Studying abroad can change your life beyond any imagination. However, this is something that cannot be achieved easily. Those interested in pursuing higher education abroad but finding it difficult to arrange funds, now have the option of education funding. Student loans for studying abroad have made dreams come true for so many aspirants over the years. Quality education at international universities is now possible with an easy education loan.
Here are some of the advantages that education loans offer:
1. Competitive interest rates
2. Tax deduction on interest paid under Section 80E of the Income Tax Act of India, 1961
3. Pre-approval before the confirmation of admission
4. Up to 100% finance
5. Online application
6. Door to door services
With the help of overseas education loans, students get the chance to pay for further studies after high school, both for courses in India and abroad. Not only tuition fees, but some of the other expenses that a loan covers also include equipment purchases, charges for the hostel, and other expenses related to the course. In the case of studying overseas, various education loan providers also consider airfare.
Read More: Study Abroad after 12th or graduation
How to choose education loans for studying abroad?
Education loans play an essential role in the lives of students who aim to study at a premier institute but don’t have enough financial sources. With the help of education loans, it has now become easier for parents to send their children abroad for higher studies. Longer moratorium periods, competitive interest rates, and flexible terms for repayment have made education loans a popular choice.
In India, various financial institutions and banks extend financial aid to students who aim for higher education in India and overseas. However, the set of services and features offered by every lender are different. The processing fee, rate of interest, repayment terms, moratorium period, repayment tenure, and tax benefits are some of the conditions which vary from bank to bank. Therefore, one needs to consider the following pointers before zeroing down on a particular loan provider:
1. Tax benefits
Education loans which are taken from foreign financial institutions and Indian banks are eligible for tax deductions on loan interest which come under Section 80E of the Income Tax Act, 1961. One can avail tax deductions for a period of eight consecutive years – the year when the loan was taken and seven consecutive years–or till the interest on the loan is paid off entirely, whichever takes place earlier.
2. Rate of interest
The interest rate is the essential thing to consider while selecting any esteemed institute or bank for an education loan as even a small difference can help in saving money. Know the difference between floating and fixed interest rates, compare the rates which are offered by different institutions and banks, and opt for the option which is the most pocket friendly.
3. Costs covered
The total disbursed amount depends upon various factors such as the reputation of the university, academic background, applicant history, co-applicant, and others. While some banks cover the entire education cost, some of them cover only a certain part. Make sure to ask about the covered costs from your loan provider. Costs covered may include lab fees, tuition fees, equipment charges, examination fees, library charges, and personal expenses.
4. Documents and eligibility
Most financial institutions and banks have a specific process for evaluating loan eligibility. The process involves creditworthiness, academic background review, family income, co-applicant details, etc. The disbursed loan amount for study abroad also depends upon the nature of the course and the employment probability after the completion of the course.
It is also recommended to collect the list of documents that are needed for a loan so that it doesn’t take time to gather the documents. Various institutions and banks usually ask for a copy of mark sheets of previous education qualifications, address proof, co-applicants’ income proof, passport size pictures, etc. While some institutions ask for a confirmed admission letter, some of them approve the loan without any need for a letter.
5. Prepayment terms
The earlier you pay the loan amount, the more you will save on interest on the principal amount. Ask if there will be any prepayment penalties. Accordingly, a strategy can be made for getting a job to repay the loan as soon as possible.
6. Moratorium extension
Financial institutions and banks give a time frame of six months to a year after course completion before prepayment starts, which is considered a moratorium. This is because students need time to get a job and gain financial stability before paying for the education loan. In certain cases, it might be required to extend the period because of job unavailability and unexpected financial obligations. Get all the necessary details about these charges and policies.
7. Total cost over EMI
An education loan is paid in EMIs which are distributed evenly throughout the loan tenure. Some people prefer longer tenure so that the monthly installments can come down. While this might seem convenient in the short term, the total loan cost will climb higher every year. Look for a lender who offers the best interest rate and makes your studies convenient.
8. Loan processing time
The deadline plays a major role in applying to a university abroad. The loan sanction letter is a must to have as a financial resource while applying for visa application and admission. Make sure to ask for the processing time that the lender needs for loan disbursement.
9. Service charge
Not only the loan amount, but certain charges are also applicable while applying for the education loan. Some of these are moratorium extension fees, loan processing fees, prepayment charges, etc. Ask about all these charges before applying so that they don’t come as a surprise to you later.
Various financial institutions and banks offer education loans for higher education abroad, and each lender offers a diverse set of benefits and services. It is recommended to compare and analyze different products to find the one that best suits your needs and requirements.
