Can You Borrow Abroad Study Loan from Multiple Lenders?

A successful higher education process involves a lot of factors. Arranging for an abroad study loan at the right time is one of the key contributors to making the entire procedure of studying abroad easy. There is a huge variety of lenders who grant an abroad study loan for those in need. When students get to explore multiple options for higher education funding, they often develop a tendency to make use of the best of them.

This drives many students into thinking that it is okay for them to borrow an abroad study loan from different lenders. However, a lot of such students are privy to the fact that although they are allowed to sanction their abroad studies loan from two different lenders, the rules and regulations allow students to take a disbursement from only one of them. This article will give you an insight into why students can't borrow an abroad study loan from different lenders.

In the abroad study loan process, education loans are categorised into two different types based on the requirement of collateral. In order to borrow an education loan in India, it is essential to have sufficient information on both types of abroad education loans.

Secured Education Loan: Secured education loans are lent based on collateral. In the typical process of obtaining this category of an abroad study loan, students are required to pledge three types of assets as collateral against their education loan. These loans are lent by all prominent government banks in India. One of the biggest benefits of secured education loans borrowed from government banks is the moratorium period which is a loan holiday granted to all candidates before the repayment period begins. This moratorium period buys enough time for other students to find employment and begin their education loan repayment. 

Unsecured Education Loan: An unsecured education loan is an education loan without collateral. These loans do not require any form of collateral. They are mainly lent by private financial companies called NBFCs (Non-Banking Finance Companies) and a few other private banks.

Government banks lend unsecured education loans of up to Rs.7.5 Lakhs too. NBFCs and other private banks offer education loans of up to INR 50 Lakhs, depending on the student's financial needs. Unlike government banks, NBFCs and private banks do not offer the benefits of a moratorium period to loan applicants.

The entire process of getting both types of education loans abroad is explained in great detail in many of our previous articles in this blog, as well as in Loanflix episodes. The WeMakeScholars team believes that no student who requires an education loan should be denied or unable to borrow one under any circumstances. To know more about how we help students with the abroad study loans, reach out to our financial officers at the earliest.

Read about Top Education Loan Lenders: How to Choose The Right One?

As mentioned earlier in the article, with the increase in the number of students who enrol in higher education courses abroad, more and more lenders are coming forward with attractive study abroad loan schemes.

More often than not, a majority of higher education aspirants tend to get confused, and in an attempt to avail themselves of the best offer that comes their way, such applicants apply for two different abroad study loans, often for the same course. The features and benefits of a study abroad loan depend on the category in which it falls.

For example, students find unsecured study abroad loans to be more feasible as they are not required to pledge collateral security for the same. Applicants who are in dire need of higher education funding within a short time often resort to unsecured education loans. Since these loans are sanctioned by NBFCs and private banks within a week, these are the go-to choices for most students who wish to fund their higher education abroad. However, when the same set of candidates comes across the education loan terms of secured education loans, they think of borrowing their living expenses from government banks and tuition fees from private lenders without being aware of the fact that, legally, this process is not acceptable. So how do you counter this dilemma? The best way to avoid being misled is to educate yourself about how the study abroad loan process is conducted.

If you have ever borrowed money from lenders in India, you may have come across the term ‘CIBIL Score’. If you plan on borrowing a loan from any bank in the country, the very first advice any expert would give you is to understand your CIBIL score before applying for one. So, what is the CIBIL score, and how does it play an important role in determining whether you get to avail of a study abroad loan?

CIBIL basically refers to Credit Bureau of India Limited, an organisation that keeps a track of all the financial transactions of individuals. These financial transactions include any loan taken by individuals, their credit card payment history, loan EMI payment schedules, etc. An individual’s credit score helps banks and other financial institutions determine their ability to repay any loan for which they may have applied. Both government and private lenders always check a loan applicant’s credit score before considering their education loan application. The score helps the banks to determine a candidate’s creditworthiness, thus helping them decide whether the applicant is worthy of being considered for a study abroad loan.

