Education Loan For Study Abroad – Eligibility, Amount & More

education loan to study abroad

Studying abroad can be a life-changing decision for students. However, fulfilling this dream can be equally challenging with few constraints. There will be people interested in pursuing higher education abroad but finding it difficult to arrange funds. But now, they have the option to fund their education. Student loans for studying abroad have made dreams come true for many aspirants. Quality education at international universities is now possible with an easy education loan.

Here are some of the advantages that education loans offer:

  • Competitive interest rates
  • Tax deduction on interest paid under Section 80E of the Income Tax Act of India, 1961
  • Pre-approval before the confirmation of admission
  • Up to 100% finance
  • Online application
  • 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 costs 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 finances. With the help of education loans, it has now become more accessible 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, every lender’s set of services and features 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 international 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 of tax deductions for 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 essential to consider while selecting any esteemed institute or bank for an education loan, as even a minute difference can help save money. Know the difference between floating and fixed interest rates, compare the rates that different institutions and banks offer, and opt for the most pocket-friendly option. 

3. Costs covered

The total disbursed amount depends on factors such as the university’s reputation, academic background, applicant’s history, co-applicant, and others. While some banks cover the entire education cost, some 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 education loan eligibility. The process involves creditworthiness, academic background review, family income, co-applicant details, etc. The disbursed education loan amount also depends upon the nature of the course and the employment probability after completion of the program. 

It is also recommended to collect the list of documents 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-applicant’s income proof, passport size pictures, etc. While some institutions ask for a confirmed admission letter, some 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. 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, 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 a visa application and admission. Ask for the processing time that the lender needs for loan disbursement.

9. Service charge

The loan amount and certain charges are also applicable while applying for the education loan. These are moratorium extension fees, loan processing fees, prepayment charges, etc. Ask about all these charges before applying so that they don’t surprise 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 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:

Bank name

Interest rate (p.a.) Loan amount Loan tenure
ICICI Bank 8.75% – 12.25% Up to Rs.1 Crore

Up to 10 years

Tata Capital

10.99% – 19% Up to Rs 30 Lakhs Up to 6 years
Axis Bank 8% – 16% Up to Rs 5 Crores

Up to 20 years

PNB

9.25% Up to Rs 7.5 Lakhs Up to 15 years
Bank of Baroda 5% – 15% Up to Rs 1 Crore

Up to 15 years

Kotak Mahindra Bank

7.60% – 16% Up to Rs.45 Lakhs (unsecured) Up to 15 years
Federal Bank 10.05% onwards Up to Rs.20 Lakhs

Up to 15 years

Union Bank of India

8.80% – 10.05% Upwards of RS 4 lakhs Up to 15 years
SBI 6.85% – 8.65% Up to Rs.1.5 Crores

Up to 15 years

HDFC Bank

9.55% – 13.25% Up to Rs 45 Lakhs Up to 15 years
Bank of India 6.85% – 9.35% Up to Rs 80 lakh

Up to 15 years

Read More: Study Abroad for free: All you need to know

Here are some terminologies that you should be aware of –

Collateral: 

Collateral in educational loans is typically physical or financial assets that act as a form of surety against a loan. Collateral is needed to reduce the risk involved in paying off the loan. As many students get jobs immediately after completing their studies, and banks, do not have any guarantee of their future income and profile. This is why collateral is required.

The instruments that are accepted as collateral are immovable property and liquid securities. Immovable properties include houses and flat and non -agricultural properties, while liquid securities include Fixed Deposits (FDs), Government Bonds, and Term Life Insurance Policies (LICs). 

Co-signer: 

A co-signer is someone who signs the loan along with the borrower, making them responsible for repayments if the borrower defaults. 

Grace Period: 

A grace period is a time when a borrower is not expected to make loan payments. This period is also known as the moratorium period. 

Annual Percentage Rate: 

Annual percentage rate, also known as APR, includes the borrower’s interest rate and all the fees and costs along with the loan. It is always higher than the interest rate.

Variable interest rates: 

Variable interest rates fluctuate with the market, it doesn’t remain stable throughout the loan tenure. 

Which is better? Loans With Collateral or Without Collateral?

Education loans are of two types; one is taken with collateral, a secured loan, and the other is without collateral, an unsecured loan. It is essential to know the difference between them before choosing the one that 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 security. 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?

  • The rate of interest is lower if compared to another one
  • A borrower can offer any collateral, such as FD, immovable property, insurance policy, etc., against which the loan can be offered
  • The approval rate is higher
  • When a student is studying, no prepayment is required
  • The repayment period is longer
  • Parental income is not necessary to get approval

Maximum Loan Amount Against Collateral

Most public and private banks and financial institutions offer education loans to study abroad. Although the amount of sanctioned education loan can vary basis the value of the collateral asset, some lenders have a slab of an amount to offer the loan.