The following table includes details of leading banks that provide students loans and education loan interest rates for abroad study:
|Interest rate (p.a.)||Loan amount||Loan tenure|
|ICICI Bank||8.75% – 12.25%||Up to Rs.1 Crore||
Upto 10 years
|10.99% – 19%||Up to Rs 30 Lakhs||Upto 6 years|
|Axis Bank||8% – 16%||Up to Rs 5 Crores||
Upto 20 years
|9.25%||Up to Rs 7.5 Lakhs||Upto 15 years|
|Bank of Baroda||5% – 15%||Up to Rs 1 Crore||
Upto 15 years
Kotak Mahindra Bank
|7.60% – 16%||Up to Rs.45 Lakhs (unsecured)||Upto 15 years|
|Federal Bank||10.05% onwards||Up to Rs.20 Lakhs||
Upto 15 years
Union Bank of India
|8.80% – 10.05%||Upwards of RS 4 lakhs||Upto 15 years|
|SBI||6.85% – 8.65%||Up to Rs.1.5 Crores||
Upto 15 years
|9.55% – 13.25%||Up to Rs 45 Lakhs||Upto 15 years|
|Bank of India||6.85% – 9.35%||Up to Rs 80 lakh||
Upto 15 years
Read More: Study Abroad for free: All you need to know
Which is better? Loans with collateral or without collateral – Know the difference!
Education loans are of two types; one which is taken with collateral, a secured loan, and the other one is without collateral, an unsecured loan. It is essential to know the difference between both of them before choosing the one which is right for you.
1. Secured Educational Loans
Collateral loans are also defined as secured loans, which can be taken with a pledge of something that has a greater monetary value than the loan amount. It works as a security and, therefore, the lender will be protected against the loss of money if the borrower fails to pay the loan. If there is any default, the lender can sell the asset to recover the amount.
How does a collateral loan work?
a) The rate of interest is lower if compared to another one.
b) A borrower can offer any collateral, such as FD, immovable property, insurance policy, etc., against which the loan can be offered.
c) The approval rate is higher.
d) When a student is studying, no prepayment is required.
e) The repayment period is longer.
f) Parental income is not necessary to get approval.
2. Unsecured Educational Loans
Non-collateral loans are also called unsecured loans. The loan can be available by the evaluation of the creditworthiness of the collateral or the borrower. The loan is sanctioned to the borrower who meets the eligibility criteria. Here, credit scores play an essential role.
How does a non-collateral loan work?
a) The rate of interest can be higher, usually, 1.6%-4.5%, which is higher than the collateral loan.
b) It is not necessary to offer any collateral to the lender for loan approval.
c) The repayment period is shorter when compared to collateral loans.
d) It can be a risky affair to get this loan. Therefore, it is not so simple to obtain an unsecured loan from the bank.
e) A certain amount of repayment needs to be done during the study period.
f) Parental income should be the proof for loan approval.
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Eligibility criteria for education loan to study abroad
While most banks provide education loans for studying abroad, it does have certain eligibility criteria. Students can avail of education loans for abroad studies without collateral or with collateral. The eligibility criteria may vary from provider to provider but the following are some common rules for study abroad loans.
- The applicant must be an Indian citizen
- Should have scored at least 50% marks in high school and graduation
- Should have received admission to courses in foreign institutions after passing requisite entrance exams.
- Should be able to provide documents as proof of income.
What are the necessary documents required for secured education loans in India to study abroad?
You can go for an education loan for abroad studies without collateral or with collateral/security but the requirement of key documents for applicants and co-applicants remain the same. While the requirement may vary from bank to bank, here is a checklist of key loan-related documents:
- Filled application form
- Passport size photographs of applicant and co-applicant
- Admission Letter from the foreign college or university
- Official cost breakup with expense heads like tuition fees, course duration, annual charges, and any other additional costs.
- Identity proof like Aadhar card, voter card, driving license, passport, etc.
- Address proof like driving license, passport, etc.
- Birth Certificate or 10th Class certificate for age proof.
- Background academic certificates like marksheets for 12th, graduation, entrance exams, etc.
- Document declaring that no loan has been availed from any other entity.
- Scholarship documents (if available)
- Student/Co-borrower/ guarantor’s bank account statement for last 6 months with IT details of 2 years (if available)
- Income proof like salary slips, etc.
Please note that the I-20 form is not necessary for applying for an education loan for abroad studies.