• CIBIL Score requirement of government banks: Government banks like the SBI, Bank of Baroda, Punjab National Bank, etc., provide secured education loans to loan applicants who have a CIBIL score of 650 and above. To get an abroad education loan from SBI, which is one of the most prominent government banks functioning in India, it is mandatory for loan applicants as well as their co-applicants to have a CIBIL score of 650 and above.

• CIBIL Score requirement of NBFCs: One of the most prominent factors considered by NBFCs and private banks before approving any education loan application is the applicant and their co-applicants' CIBIL score. Most of the NBFCs that function in India require loan applicants as well as their co-applicants to have a CIBIL score above 700.

The following CIBIL score limits are recommended for students who wish to borrow abroad for education loans.

• 300-599: If your CIBIL score falls in this range, then it is high time to analyse your financial records and pay attention to any critical issues that may be causing your CIBIL score to be this low. A CIBIL score below 600 is considered to be very bad by most financial institutions, and hence, the chances of you getting an education loan become much less.
• 600 - 749: Individuals whose CIBIL score falls in this category can still get an education loan. However, you need to keep in mind that when it comes to getting an education loan, most banks and NBFCs are very particular about loan applicants fulfilling the CIBIL score criterion due to the huge percentage of education loans being declared as NPAs every year.
• 750 & above: Individuals having a CIBIL score of 750 and above will not face any difficulty in getting an abroad education loan, as their scores indicate a healthy financial record. This CIBIL score is also helpful to lenders in determining the financial reliability of the particular individual and their co-applicant.
  To know the CIBIL score requirements of the different education loan lenders and also to know whether your profile will be considered to be eligible for an education loan, do reach out to the financial team of WeMakeScholars for assistance regarding the same. Our financial officers have helped many candidates get an education loan despite the difficult nature of their profile and they will be able to do the same in your case too.

The very first action taken by most bank officials once they receive a study abroad loan application is to check the CIBIL score of both the loan applicant, as well as their co-applicant.  If the score meets the requirements of the respective lender, the application is forwarded to the respective departments for further steps of the process. This is what happens when students apply for a study abroad loan for the first time. 

Now, when students apply for two different education loans with two different lenders to fund the same course, the following sequence of events takes place in the following way:

1. Bank no.1 checks for the student’s CIBIL score for any discrepancies. and approves their file for further processing. While this process goes on, the student applies for a study abroad loan with another bank for the same course.
2. Bank no. 2 also checks for the applicant’s CIBIL score and finds records that indicate that the student has applied for a study abroad loan to fund the same course. However, since this event does not cause the student' and their co-applicants CIBIL scores to reduce significantly, Bank No. 2 also proceeds with the next phase.
3. The study abroad loan process goes on smoothly with both banks until an education loan is sanctioned. It is important to note that till this point, the CIBIL score of both, the student as well as their co-applicant has been unaffected due to the fact that they have not yet taken a disbursement of their overseas education loan amount.
4. Now, post the loan sanction, students go to either one of the banks for the final phase of their education loan process, which involves the signing of the loan agreement, along with other important formalities. Post these actions, the education loan is disbursed from Bank no.1/Bank no. 2.
5. When one bank disburses the education loan to the loan applicant (student) and their co-applicant, this event is recorded in the credit report of both parties by the CIBIL, and their score are reduced significantly.
6. The other bank takes note of this change and automatically rejects the loan sanction granted to the same applicant and their co-applicant.

From the above events, it may be inferred that students can apply for an overseas studies education loan with two different lenders to fund the same course; however, only one of them would allow the applicant to disburse the loan.

To avoid being in such a situation, you must educate yourself about the basics of the process of getting an education loan for abroad studies. The financial team of WeMakeScholars has a good knowledge of the smallest details of the typical process of getting a study abroad loan, and they are well-equipped to assist you every step of the way. So, before you commit the mistake of applying to two different lenders for an education loan to fund the same course, register a callback with the team and then proceed with your overseas education loan.