant’s academic profile is considered the most important criterion and is evaluated to determine their “Employability Potential”. A minimum of 60% of marks is required in 10th, 12th, and degree. Students with more than 3 backlogs may not qualify for an unsecured education loan.
  • Financial Co-Applicants: The income and CIBIL score of the financial co-applicant is another important deciding factor before applying for an unsecured education loan. Since lenders are not taking any collateral, they can stay assured that if a student fails to repay the loan amount, their financial co-applicant will pay on the student’s behalf.
  • Course/Degree: Lenders will take into consideration the course you are choosing to study. Courses like UG and PG in STEM disciplines are preferred over courses like Public policy or Aviation but never Ph.D., MBBS, Theology, and other passion courses like baking, art, fashion, etc.
  • Country: Most lenders focus on major study-abroad destinations like the US, UK, Canada, Australia, Ireland, and Germany but they are skeptical about the less known countries like China, Ukraine, etc when it comes to unsecured loans.
  • University: Private banks have a list of universities with them only for which they approve an unsecured loan.

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

What documents are required for an unsecured education loan

Education loans without collateral are provided by banks or NBFCs only after thoroughly checking the documents of the student and the co-applicant because the credibility is reflected in the documents and certificates given by the applicant.  Lenders provide quick and hassle-free unsecured education loans once you provide the filled loan application form along with all the required documents listed below:

Documents required for an unsecured education loan
  • KYC documents
  • 2 passport-size photographs of the applicant and co-applicants
  • Bank Statement for the last 6 months
  • Optional – Guarantor Form
  • Copy of the offer letter of the Institute/university with fee schedule
  • Mark sheets / passing certificates of S.S.C., H.S.C., Degree courses, entrance tests like IELTS, TOEFL, etc.
  • Income proof of the guarantor or co-applicant/borrower (i.e. salary slips/ Form 16) 

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 lenders may ask for different documents from the co-applicant.

Also Read: Countries which do not require IELTS

Which Banks give education loans without collateral for abroad education?

Some banks can give you a loan for studying abroad without asking for any collateral security. But the question is, "How much education loan can I get without collateral?" Different banks have different parameters for this. Some are government banks, and some are private lenders.

The private ones usually give more funds for studying abroad without any collateral requirement. Understanding these differences can help you figure out which bank might be able to help you best. Here is the list of a few banks and their details on collateral-free education loan.

Public Banks for Unsecured Education Loans

Public banks like SBI, BOB, Union Bank, etc as per their policies can provide up to only 7.5 lakhs of rupees for student loans without collateral irrespective of the course and country. But for some top-tier institutes in India, you can avail up to 40 lakhs of unsecured education loans from Union Bank. 

Private Banks for Unsecured Education Loans

Private banks can offer education loans of up to 1 crore rupees to study abroad without collateral. These banks have a list of some top universities with them only for which they approve an unsecured loan. Private banks can fund both a PG program and a UG program with a rate of interest of 10.5% and above. Here are the top private banks for an unsecured education loan:

NBFCs for Unsecured Education Loans

A Non-Banking Financial Company (NBFC) is also an option for Indian students as there are four NBFCs in India that provide a student loan without collateral. NBFCs decide the loan amount based on the student's choice of country. 

Country

Loan Amount (in lakhs)

Interest Rate

USA

60

11-12%

Canada

35

12-13%

UK

45

11-12.5%

Germany

20

12-13%

Australia

30

12-13.5%

Foreign lenders

Foreign lenders like Leap Finance, Prodigy Finance, etc can cover up to 80% of your total expenses. Their rate of interest is around 9.25-16% but because it is based on the London Interbank Offered Rate(LIBOR), not Marginal Cost of Funds based Lending Rate(MCLR) when converted to INR it reaches around 14-15%, making it the most expensive unsecured education loan option.

All these aforementioned lenders can give you a non-collateral education loan for your abroad studies. There are many pros and cons of opting unsecured education loan which you should be aware of before applying for one.

Be mindful of additional costs

  • Moratorium period - A moratorium period lasts for students' course duration plus 6 months to 1 year. Now with public banks, students get the option to skip the payments of their incurred interest on the disbursed amount during the moratorium period. However, private lenders do not give any such no-payment moratorium period to students. Yes, the EMIs start after the moratorium period but during their moratorium period, students are mandated to pay either partial or full interest.
  • Processing fee - While public banks do not charge a processing fee for an unsecured education loan, private banks charge up to 1% on the loan amount plus GST and for some, it is 15k 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 is 1% to 1.5% of the loan amount for private banks and 2% or above for the NBFCs. 

It is to keep in mind that the processing fees and the loan insurance with private lenders is negotiable. Students end up paying more when they approach these lenders on their own and this can be avoided. 