Here is a list of leaders and the maximum limit they offer:

Lender Maximum Amount with Collateral
Axis Bank Up to 75 lakh (however, flexible)
Bank of Baroda Listed universities: INR 80 lakhs

Unlisted universities: INR 60 lakhs

ICICI Bank Up to INR 1 Crore
IDBI Bank up to 20 lakh 
State Bank of India Domestic Education – up to 15 lakh

Study Abroad Education – up to 1.5 Crore 

2. Unsecured Educational Loans

Non-collateral loans are also called unsecured loans. The loan can be available by evaluating 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?

  • The rate of interest can be higher, usually, 1.6%-4.5%, which is higher than the collateral loan
  • It is not necessary to offer any collateral to the lender for loan approval
  • The repayment period is shorter when compared to collateral loans
  • It can be a risky affair to get this loan. Therefore, obtaining an unsecured loan from the bank is not so simple
  • A certain amount of repayment needs to be done during the study period
  • Parental income should be the proof for loan approval

How to Get an Education Loan to Study Abroad Without Collateral?

Education loan to study abroad without collateral is also known as unsecured loans that can be made available by evaluating the creditworthiness of the collateral or the borrower. Parental income should be the proof for loan approval without collateral.

Responsibility Of A Guarantor In An Education Loan

The lenders ask for a guarantor from the borrower; especially, when the loan amount is high. The guarantor should have the capacity to repay the loan if the borrower fails to do so. The guarantor in an education loan for study abroad is not just a witness to approve the authenticity of the borrower but also supports them financially and guarantees that the loan will be paid in case the borrower becomes a defaulter. Anybody can become a guarantor; however, a close family member is preferred.

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.

Read More: Best countries to study abroad for Indian students

Necessary Documents for Secured Education Loans in India to Study Abroad

Financing higher education abroad is the biggest challenge for students who want to study abroad. While many institutes/universities offer scholarships, not everyone is eligible for them. Therefore, many of them depend on education loans for studying abroad. 

Applying for the loan can be hassle-free if all the necessary documents are available from the applicant’s side. Read on if you don’t know about the required and essential documents for higher studies abroad. 

The following documents are cross-checked at the bank and verified for approval of the loan:

  • A valid passport: A valid passport is necessary to apply for a loan overseas
  • KYC: KYC documents include the candidate’s valid identity proofs, i.e. PAN card and Aadhaar Card
  • Education proof: The 10th, 12th, and other relevant degree certificates should be presented. If there’s any gap between your studies, a certificate stating the gap should be included. If you have any work experience, an offer letter can be provided
  • Address proof: There should be proof of your permanent residential address and the present residential address along with the application
  • There should be an offer letter that a university has to apply for the loan. It is also necessary to show the scorecard, fee structure, and the results of admission tests such as IELTS/TOEFL, GMAT/GRE, or any other test for which you might have applied
  • Co-applicant documents also need to be submitted, including address proof, photo identity proof, bank statements, salary proof, business proof, and income tax return certificates

You can directly visit the website of the bank or institution to apply for the loan. Fill in the form, and you will know your eligibility. If you need to know more and are looking for a hassle-free process to obtain an education loan to study abroad, experts at upGrad Abroad will guide you towards a convenient and quick process.

Process of Getting an 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 to 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 this 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.

Read More: Best Immigration friendly countries for Indians

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.

Why choose upGrad Abroad?

With a commitment to providing quality education at affordable prices, upGrad has launched study abroad programs. These programs enable students to study for one year online from home and then on-campus for the following years. With this, learners can save a lot on living costs or other additional expenses. Our programs cost around 1/10th of the regular on-campus studies and learners can save up to 80% of their tuition fees. With upGrad Abroad’s Accelerator programs, the learners don’t need to worry much about education loans. upGrad Abroad will also assist the learners in taking education loans from a reliable financial institution.

Read More: Study Abroad from India with great affordability and efficiency

Frequently Asked Questions

Q1. Am I eligible for a study abroad loan?

To be eligible for a study abroad loan, the following eligibility criteria must be met:

  • Should be 18 years old or above
  • Must be a citizen of India
  • The admission should be confirmed by the university where you have applied
  • 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 all costs are covered by an education loan?

The loan covers almost all the student’s expenses. Some of the costs which are covered by the loan for higher education abroad are:

  • Purchase of study materials, books, project expenses, and computers
    Course fee
  • The insurance premium is also covered in some loans offered by the banks
  • 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?

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?

There’s no limit when applying for a loan. However, the loan amount depends upon certain factors: 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 visit 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?

It is not necessary to provide collateral for further education abroad in some institutions. However, suppose there’s any chance of providing security in commercial/residential property or any fixed deposit. In that case, you can enjoy higher loan amounts and a reduced rate of interest.

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