✓ Public and Private Lender Cancellation policies
✓ Pros and Cons of Education Loan Cancellation
Studying abroad is a dream come true for many students in India. Getting a chance at availing of a better education and the lure of better-paying jobs is what attracts a majority of Indian students to well-reputed, international universities. When it comes to obtaining the funds to study in foreign countries, most students turn to an abroad education loan in India.
This article aims to clarify some of the common reasons why students opt to cancel their education loans when they should be taking this step and the cancellation policies of the various lenders that grant an abroad education loan in India.
Before learning more about the education loan cancellation process, it is important to understand that an abroad education loan in India is divided into two major categories. The two groups of an abroad education loan in India have been narrowed down to secured education loans and unsecured education loans, based on the need to pledge collateral security against them.
A secured education loan is basically used to refer to education loans that are granted on the basis of collateral security. All the government banks in India majorly provide secured education loans to students. When it comes to pledging collateral security, most of the banks have divided collateral security into three categories:
We hope that the above information has given you a rough idea of what secured education loans are all about. If you have any queries regarding the education loan process or wish to seek assistance in getting an abroad education loan in India, reach out to the financial team of WeMakeScholars.
Read about MS in US: Types of Collateral Security For Student Loans in India
As the name suggests, unsecured education loans are granted without the involvement of any kind of collateral security. Lenders of unsecured education loans always take a good look at the loan applicant’s profile before making a concrete decision to grant the education loan.
NBFCs and private banks are some of the major providers of unsecured education loans in India. Since these loans do not involve collateral security of any kind, the interest rate of education loans without collateral is higher as compared to those of government bank education loan interest rates. The education loan interest rate charged by private banks and NBFCs varies depending on numerous factors. One of them is the country of study chosen by loan applicants. Here is an overview of the estimated education loan interest rate levied by NBFCs and private banks for the following countries:
Overall, the interest rate of education loans without collateral from NBFCs and private banks may roughly vary between 11.5% to 14.9%.
As there is no collateral security involved in the non-collateral education loan process, lenders, especially the NBFCs, pay close attention to the universities into which the students have been accepted. This is why NBFCs and private banks maintain a list of universities and countries which are approved for an education loan by them.
Now that you have read about the two distinct types of study abroad education loans in India, let’s move on to the talking point of today’s article - student loan cancellation.
An abroad education loan in India is one of the best ways of funding your higher education overseas, as it comes with a lot of benefits. However, not all applicants for a study abroad education loan may agree to this point.
More often than not a lot of students who take on secured education loans often develop cold feet and are concerned about the safety of their assets which are pledged with government banks, while some others are concerned about the education loan repayment. In most cases, it is their concern about repaying the education loan that drives many students into requesting the cancellation of student loans. To ease your worries, here are a few points which explain why an abroad education loan cancellation may not be the best decision.
The following points will help keep your worries regarding an abroad education loan in India away:
Taking on an education loan in recent times when universities are making unpredictable decisions on student intake may seem scary. If your university has decided to postpone your course to next year and you don’t know what to do about it, do get in touch with the financial team of WeMakeScholars before deciding to cancel abroad education loans.
It is common knowledge that the cost of studying abroad is way higher than studying in India. Hence, while applying to cancel an abroad education loan in India, it is necessary to remember that students are expected to abide by certain rules and regulations laid down by the lending institutions. Hence, it is recommended that applicants should apply for an education loan cancellation only under the following circumstances:
Cancelling education loans can be a long process. Before making a decision to cancel abroad education loans, get in touch with the WeMakeScholars team for guidance. Government banks and private lenders have different policies when it comes to cancelling education loans. Let us take a look at them.
The rules and regulations of government education loan lenders regarding student cancellations are divided into two different scenarios:
The student loan cancellation policies of NBFCs and private banks differ from those of government banks. Again, the rules for cancelling an education loan without collateral can be divided into two phases:
Although the policies laid down by NBFCs and private banks regarding the cancellation of an education loan without collateral are not uniform at all times, most of them allow students to cancel their education loan before disbursement. However, the processing fees are not refunded under any circumstances
Applicants who plan on cancelling their unsecured education loans before disbursement must keep in mind that NBFCs and private banks charge close to 2% of the total education loan amount as processing fees. These processing fees will not be refunded to the borrower if they choose to cancel the education loan without collateral. Hence, it is recommended that before making the decision to cancel your unsecured abroad education loan in India, you give it another thought.
Once their education loans are disbursed, loan applicants are not allowed to take any action on the disbursed amount for close to six months from the date of disbursement. If students wish to cancel their loan after six months of disbursement, they will be required to repay the entire principal amount, along with the accrued interest of six months. Once this financial obligation is fulfilled, students can go ahead with the cancellation procedure of their unsecured abroad education loan in India.
The cons of cancelling an abroad education loan in India outnumber the pros. Cancelling an abroad education loan in India can prove to be more costly than the entire application process. Unless and until circumstances do not compel you to cancel your abroad education loan, it is recommended that students should refrain from beginning their cancellation process.
Self-funding and scholarships are the only other ways which could aid students in funding their higher education abroad. Very few students are successful when it comes to winning fully funded scholarships to study abroad, and unless loan applicants have a sturdy financial background, pooling an entire lifetime’s savings into higher education will cause economic instability. With every passing year, studying in universities across the globe, especially those located in countries like the USA and Canada, is becoming costlier. Hence, you need to ensure that you have sufficient funds that can help you get through your course abroad before requesting your lender for an education loan cancellation.
The financial officers of WeMakeScholars are well-equipped with sufficient information to guide students along their education loan process. Hence, before you make concrete plans to forgo your decision to fund your higher education loans.
How do I know if I should cancel my abroad education loan ?
You should consider cancelling your abroad education loan if you decide not to study abroad, receive a scholarship or grant that covers your expenses or face any other unforeseen circumstances that make it difficult for you to repay the loan.
What documents do I need to submit to cancel my abroad education loan?
The documents required to cancel your abroad education loan may vary from bank to bank. However, generally, you'll need to submit a written application for loan cancellation, proof of admission cancellation or scholarship award letter, and any other documents the bank requests.
Can I cancel my abroad education loan even if I've already made some repayments?
Yes, you can cancel your abroad education loan even if you've made some repayments. However, it depends on the lenders' policies that you may or may not be eligible for a full refund of the loan amount, and the bank may charge a penalty fee.
Are there any tax implications of cancelling an abroad education loan?
Yes, there may be tax implications for cancelling an abroad education loan. If you receive any refund or waiver of the loan amount, it may be considered as income and subject to income tax. You should consult a tax expert for advice on the tax implications of loan cancellation.
What other financing options do I have besides an abroad education loan ?
Besides an abroad education loan, you can explore options like scholarships, grants, personal savings, education insurance, and sponsorships from organizations or family members. But it's always advisable that as a backup option, you should apply for Education Loan. WeMakeScholars experts will provide you best funding options suitable as per your profile. Even that is for no cost.