- Both Lenders Offer the Same Rate of Interest - In 2012, USD 1 was INR 45. In 2016, it rose to INR 60. Today, it is over INR 71. This rise will continue, meaning if you earn in dollars, it’ll be far more manageable and beneficial to repay a loan in rupees. Therefore, choose a domestic lender if both offer comparable interest rates.
- Both Lenders Offer Different Rates of Interests - Let’s say the foreign lender provides you with a loan of USD 50,000 at 9%, while the Indian lender offers INR 35 Lakhs at 11%. The obvious pick appears to be the loan in dollars because it has a lesser rate of interest. Right?
- The Total interest - For longer tenures, the total interest repayment is higher. Your expected income - The EMI of the study loan should not exceed what you can comfortably repay in the future.
- Check your loan eligibility here on GyanDhan.
- Get loan counselling from our ELCs to compare loan options better.
- Shortlist a lender and fill education loan application online on our platform.
- Get your customised document check-list to ensure one-shot documentation.
- Easy document submission (document pick-up in Metro cities for SBI, branch manager or relationship officer for other banks, or online document uploading for NBFCs).
- A couple of visits to the branch for signing documents.
- Property & other legal evaluation (only in secured loans).
- Get Sanction letter after loan approval.
- Get a checklist of documents required for the disbursement and submit them to the lender.
- Apply for disbursement.
Updated on: 04 Sep 2023
How many Indian students got an education loan in 2015? A whopping 3.34 Lakhs. How many students secured a study loan in 2019? A measly 2.5 Lakhs. What does that say to an Indian student hoping to apply for an education loan abroad? The number of applications for student loans being accepted is abysmally low and constantly decreasing. Yet, not all hope is lost. The total loan amount disbursed has jumped from INR 16,800 Crore in FY16 to INR 22,550 Crore in FY19. It attests that banks are keen on authorising high-value loans to worthy candidates. How does this keenness help you? As long as you are careful with the study loan procedure and take every factor into consideration, the chances of your approval rise. Also, knowing and avoiding the common reasons for loan rejection can further improve your chances significantly. This blog will assure that your loan application isn’t lost in the pool of uncountable applicants and give you a clear starting point. Then, you can dive into the things to be kept at the forefront while applying for an education loan to study abroad. Fill this form and get in touch with an expert Applying for a loan as hefty as funding one’s study abroad plan is a multifaceted process. When you don’t give the procedure its due diligence, you fail to read between the lines. And, it is when you slip up on the minor details that the education loan proves to be a financial burden. You stand to risk either the financial asset or your future earnings when the bank comes knocking for repayment. Over and above, if the loan is not squared off on time, your CIBIL score is impacted, which, in turn, affects the ability to take another loan (think: home or car) in future. It’s clear as crystal that securing the right education loan demands utmost vigilance. Else, instead of being your pathway to achieving dreams, they become a liability. With this thought in mind, let’s explore the factors that need your attention when considering a study loan scheme. Depending upon your lender, the rate of interest on a study abroad education loan ranges from 8.85% to 16%. Here’s a rudimentary idea of the interest charged by GyanDhan partners - top education loan lenders in India. Read more about: Education Loan Interest Rate Secured Loans Features Public Banks Private Banks NBFCs Lenders Loan Amount Upto INR 1.5 Crore Upto INR 80 Lakhs Upto INR 80 Lakhs Interest Rate Range 7.65%-10.5%* 11.5%-13.5%* 12%-14%* Unsecured Loans Features Private Banks NBFCs International Lenders Lenders Loan Amount Upto INR 40 Lakhs Upto INR 50 Lakhs Upto INR 35 Lakhs Interest Rate Range 11.5%-13.5%* 12%-16%* 12%** (In USD) *As on 17/12/2019 While a 1% difference in ROIs doesn’t seem significant, when you convert the rate into total interest to be paid over the repayment tenure using GyanDhan’s EMI calculator, it’s exorbitant. Education loan lenders offer a grace period to students to cover the lag between