The Abroad Education Loan Procedure in India: Secured Loans
An education loan is a sure shot way to ensure an unrestricted flow of funds for your higher education course abroad. Several sources on the internet provide different versions of the abroad education loan procedure in India. As the saying goes, ‘too many cooks spoil the broth.’ Likewise, too many versions of the education loan procedure can easily cause unwanted confusion in young students’ minds. This article aims to give you a precise picture of the education loan procedure for secured loans. The details of every stage in the education loan procedure is explained here.
Types of Education Loans in India: Secured Education Loans
Before we begin to understand how the study abroad education loan process is carried out, it is essential to know the basics. An education loan in India is categorized as secured loan and unsecured education loan, based on the requirement of collateral security.
A secured education loan in India is provided on the basis of collateral security. A collateral security basically refers to an asset which is pledged by the borrower to the lender as security for loan. The same concept is applied to education loans also. Secured education loans are mainly granted by prominent government banks in India. Banks such as the SBI, Bank of Baroda, the Punjab national bank, etc. are some of the well known lenders of collateral based education loans. Since the government bank education loan process involves pledging of collateral security, the education loan procedure of the same is longer. The first step towards securing a collateral education loan is the application process.
The Secured Education Loan Procedure: Application Process
With the advent of digitization, most government banks have introduced online application systems for abroad education loans. Banks like the SBI and Bank of Baroda have an excellent online presence and their education loan application portals are simple and easy to use. The online education loan application forms of different banks are self-explanatory. Hence, it is easier for students to navigate through the same.
When Should You Apply Through The Vidyalakshmi Portal?
In an attempt to digitize the education loan application process for students, the government of India had introduced the Vidyalakshmi portal which is a common, centralized online education loan application platform. In order to apply for a study in India education loan amounting to INR 10 Lakhs and an abroad education loan amounting to INR 20 Lakhs, many government banks recommend students to apply through this common education loan portal. This rule is applicable to SBI education loan as well as Bank of Baroda education loan.
However, one of the biggest challenges of this portal is that once students submit their application form, they do not have the option to modify their options unless and until one of the banks with which they have applied to, accepts their application.
It is important to understand that the education loan requirements of different students are different. Once students have applied for an education loan online, they are required to get in touch with the respective banks for further assistance. Many students have reportedly had a terrible time trying to convince the bank officials to approve their education loan applications.
The financial team of WeMakeScholars has made it possible for many such students to acquire their education loans successfully, helping them bypass a lot of unnecessary steps in the entire education loan process. So if you are struggling with yours, get in touch with their team today for a faster education loan process. Let us move on to the next step in the secured education loan process.
Secured Education Loan Procedure: Processing & Documentation
As easy and simple as it may sound, the secured education loan process involves a lot of complex steps. Before we get started with them, it is important to bear in mind that when it comes to processing education loan applications, the course of action taken by different banks are different.
- Once the application is received at the respective branches, banks verify the information by speaking with the loan applicants directly. Students may be required to visit their respective bank branches to submit photocopies of relevant documents related to their academic records, co-applicant’s financial statements, and those related to the asset being pledged as collateral security.
- After having successfully verified all the documents, the respective branches forward the set of documents to their respective processing centers. Now, these processing centers are assigned different names by different banks. For example, in the SBI education loan procedure, the processing center is addressed as RACPC/RASMECC, depending on their respective locations. Those located within urban areas are called RACPCs while those in remote locations of India are called RASMECC. Similarly, the Bank of Baroda has an SMS. So, if your loan officer happens to use these education loan terms while interacting with you, they are basically referring to processing centers.
- Branches always check whether the collateral security being pledged for secured loans has undergone a legal and monetary evaluation, before sending them to the respective processing centers. Again, this step may happen before the file is sent to the processing center, or after. It is entirely dependent on your bank’s policy.
- If the legal verification and monetary valuation of the collateral security is not completed, all the property documents are sent to a bank-appointed lawyer and valuator for the same purpose. All the further steps are undertaken only after the reports are received at the processing centers.
- After the first round of verification is successfully completed, the documents are re-verified once before they are sent for approval of the sanctioning authorities.
- Once the application is approved, the candidates are required to visit their respective branches for a final verification of the original documents.
Most government banks take a minimum of 20 days to a maximum of 1.5 months to complete a typical education loan process. Although most of them promise the students minimum processing time, this seldom happens. This is when the knowledge and efficient assistance of the WeMakeScholars team comes into the picture. The financial team has a dedicated group of effective members who ensure that the entire process is completed efficiently by acting on behalf of the students, thus saving their time and efforts.
Secured Education Loan Disbursement Process
Once the education loan application is approved for a sanction and an education loan sanction letter has been granted, students are required to visit their respective branches for mortgage creation. This process simply comprises a re-verification of the original property documents, before a mortgage account is created. Once the mortgage account has been created, the loan agreement is to be signed by candidates and co-applicants.
The signing of the loan agreement marks the end of the secured education loan procedure. Post this, the abroad education loan is ready to be disbursed. The education loan disbursement process of government banks takes place in the following order.
- Students are required to submit a disbursement letter to the lending bank. They need to include the preferred method of payment of tuition fees by respective educational institutions in this letter.
- Once banks receive this letter, the tuition fees will be deposited as per the directions received from students. It will either be disbursed directly to the university’s tuition fee account or via a third-party payment software.
- The living expenses are deposited into a foreign travel card. Students may use this card to withdraw their living expenses in the initial days of their stay abroad. It is valid for upto three months, once students start using it. Post this time period, students will be required to create a savings account with a local bank abroad and convey their account details to respective banks. The remaining living expenses will be transferred to this savings account for the remaining course period.
The pre-visa disbursement hassle
The education loan disbursement process marks the end of the secured education loan procedure. Now, students who wish to study in countries like Canada, Germany, Australia and New Zealand are bound by rules to make a prepayment of their one year’s living expenses in order to qualify for their student visas.
In order to fulfil the financial obligations, abroad education loan applicants must request their lending banks to approve a pre-visa disbursement. Bank officials dismiss such requests most of the time as they are unaware of the financial obligations for student visas of these countries. Hence, students have a tough time trying to convince the authorities.
One of the biggest advantages of applying for abroad education loans with government banks through WeMakeScholars is that students get instant approval of their pre-visa disbursement with the assistance of the financial team. If you are stuck at this phase of your abroad education loan procedure, get in touch with the WeMakeScholars team today.
Education Loan Procedure: Repayment
Any education loan procedure does not end until the loan is repaid entirely. The education loan repayment policy of government banks offers an exclusive benefit which is not applicable to any other loan category; a moratorium period.
- Moratorium period basically refers to a loan holiday which is granted to students before their repayment period begins. This advantage is only applicable to loans like an SBI education loan or a Bank of Baroda education loan.
- The concept of moratorium period was introduced by government banks after having given due consideration to the fact that students require sufficient time to find employment once their course period gets over. This feature of the secured education loan procedure is what attracts a majority of students.
- The education loan repayment tenure granted for secured education loans is 15 years.
The next article will elaborate on the unsecured education loan procedure. So stay tuned and keep visiting this page for further updates.
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