261,406 Indian students studied abroad in 2022, according to the Ministry of External Affairs, and more students are anticipated to enroll in top-notch programs next year.
The best way to pay for studying abroad is often thought to be through student loans. Loans for studying abroad come in a variety of forms.
Let’s learn about them and help you choose your best option.
Types of education loans
Let’s first explore the two major forms of education loans accessible to international students who want to study abroad through collateral-free education loans:
1. Collateral education loan
To get the required loan amount for a collateral education loan, the borrower must pledge collateral (such as a house, property, gold, insurance policies, land, fixed deposits, etc.) as security. Collateral loans can further be divided into three categories;
- Immovable property: This comprises buildings, flat surfaces, uncultivated land, and areas with well-defined borders.
- Liquid security: This covers LICs, government bonds, fixed deposits, etc.
- Third-party collateral: Only government and public banks are covered by this law. In this situation, if a candidate lacks the necessary assets listed above or is unable to provide the value to match the necessary loan amount, they may pledge the asset of a third party as collateral. In essence, the term “third party” refers to those who are not members of the candidate’s close family. For instance, the candidate’s uncle, aunt, pals, or the major co-applicant, etc.
2. Non-collateral education loan
The borrower of an education loan for international studies without collateral is not required to provide collateral as security, in contrast to an education loan with collateral.
In the case of an education loan without collateral for abroad, borrowers are required to submit documentation and fulfill relevant requirements and eligibility criteria.
Types of education loans based on lenders
The following are the different types of education loans based on lenders:
1. Loans from Public-Sector Banks
In India, public-sector banks or government banks give education loans to those who want to study abroad mostly based on collateral that is given as security.
Government banks offer unsecured loans to students for INR 7.5 lakh. Applicants must offer collateral as security for sums more than this.
Compared to commercial lenders, public sector banks provide lower interest rates. Section 80E offers tax advantages for government bank student loans. Major public-sector banks that provide loans for international schooling include:
- State Bank of India
- Bank of Baroda
- Punjab National Bank
- Union Bank of India
2. Loans from Private Banks
Both secured and unsecured loans for study abroad are available from private Indian banks to students. The amount that may be approved depends on several variables, including the applicant’s profile, the co-applicants financial situation, the nation, the course, etc.
Private-sector banks provide better interest rates than NBFCs and foreign lenders, but they are higher than government banks. ROI generally begins around 11% annually.
Private bank student loans are also eligible for Section 80E tax advantages. Compared to government banks, private banks require less time to approve an education loan. Several of the largest private sector banks providing loans for international schooling are:
- ICICI Bank
- Axis Bank
3. Loans from Non-Banking Financial Companies (NBFCs)
NBFCs provide unsecured and secured student loans for international studies. The maximum loan amount that can be approved varies depending on several variables, including the applicant’s profile and the financial status of any co-applicants.
When compared to commercial banks and government banks, the interest rates on loans from NBFCs are on the higher side. The interest rate for NBFC education loans normally ranges from 11.5% to 16% per annum. NBFC education loans do not qualify for Section 80E tax advantages.
Compared to government banks and commercial banks, NBFCs require less time to complete an education loan. Some of the largest NBFCs providing loans for international schooling include:
- HDFC Credila
- Avanse
- InCred
- Auxilo
How to choose the right abroad education loans for higher education?
Research and thorough comparison are necessary while selecting the best education loan for higher education. Before choosing an education loan, compare the interest rates and repayment options offered by several institutions.
You may also get in touch with an expert. They can assist you in negotiating a lower interest rate and in organizing your repayment plan to help you save money. Before choosing to take out an education loan, ascertain how much money you require to fund your higher education.
Our College Cost Calculator will help you determine how much additional money you’ll need to live comfortably in your college city by providing you with information on the tuition and living costs there.
In the modern, dynamic world, a good education is crucial because it gives students more self-confidence and gives them the tools they need to live their best lives.
Therefore, although taking out a loan first seems scary, as long as the student is dedicated and makes the most of the opportunity, it will ultimately pay off.
