Education loan serves the purpose of imparting education to those who are deprived of quality education due to a lack of finances. But the journey to getting education loans is in itself a different kind of struggle. Every year a number of students apply for education loans, but very few get them.

The number of students getting the final sanction to the number of people applying is very less. The total number of students getting education loans has been declining by 7.29% quarter on quarter. Though there is an exception for students who took an education loan via WeMakeScholars.

In this article we are going to discuss the types of education loans and why they get rejected. Only when you get to know the reason for rejection, then you can avoid rejection. We will also help you with some tips to avoid failure in the repayment of education loans. 

Types of Education Loans

Basically, you can get two different types of education loans. The first one is a collateral loan and the second one is a non-collateral loan. 

Collateral Loan(Secure Loan):-

Collateral is an asset that you pledge against your loan. Under collaterals, you can pledge a proper independent house, flat or nonagricultural land with boundaries that should match all the criteria prescribed by banks or you can also refer to this link. You can also pledge liquid securities like FD, LIC policy, or Government bonds.

Noncollateral Loan(Unsecured Loan):-

These are unsecured loans where you don’t need to pledge any asset of yours. They are mostly given to students who are going to good universities or countries that match the university lists of private banks or the students who have a financially strong co-applicant. Check the link to know all the criteria for unsecured loans.

Tips to avoid Unsecured Loan rejection (Pvt lenders)

Below are some common tips to avoid education loan failure in unsecured loans.

Country:- Choose a well-developed country, preferably countries known for quality education. Try to avoid countries that are financially not stable, mostly third-world countries.

University:- Selection of well-known and well-ranked universities is important. Even if you are going to well-known countries, sometimes the loan might get rejected due to poor selection of university.

Co-applicant:- This is a very important criterion for Pvt lenders. They need a strong financial co-applicant to sanction the loan, though in some cases certain banks can consider the applicant as the financial co-applicant if they match bank requirements.

Tips to avoid failure of Secured Education Loan (public banks):-

 Below are some common tips to avoid education loan failure in secure loans. You can also get in touch with the Wemakescholars team to understand the whole process and to connect with suitable lenders.

Collateral:- This is the most important requirement for public banks. You cannot get education loans without collateral in public banks, except vidyaloans where they provide only up to 7.5 lacs loan. Even after having collateral, you can get rejected due to not meeting certain requirements. Refer to this link to read about all the requirements.

Country:- The State Bank of India(SBI) has a list of countries that it prefers when giving education loans. BOB doesn’t have such a list but it also avoids the countries which are not listed in SBI. Try to select the countries that are listed in SBI for a hassle-free loan sanction.

University:- SBI prefers universities that are ranked in the top 5000 in the world's top university ranking. BOB has a list of universities which it refers to as prime, which it does give importance to and provides 100% loan on total expenses. Though it also provides loans for nonprime universities, but 0nly 90% on total expenses. Try to choose a university from BOB prime list to get better interest rates.

Co-applicant:- Public banks do not stress much about co-applicant, because they provide collateralized loans. SBI doesn’t need a co-applicant with great finances, whereas in BOB financial co-applicant is mandatory. Though they don’t ask for a very high income. In some cases, SBI can process without ITRs, with only income certificates.

Tips to avoid repayment failure

Once you get an education loan and started your study, there is another thing you need to think of. That is repayment of education loan as banks and pvt lenders can stop your next installment of loan and it will hinder your study. Tips for avoiding education loan rejection align with the tips for avoiding repayment failure.

Read More: What Happens When You Fail To Repay Education Loan

If you get admitted into a great university, in a well-developed country, known for quality education, then the chances of you getting a well-paid job in a good organization are very high. When you get a well-paid job in a good organization, then the chances of repayment failure are very low. So try to select a good university in a good country, so you can repay the loan. There are some more tips to avoid repayment failure, which are listed below.

Making use of the Moratorium period:- After getting education loans, students get a repayment holiday in which they need not pay anything. Moratorium period is generally course duration plus 6 months in public banks which is extendable for up to 1 year. In the case of public banks, it is course duration plus 6 months and course duration plus 1 year in NBFCs. Students can make good use of this time period by reducing expenses and saving the extra amount for loan repayment.

Part-time job:- Students can get part-time jobs during the course and save money for repayment of the loan. They also gain experience and hence will help in strengthening their resume and getting better pay after the completion of the course, which will also help in repayment of the loan.

The brief to all the above tips is that you need to be careful in choosing the university and the country where you are going which will help you in getting the loan and also ease the process of repayment. For further inquiries about education loans and easing your process, you can request a callback from WeMakeScholars and our financial officers will get back to you. They will guide you with the process of education loans and will also connect you to suitable public and private lenders. So do not hesitate in requesting a callback and apply the most important tip to avoid failure in education loan, that is contact WeMakeScholars.