Choosing the best education loan in India for study abroad is not easy. It requires comparing various lenders, loan rates, options, and requirements. It is a long, arduous process that can take up a lot of your time and energy.
But don’t worry! We have compiled all the necessary information to help you choose the best education loan in India for study abroad purposes. Keep reading!
According to the data released by the Finance Ministry, in the past 10 years, over 4.60 lakh students took education loans to study abroad. The demand for loans is rising with the increasing costs of studying abroad.
They offer immediate relief to students who wish to pursue their dreams abroad but don’t want to rely on their parents’ savings. They are cost-effective, easy to access, and cover education expenses for a student.
Different Types of Best Education Loans in India for Study Abroad?
Education loans are a special category of loans offered to students to cover education expenses. These loans are used for overseas or national education expenses only. A borrower cannot use an education loan for any other purpose.
Education loans are of two types – collateral based and non-collateral. Collateral-based education loans require the borrower to pledge security in form of asset to get an education loan approval whereas non-collateral education loans are collateral-free.
Education loans cover different kinds of education expenses. Not just tuition fees. Here’s a list of all the expenses an education loan can cover for you:
- Tuition Fees: The biggest expense is tuition fees for any student. An education loan covers your fees and helps you focus on your studies.
- Living Expenses: Accommodation, food supplies and travel are also covered by education loans. Accommodation can be a huge expense, and this coverage is a major relief for students who can’t rely on their savings.
- Health Insurance: Insurance may be covered by an education loan too. Some countries have mandatory insurance policies that every student needs to take in order to study in that country.
- Visa Fees: Student visa fees can also be covered under education loan expenses.
- Air Ticket: Flights are also a huge expense that some education loans are willing to bear for the student. The one-way fare for some countries can easily cross ₹1 lakh so this coverage is extremely helpful.
- Study Expenses: There are more expenses like books, laptop expenses or tab/ipads that students may need for their education.
Secured Education Loans
Secured education loans, also known as collateral education loans, are loans where the student pledges collateral to secure funds for higher education. The collateral acts as a security for lenders. Collateral refers to valuable asset that you own. It can be a property or fixed deposit, to the lender as a guarantee for repayment. If you fail to repay the loan, the lender can seize your collateral.
Contrary to popular belief, gold jewelry cannot be pledged as collateral for education loans. Check this article to find out what asset is accepted as collateral for education loans in India.
Features of Secured Education Loans
Lower Interest Rates: Secured education loans often come with lower interest rates compared to unsecured loans. The lender has security that gives them confidence in the student loan profile.
Higher Loan Amounts: You can typically borrow larger amounts with a secured loan because the lender has an asset to fall back on in case of non-repayment.
Longer Repayment Tenure: Secured loans often offer longer repayment periods, giving you more time to repay the loan.
Moratorium Period: Many lenders provide a moratorium period for secured education loans, during which you don’t have to make any repayments. This typically starts after completing your course and can last for a few months or years.
Unsecured Education Loan
An unsecured education loan is a loan that does not require any collateral. Most students flying abroad from India opt for this type of education loan. Unsecured education loans or non-collateral education loans are a huge relief for students who do not have collateral to pledge in lieu of a loan.
It is also a good option for students who do not want to burden their parents. These loans are higher risk loans for the lender, which means that your application will be scrutinized and verified. The student profile is extremely important for an unsecured education loan.
Features of Unsecured Education Loan
Higher Interest Rates: Unsecured loans generally have higher interest rates than secured loans due to the increased risk for the lender.
Lower Loan Amounts: The maximum loan amount for an unsecured loan is typically lower than for a secured loan. However, it depends on the student profile and the lender. Some lenders in India offer loan amounts for unsecured loans that go to ₹2 crores.
Shorter Repayment Tenure: Unsecured loans often have shorter repayment periods.
Limited Moratorium Period: If a moratorium period is available, it’s usually shorter than for secured loans.
Eligibility Requirements: Unsecured loans may have stricter eligibility requirements, such as a higher credit score or a co-signer.
Top Education Loan Providers
All major lenders in India offer both secured and unsecured education loans for students heading abroad to pursue their education loans. Here is a list of lenders you can consult for an overseas education loan –
- HDFC Credila
- Prodigy Finance
- MPower
- TATA Capital
- Axis Bank
- Avanse
- IDFC First Bank
- Auxilo
- ICICI Bank
- Yes Bank
- InCred
- Union Bank of India
Let’s look at the specific loan offerings of some of these lenders. We will cover approximate interest rates and other relevant details to help you navigate this big step in your loan application journey.
HDFC Credila
HDFC Credila is one of the leading lenders for education loans in India. They covers 35+ countries like USA, Canada, UK, Ireland, New Zealand, Australia, and many more. Here are the loan details:
- Minimum Loan Amount: ₹1,00,000
- Maximum Loan Amount: There is no upper limit. Education loans with HDFC can cover the entire amount of attendance for a student.
- The rate of interest offered by HDFC is a floating rate of interest and it is linked to their own benchmark lending rate.
- Loan disbursement is in INR, the lender sends the money directly to the university or the authorized provider.
- HDFC offers a maximum loan tenure period of 12 years.
Axis Bank
- The maximum limit for an unsecured educational loan is up to ₹75 lakh, whereas there is no upper limit for a secured education loan.
- This lender offers preadmission sanction letter
- No margin on education loan up to ₹4 lakhs and 5% on education loans above ₹4 lakhs.
- Education loans are offered for a variety of career-oriented courses at both bachelors and master’s level.
Union Bank of India
- No restriction with regard to the minimum and maximum age.
- No margin on education loan up to ₹4 lakhs and 15% on education loans above ₹4 lakhs for overseas education plans.