Process of getting education loan to study abroad
The process of getting an education loan in India for studying abroad can start both offline and online. It usually starts with a lot of research to find the right match for your requirement and financial condition. You can register or apply for a student loan for study abroad on the official website of the bank by submitting your contact details like name, phone number, email ID, etc. The bank officials will get in touch with you to discuss further.
You can also apply for the education loan for abroad studies offline by directly visiting the bank. You can visit the nearest bank branch and submit the application form after discussing it with the bank officials. However, you’ll have to submit some documents along with your application.
Expenses covered by education loan for studying abroad
The education loan for studying abroad can be used for education-related purposes only. The rules might vary from bank to bank. However, the following expenses are generally covered by study abroad loans.
- Fees for admission, tuition, and examination
- Books, stationery, and equipment (computers, etc.)
- Airfare for joining the course abroad
- Hostel or boarding costs
- Insurance premium, if opted by the student.
- Additional costs like study tours, research costs, etc.
Education loans and schemes to study abroad by the Indian government
While it might be a challenge to get an education loan for abroad studies without security in India, the government of India provides certain loans and loan-oriented benefits for underprivileged students. Some of them are:
- Study loans by NBCFDC:
The National Backward Classes Finance & Development Corporation (NBCFDC) provides education loans for studying abroad to underprivileged students. The maximum loan amount can go up to Rs 20 Lakhs at a rate of interest of 4% p.a. only. Over that, female students can get loans at a special rate of 3.5% p.a.
- Padho Pardesh:
This is not exactly a loan but an interest subsidy on loans for economically weaker sections of minority communities. Students can get up to 100% subsidy on the interest on an educational loan for a certain period of the repayment of the duration.
- Dr. Ambedkar Central Sector Scheme:
This scheme was introduced for underprivileged students from the OBC and EBC categories. The scheme allows a 100% interest waiver on loans up to Rs 20 Lakhs for a certain period of the repayment duration.
- Central Scheme of Interest Subsidy for Education Loans (CSIS)
The CSIS scheme is for students from economically weaker sections (EWS). This scheme also grants interest subsidies for a certain period of the repayment duration.
Education loans for abroad studies-FAQs
Q1. Am I eligible for a study abroad loan?
A. To be eligible for a study abroad loan, the following eligibility criteria must be met:
1) Should be 18 years old or above.
2) Must be a citizen of India.
3) The admission should be confirmed by the university where you have applied.
4) The co-borrower should be from India.
If the admission is not confirmed, there are still chances of getting a pre-admission loan. This will help you to cover all the expenses, such as consultation fees, entrance exam fees, cost of tests, etc.
Q2. What are the covered costs of an education loan?
A. Almost all the student’s expenses are covered by the loan. Some of the expenses which are covered by the loan for higher education abroad are:
1) Purchase of study materials, books, project expenses, and computers.
2) Course fee.
3) The insurance premium is also covered in some loans offered by the banks.
4) Building fund, caution deposit, entrance exams, consultation fees, prep tests, etc.
When you apply for an education loan, almost everything regarding study costs is covered. This ensures all your expenses are paid off without any hassle.
Q3. Do I need to provide the margin money?
A. Some of the financing institutions and banks offer 100% finance. This means there’s no need to provide the margin fee to get the educational loan for abroad studies.
Q4. What is the maximum loan amount?
A. There’s no limit when applying for a loan. However, the loan amount depends upon certain factors, which are type of course, academic record, parents’ ability to repay the loan, etc. You can use the eligibility calculator to find out the loan amount. You can also pay a visit to any of the nearest branches to find out about the procedure for getting a loan.
Q5. Do I need to provide collateral for the loan?
A. In some institutions, it is not necessary to provide collateral for further education abroad. However, if there’s any chance of providing security in the form of commercial/residential property or any fixed deposit, then you can enjoy higher loan amounts and a reduced rate of interest.
Q6. How to get an education loan for studying abroad?
A. You can apply for a study loan by visiting a bank’s website or by visiting a branch office. However, you will have to meet the criteria and provide the necessary documents to get the loan sanctioned.
Q7. How much education loan can I get for studying abroad?
A. Most banks provide education loans of up to Rs 15 Lakhs. Some banks have higher limits and you can get the amount you require to meet your expenses.
Q8. Which bank is best for education loans for abroad studies?
A. Most nationalized banks like SBI and Bank of Baroda are good for education loans for studying abroad due to good interest rates. But you should select your bank after proper research so that it meets your requirements.
Q9. How to get education loan easily?
A. The easiest way to get your education loan is by meeting the eligibility criteria and having documents ready. It not only makes the loan process easy but also saves time.