completing their studies and starting work. During this interval, students don’t have to repay the loan, and it varies from 6 months to a whole year after the completion of the course. That said, some student loan lenders do ask the borrower to pay either the simple or the partial interest rate during his/her study period. Read more about: Moratorium Period In Education Loan A waiting period before you begin paying EMI can be particularly helpful if you don’t get a job right after course completion. -- Example of Moratorium Period -- Features Public Banks Private Banks NBFCs International Lenders Lenders MPower Moratorium Period Course Period + 6 Months Course Period + 12 Months Course Period + 12 Months Course Period + 12 Months Payment During Study Period None Simple Interest Simple/Partial Interest Interest-only Like any other service, education loans require you to cough up several fees and charges. One of them is a processing fee, which covers the whole range from 0% to 5% based on the lender. The processing fee can blindside you, especially if you become aware of them after the loan is approved. So, keep it in mind when you initiate an education loan procedure. Example: An unsecured education loan of INR 40L from Axis Bank will have a processing fee of INR 15,000 only, whereas an International lender that levies a processing charge of 5% of the loan amount will demand INR 2,00,000 which is a loss of INR 1,85,000 even before loan disbursal. Examples of Processing Fee Features Public Banks Private Banks NBFCs International Lenders Example Lenders Secured Loans INR 11,800 No fee if the loan amount is less than INR 20 Lakhs. If it is more, INR 750 is applicable on each Lakh above 20 Lakhs. 1%-2% loan amount Do not offer secured loans Unsecured Loans Do not offer unsecured loans more than INR 7.5 Lakhs 1%-2% of the total loan amount 5% A lot of students decide to begin squaring off their loan before the scheduled repayment time. The reason is by repaying now, they tend to save on future interest amounts. While the logic is sound, you should consider if the lender charges a prepayment penalty. The penalty can be free of cost or a 2% to 4% fee when you pay to the lender before the tenure. Knowing the prepayment penalties at the beginning of a loan process helps you plan in advance and choose an education loan scheme that fits you. Confused if your lender charges a prepayment penalty? Get in touch with loan counsellors at GyanDhan. We’ll clarify it in the simplest and clearest words. A point of contention when considering study loans is whether to pick a domestic lender or a foreign lender. There are two possibilities here: Wrong. The gist is that the USD gains so much on INR that even with a 2% difference in ROIs, the domestic lender turns out to be the better and cheaper option. A more simplistic way to compare lenders is to convert the interest rate of the foreign loan into INR. In the example above, the 9% turns into 14%. Yes, student loans allow candidates to fulfil their dream of studying overseas. But, every year lenders are charging an arm and a leg in regards to the interest rate. So, before choosing an education loan, check if it comes under an interest subsidy scheme by the Government of India. For example, the Padho Pardesh Scheme lightens the burden on students belonging to minority communities. In most cases, education loans from banks have a floating rate of interest as they are linked to the bank’s MCLR (Marginal Cost of Funds based Lending Rate) plus 1.5-2%. Whereas, the interest rate of NBFCs mainly depends on the operating profit of the company. As a result, all the students who took loans from NBFCs in the year 2016 are now paying up to 2% extra due to changes in the money market conditions in India which directly impacted the operating profit of NBFCs. Whereas in the case of banks, the increment is either NIL or less than 0.25%. Always consider the impact of the floating rate on your EMI before you choose a loan. Repaying a loan is a long-term commitment, lasting up to a decade and a half. Ponder over two elements before selecting the time period suitable for you: If you’re looking for the longest repayment tenure to have the smallest EMIs, then initiate the education loan Axis process. They offer the maximum loan period of up to 20 years, as is clear from the table below: Features Public Banks Private Banks NBFCs International Lenders Example Lenders Repayment Tenure Up to 15 years Up