Why do loan applications for unsecured education loans get rejected? 

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

  • Undergraduate program - Private lenders do fund a UG program abroad if the university falls under the list but the chances are they will deny it at first as they prefer funding a PG program mainly 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.
  • Age of the applicant and co-applicant - Yes, age matters for NBFCs. For students older than 27 years, NBFCs are not willing to offer education loans. They can consider at max up to 30 years if only the other profile parameters are good. As far as co-applicants, NBFCs won't accept the profile if your co-applicant is retired (pensioner or not) or about to be retired in 3 years. 
  • FOIR- A fixed obligation to income ratio or FOIR norm is only followed by the private banks. Private banks reject the loan if your co-applicant does not meet the FOIR norm, which means that the co-applicants' obligations i.e. the EMIs, are higher than how much they can afford. 

How To Get An Education Loan For Abroad Studies Without Collateral?


Step 1: Shortlisting the Private Lenders for an Education Loan Without Collateral

Lenders sometimes may ask you to send your documents separately in the mail or over WhatsApp, but it is recommended to refrain from doing so as the confidentiality of the documents gets compromised, instead ask the lender to access them from the WeMakeScholars portals only. WeMakeScholars is renowned for maintaining the confidentiality of the documents uploaded by the students on our secured link. 

Step 2: Connecting With the Non-Collateral Education Loan Lender

Most of the banks have their websites, where students can fill in some of their basic details and receive a callback from them. This facility is indeed a boon as candidates are physically not required to visit these lenders to know their non-collateral education loan scheme details. The downside of this system, however, is that you cannot make out whether the caller is genuine or not. Unless and until you approach these private lenders through trusted sources, it is never safe to disclose sensitive details to these callers.
With the increase in the number of bank fraud cases, it is very difficult to find out whether the call you have been receiving is genuine or not

Step 3: Sharing The Documents

Once all the terms and conditions have been orally relayed to you by your respective bank, you will be required to submit the relevant documents for your education loan without collateral.  As these lenders are privately run financial companies, their employee strength varies from time to time. When you come to think about it, the thought of strangers possessing your education loan-related documents is nothing less than a nightmare. 

Step 4: Credit Verification Call

A candidate’s CIBIL score is extremely crucial to the unsecured education loan process in India. Most of the private banks/NBFCs are extremely careful about this factor of a candidate’s profile. Hence, post the successful submission of all the education loan documents for a non-collateral education loan on the WeMakeScholars portal, your profile will be loaded into the lenders system. All your details are forwarded to the lending partner credit team. Post this, you shall receive a call from this team for reconfirmation of details.
If they need to cross-verify any details about your profile, you will be asked about the same during this call with the credit team. Post this process, you will receive a confirmation regarding the status of your application for an unsecured education loan.

Step 5: Provisional Approval of Education Loan Without Collateral

Once the credit team confirms the details of your financial records, candidates receive a call regarding the status of their education loan application. If confirmed, the following terms regarding your education loan will be communicated to you verbally by your loan officer at the lending Bank/NBFCs.

  1.  Rate of Interest of your unsecured education loan.
  2.  The total unsecured education loan amount being offered.
  3.  Processing fees are to be paid by candidates to their lending Bank/NBFCs .
  4. The interest payment is to be done by the candidate every month. Private lenders offer partial interest payment or full interest payment, depending on your profile
  5. Your loan insurance expenses.

If you are not comfortable with the details of any of the above terms, you can immediately get in touch with the financial officer assigned to you by our team. The financial team of WeMakeScholars is committed to making the education loan process easier for students. 

If you feel that the processing fees or the rate of interest being asked for is too much, we can negotiate these terms on your behalf and ensure that these terms are justified according to your financial capacity.

Step 6: Paying the Processing Fee

The final stage in the unsecured education loan process is paying the processing fee. Do keep in mind that when you apply separately to Private Banks/NBFCs, the final terms are only communicated to you verbally. Nothing is given to you in writing. When you apply through WeMakeScholars, your financial officer will ensure that the lending Bank or NBFCs gives written confirmation of terms like the interest rate, loan amount, final processing fees to be paid to the lender, etc.
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.

Step 7: Loan Agreement and Disbursement 

Once the unsecured education loan has been sanctioned, the loan agreement will be prepared and given to you. After signing the loan agreement, the loan amount will be disbursed according to your payment preference. The loan can either be credited to your personal savings account or through any payment mode preferred by you. This is the last and final step of the process for unsecured education loans in India.

Before you decide to begin the process for a non-collateral education loan in India, you need to keep in mind that these lenders are privately run financial companies and hence, one cannot expect the same level of security that government banks provide.
But sometimes, when students have no valuable collateral to pledge, an unsecured education loan is the only way to fund their higher studies abroad.