How to Get an Education Loan for Studying Abroad Without Collateral?

Do you know that you can get a collateral-free education loan for 1 crore? Your application must be impeccable with all the right documents, grades and financially right co-applicant.  

In this blog, we will help you create the right application and give you tips on how to get an education loan for studying abroad without collateral. Keep reading! 

Understanding Unsecured Education Loans 

Unsecured education loans, a.k.a. collateral-free education loans, are a popular choice for Indian students studying abroad. They don’t require you to pledge assets like property or fixed deposits as security. However, they often come with higher interest rates compared to secured loans. 

Assess Your Eligibility for Collateral-Free Loans

To qualify for a collateral-free education loan, you typically need: 

1. A strong academic record 

2. Admission to a recognized foreign university 

3. Proof of age and income (minimum age is 16 years) 

4. A financially sound co-applicant (usually a parent or guardian) 

5. Proven work experience (if any) 

Choosing the Right Lender 

Consider both public and private banks, as well as online lenders and NBFCs. Compare interest rates, loan terms, and repayment options to find the best fit for your needs. 

Required Documentation 

To apply for an education loan, you’ll need: 

 Personal Documents 

1. Loan application form  

2. Passport-size photos  

3. PAN card and Aadhar card 

Indian passport  

Academic and Professional Documents  

1. Marksheets for 10th, 12th & graduation  

2. Entrance exam results (like IELTS, GMAT, GRE, TOEFL, etc.) 

3. College prospectus 

4. Statement of cost of study/ Schedule of expenses 

5. Offer letter or a conditional admission letter (if received) 

6. Work experience proof (if any) 

Financial Documents of the Applicant 

1. A/C statement for last 1 year in case of any previous loan from other Banks/Lenders 

2. Updated Income Tax Returns (ITR) with income for past 2 years 

Financial Documents of the Co-applicant  

In case of salaried co-applicant 

1. 6-month bank statements of salary account of the co-applicant 

2. 2-year ITR / FORM 16 co-applicant 

3. 3-month salary slips  

4. Collateral documents (if needed) 

 In case of self-employed co-applicant 

1. 8-months bank statements of savings & current account 

2. 2- years ITR statement  

3. Collateral documents (if needed) 

Must Read: Co-Applicant’s Role in Education Loans: Eligibility 

Strengthening Your Loan Application with a Strong Financial Profile 

To improve your chances of loan approval: 

• Maintain a good credit score: Make sure to repay your credit card bills on time. Do not miss a loan repayment (if any). 

• Have a co-applicant with a strong financial profile: Choose a family member whose credit history is good enough to support you in your education loan journey. 

• Clearly articulate your future career goals: Choosing a good course with a great ROI is one way to offer lenders a surety of repayment.  

Also Read: Best Time to Apply for Education Loans 

Steps to Apply for the Loan 

Here are the steps to help you navigate this journey: 

1. The first step in the application process for education loans to study is to figure out the education loan providers and their terms. All lenders in India offer an education loan and you will have to compare interest rates, terms, and eligibility criteria from various banks, financial institutions, and government-backed loan providers. 

1. You will have to consider factors like repayment terms, moratorium periods, and processing fees. 

2. The second step is to gather the documents to help expediate the process of getting an education loan. Every lender needs a series of documents to support your claim to get your loan approved on time. Here are some documents you need:  

1. Admission letter: An admission letter from your university or college. 

2. Course fee structure: Detailed breakdown of tuition fees, living expenses, and other costs. 

3. Financial documents: Income proof (salary slips, tax returns), bank statements, property documents (if applicable), and other relevant financial information. 

4. Identity proof: Passport, Aadhaar card, or other government-issued identification. 

3. The third step is to provide accurate and complete information about your personal details, academic background, financial situation, and loan requirements. Attach all necessary documents as per the lender’s guidelines and complete the application. 

4. The fourth step is to submit the completed application form along with supporting documents to the lender either in person, by post, or online. 

5. The fifth step requires waiting for the verdict. The lender will review your application and verify the authenticity of your documents. They may conduct credit checks to assess your creditworthiness. If your application is approved, you’ll receive a loan sanction letter outlining the loan amount, interest rate, repayment terms, and other conditions. 

6. The last step is disbursement. The loan amount will be disbursed in installments as per the agreed-upon schedule. The funds will typically be transferred directly to the university or college to cover tuition fees and other expenses. 

Also Read: What is the Cost of Attendance? 

Key Factors Affecting Loan Amount 

• Course Fees, Type and Duration: Your amount is determined based on your need, type of course and its duration. 

• Country: Different countries inspire trust in lenders and in turn can help with determine the loan amount. It also depends on the cost of living in that country. 

• Loan Tenure: The longer the tenure, the higher the loan amount for the student. 

Now that you understand the conditions of getting an education loan without collateral, here’s what to do during the process! 

What to Expect During the Loan Approval Process? 

• Processing Time: Approval time can be taxing. The lenders have to verify all the documents submitted by you before they sanction your loan. It takes typically 15-30 days depending on the lender. 

• Loan Sanction Letter: A loan sanction letter is an official document issued by a bank or financial institution confirming the approval of a loan application. It outlines the sanctioned loan amount, interest rate, tenure, and other terms and conditions. 

• Disbursement of Funds: Typically, the loan is disbursed directly to the university to cover tuition fees and other expenses. In some cases, it may be credited to the student’s bank account for other costs like accommodation and living expenses. 

Repayment of Education Loans

• Repayment Period: Typically, repayment starts after a grace period post-graduation. 

• EMI Calculation: Understand how EMIs are calculated and plan your budget accordingly. 

• Prepayment and Foreclosure: Explore options for early repayment to save on interest. 

Common Mistakes to Avoid

• Not Understanding the Fine Print: Read the loan agreement carefully. 

• Underestimating Repayment Costs: Consider the total cost, including interest. 

• Delaying the Application: Timely application is crucial to avoid delays. 

Tips to Improve Loan Approval Chances 

• Strong Academic Record: Showcase your academic achievements. 

• Clear Career Goals and SOP: A well-written SOP can strengthen your application. 

• Good Co-applicant Credit Score: A strong co-applicant can significantly improve your chances. 

By following these steps and considering the key factors, you can increase your chances of securing an education loan without collateral. Need help? Connect with us!