to 20 years Up to 10 years Up to 10 years You can also use GyanDhan’s gateway to acquire an education loan, and get a customized deal and enjoy features like longer repayment tenure for any of the above lenders. However, we strongly recommend calculating your total interest and difference in EMIs per month before you select your repayment tenure. Here’s a simple example: If you take a loan of INR 20L @ 11% for 10 years, your total interest would be INR 19,42,412 and monthly EMI would be INR 32,853. However, if you select your repayment tenure as 15 years, an addition of 5 years would lead to an interest payment of INR 28,79,413 with monthly EMIs of INR 27,108. The whopping difference of INR 9,37,001 over an additional 5 years in payable interest and a tiny difference of INR 5,745 per month in EMI payment prove that shorter repayment tenures are a wiser financial decision. There are two types of education loans. When you choose a secured study loan, you provide the lender with some form of collateral (an asset like a house or FD). It acts as a security for the lender if you neglect to repay the loan. Unsecured student loans don’t involve collateral and present a higher risk to the lender. Therefore, interest rates are higher. The terms and conditions of an education loan agreement are driven by the type of loan you choose. For instance, student loans without collateral tend to have less favourable interest rates, partial or full interest payment while studying, and higher processing fees, etc. Read Also: With our education loan eligibility tool, you can check if you qualify for a particular loan and save considerable time in the application process, which could be otherwise spent scouting the internet for your options. Our loan counsellors evaluate your profile and reveal the best-suited, most cost-effective loan products from lenders that are most likely to approve a loan amount of your choice. We expedite the process and make things happen quickly by coordinating directly with the lender and tracking the status of your application on an everyday basis. Still, wondering how to get an education loan easily? Request a call back from GyanDhan. We will guide you at every step - from filling out the application form to disbursement. From analysing the worth of your degree to expediting the student loan procedure, we’ll leave no stone unturned to make the process effortless for you. Check your loan eligibility today!
Table of Content
Looking For Lowest Rate Abroad Education Loan?
Why Should You Be Careful While Taking an Education Loan / Student Loan?
What Factors to Consider in an Education Loan Scheme?
1. Rate of Interest
** These rates are equivalent to 14%-16% as the loan granted is in USD and not INR
How Does a 1% Difference in ROI Makes a Huge Impact on EMI?
Let’s assume you’re thinking of starting the education loan Incred process. Your loan amount is INR 30,00,000 at 13% ROI with an 8-year repayment period. In this instance, your monthly EMI is INR 61,893. Keeping all other factors the same, let’s see what happens if the ROI is 12%. The monthly EMI decreases to INR 58,998. The difference in savings adds up to INR 277,920 over the repayment tenure!
The example proves that even a 1% increase in interest rate can turn out to be detrimental to your future financial interest.
Calculate Your Education Loan EMI Check Here
2. Moratorium Period
3. Processing Fee
Get Connect with Our Education Loan Counsellor Request a Callback
4. Prepayment Penalty
5. Loans in INR vs.USD
Let’s fast forward to the year you have to repay the loan. You’re now earning in USD, and the rupee has depreciated further. To the foreign lender, you have to repay the whole USD 50,000. For the domestic loan, you still only need to pay a principal of INR 35 Lakhs (USD 37,500 because the value of the rupee has further reduced over the years).
Confused? Watch this.
6. Interest Subsidy Schemes
Explore More Education Loan Schemes Check Here
7. Fixed vs. Floating Interest
You can check your education loan eligibility to find the best study loan option for you, ensuring you don’t pay a dime more than planned.8. Tenure of the Loan
9. Type of Loan
How Can GyanDhan Help in the Education Loan Procedure?
Check Your Education Loan Eligibility Apply Here
Steps to Securing an Education Loan with GyanDhan
First published date: 24 Dec 2019
About author
Madhuwrita Nandi
Reader, writer, music lover!
GyanDhan is India's first education financing marketplace.