- The maximum repayment tenure will be 15 years (after course & moratorium period) irrespective of quantum of loan.
Avanse
- Up to 100% of the tuition fee as decided by the university.
- Tuition and hostel fees will be sent directly to the institute or university as per the agreed-upon schedule of payments.
- The minimum loan repayment tenure is 12 months, and the maximum loan repayment tenure is 180 months (including the course duration)
Comparison of Key Features
Here are some key features to consider when you are selecting the best education loan in India for study abroad plans!
Interest Rates
Different lenders offer different interest rates to applicants. The interest rate is determined by your loan application details and it is not uniform. For example, if you and your friend both may be applying to the same university, same course with the same lender, but your interest rate may be different. This is because interest rates are determined by a host of factors – which includes your credit history, your co-applicant’s credit history, and loan amount. The interest rates can range from 11% to 14% per annum, depending on the bank and the borrower’s credit profile.
Loan Amounts
Loan amounts differ based on the individual profile and the lender. Some lenders offer complete financing to students headed abroad while others may offer ₹40 to 50 lakhs to cover the cost of education. Loan amounts are also subjective and is changed based on the borrower and their needs. For example, the maximum limit for an unsecured educational loan with Axis Bank is up to ₹75 lakh, whereas there is no upper limit for a secured education loan.
Repayment Terms
Repayment terms are not uniform. Every lender has their own conditions based on the individual profile. The minimum loan repayment tenure for some lenders is 12 months, and maximum loan repayment tenure goes up to 12 years. Similarly, some lenders offer moratorium period to their borrowers.
Eligibility Criteria for Education Loans
The eligibility criteria for an education loan is straightforward. A few details may vary slightly between lenders, but some general requirements hold true across the board.
Academic Performance: Banks and lenders typically look for students with a strong academic record. This demonstrates your commitment to your studies and increases the likelihood of securing a well-paying job after graduation, which will help you repay the loan smoothly.
Admission to a Recognized Institution: You’ll need to provide proof of admission to a reputable university or educational institution recognized by the lender. This could include an official acceptance letter or enrollment confirmation.
Credit Score and Financial Background: While a credit history may not be a mandatory requirement for all lenders, a good credit score can significantly improve your chances of loan approval and potentially secure a more favorable interest rate. If you don’t have a credit history yet, building a strong financial background through responsible savings habits can benefit your application.
Co-Applicant Requirements: In most cases, an overseas education loan will require a co-applicant, typically a parent or guardian with a stable source of income. The co-applicant’s income and creditworthiness will be considered alongside yours, strengthening your application and providing additional security for the lender.
Age Limit and Other Specific Criteria: Lenders typically set a minimum age limit, often 16 years old, for loan applicants. They may also have specific eligibility criteria related to the chosen course of study, the destination country, or the loan amount.
Ideal Loan Profile
- 60% marks throughout 10th, 12th, bachelors, a good score in entrance exams (IELTS, GMAT, etc)
- The USA is the preferred location for studying abroad for the lenders.
- An issued admit letter from a premier university recognized by the lenders.
- STEM and management courses are preferred by lenders.
- Good work experience and good CTC.
- The good credit history of the applicant is more important than the co-applicant’s. A single delay or repayment lapse can affect your loan approval.
- Co-applicant profile can strengthen the loan application and collateral issued also increases the chances of getting a loan.
Documents Required for Loan Application
4 sets of documents you need for an education loan in India to fund your spring intake in the UK:
Personal Documents
- Loan application form
- Passport-size photos
- PAN card and Aadhar card
- Indian passport
Academic and Professional Documents
- Marksheets for 10th, 12th & graduation
- Entrance exam results (like IELTS, GMAT, GRE, TOEFL, etc.)
- College prospectus
- Statement of cost of study/ Schedule of expenses
- Offer letter or a conditional admission letter (if received)
- Work experience proof (if any)
Financial Documents of the Applicant
- A/C statement for last 1 year in case of any previous loan from other Banks/Lenders
- Updated Income Tax Returns (ITR) with income for past 2 years
Financial Documents of the Co-applicant
In case of salaried co-applicant
- 6-month bank statements of salary account of the co-applicant
- 2-year ITR / FORM 16 co-applicant
- 3-month salary slips
- Collateral documents (if needed)
In case of self-employed co-applicant
- 8-months bank statements of savings & current account
- 2- years ITR statement
- Collateral documents (if needed)
Benefits of Education Loans
Education loans are a boon for students who wish to study abroad but do not have the financial means to do. The average cost of studying abroad has crossed ₹40 lakhs.
Most Indian students do not have the financial capacity to sponsor themselves and hence, education loans fill that gap. They help students pursue their dreams at an affordable interest rate and favourable terms of repayment. Here are some major benefits of education loans:
- Education loans cover all major education expenses including fees, accommodation, flights, admission fees, travel, etc
- Education loans offer easy repayment plans to help students repay the loan amount.
- Education loans cover the entire cost of education for some students.
- Interest paid on education loans was tax deductible under Section 80E of the Income Tax Act. The overall cost of the loan is reduced.
Challenges and Considerations
Understanding the terms, conditions, and hidden costs associated with education loans is crucial to avoid financial pitfalls. By carefully researching lenders, comparing interest rates, and being aware of potential fees, borrowers can make informed decisions and secure loans that align with their financial goals. Neglecting to understand these factors can lead to unexpected costs, increased interest payments, and financial strain in the long run.
Conclusion
If you want to select the best education loan in India for study abroad plans, then here are some parting tips. Start your application process before you get your admission letter, compare your lenders wisely, and negotiate a better deal for yourself. Education loan is a big commitment and it’s important to consider all your options carefully.
