Get Education Loan without Parental Income for Abroad

Updated on: 29 Sep 2023

Studying abroad can be financially challenging, with substantial tuition fees and additional expenses to consider. In popular study destinations like the USA, UK, and Canada, tuition fees can reach approximately USD 42,000, USD 40,500, and USD 14,700 respectively. These figures only scratch the surface, as the cost of living must also be taken into account. To tackle these financial obstacles, obtaining an education loan for studying abroad is a viable solution to ease the burden and make studying abroad more attainable.

However, securing an education loan for studying abroad requires meeting strict eligibility criteria. One crucial requirement is demonstrating parental income or having a suitable financial co-applicant, especially for unsecured education loans. International students often rely on their parents as co-applicants to fulfill this requirement. But what if you cannot demonstrate parental income or your co-applicant has a low income? Does this mean you have to give up on your dream of studying abroad? Let's explore this predicament and seek a resolution.

Importance of co-applicant/parental income while taking education loan

Before we start exploring the alternative options of getting an abroad education loan with low or no parental income at all, let’s first understand the importance of co-applicant/parental income. Parental income plays a significant role in obtaining an education loan for studying abroad due to several reasons:

• Financial security: Lenders view parental income as a measure of financial stability and the ability to repay the loan. Parents' income provides a guarantee to the lender that the borrower has a reliable source of repayment.
• Creditworthiness: Parents' income and credit history contribute to the overall creditworthiness of the loan application. Lenders assess the parents' financial standing to determine the applicant's ability to manage and repay the loan.
• Financial responsibility: Demonstrating parental income signifies a sense of financial responsibility on the part of the borrower. It showcases the ability to handle financial commitments and provides assurance to the lender.

Alternative options for education loans with no parental income

Having a financially capable co-applicant, such as parents, is typically advantageous when applying for an abroad education loan. However, if your parents are ineligible or unable to fulfill this role due to limited or no income, there are alternative factors that can still enable you to secure an abroad education loan without relying on their financial strength.

Secured education loan

The first alternative option is an education loan with collateral, where you pledge an asset as security against the loan amount. This eliminates the need for parental income as the collateral serves as a guarantee for repayment. Majority of the time a normal co-applicant is required but a financial co-applicant is not required. Lenders like SBI and UBI offer secured abroad education loans, providing up to 80% of the collateral's valuation as the loan amount. This allows you to access the funds needed for studying abroad without relying on parental financial support. 

Co-applicant: Blood relative

When it comes to obtaining an education loan abroad with low or no parental income, one of the most viable options is an unsecured education loan. Private banks and Non-Banking Financial Companies (NBFCs) offer unsecured education loans with a loan quantum that can range between INR 30 - 70 Lakhs. This loan amount can vary because of several reasons like your profile as an applicant, chosen course, targetted university/college, and more. 

While these loans typically require a financial co-applicant as security, it doesn't have to be limited to financially strong parents i.e. parental income. A close blood relative, such as a brother, can also serve as a co-applicant, as long as they meet the lender's minimum income requirement, typically around INR 35,000 - 40,000. It's crucial that the co-applicant has no existing EMI obligations. In case there are certain EMI obligations then the minimum income criteria will be increased by the lender. Consider the table below for different lenders and eligible co-applicants in the case where the parental income is low or not at all present. 

Co-applicant: Self

Certain lenders offer abroad education loans that consider your professional experience as a basis for loan approval, eliminating the need for a traditional co-applicant thus not requiring any income i.e. it will not matter if your parents have a low income or no income at all. ICICI Bank is one such lender that provides education loans for studying abroad based on your professional experience. This unique approach allows you to secure a loan independently, leveraging your own qualifications and work history rather than parental income.

A few of the aspects of this experience-based product by ICICI Bank are - 

• This is best for those individuals that have a minimum of 3 years or more of professional experience.
• You do not need a co-applicant for this loan product thus avoiding the need for parental income. 
• You should have a minimum salary of INR 35,000 but this may differ as per the loan amount required. 
• There is a restriction for universities/colleges to avail this service.
• You do not have to pay any amount during your moratorium period although you need to make it as FD as a security. The main benefit of this is that you will get regular interest on the same and you will get the locked amount in FD after the repayment period.

Loan from international lenders

In cases where you are unable to pledge collateral or arrange an alternative financial co-applicant as suggested earlier, there are still options available to pursue an abroad education loan with low or no parental income. International lenders such as MPOWER Financing and Prodigy Finance specialize in providing loans without the need for collateral or financial co-applicants i.e. skipping the factor of parental income altogether. These lenders can offer loans of up to 100,000 USD, providing a viable solution for students in need. However, it is important to carefully consider and adhere to any additional requirements or conditions set forth by these lenders when applying for an education loan.

• Loan currency: These lenders provide loans in USD or CAD, not in Indian currency.
• Interest rate: The interest rate for these loans typically ranges between 12% and 14%.
• Processing fees/ Origination fees: The processing fees, also known as the origination fee, may be on the higher end, they are usually adjusted within the loan amount itself. Also, it will be charged with each disbursement of the loan.

Note: A strong applicant profile is imperative in all the options above, encompassing good academics, university admission proof, positive credit history (if applicable), and other relevant factors

Read more about

• Education loan for Canada
• Education loan for MS in US
• Education loan for Australia
• Education Loan for NRI Applicants
• Study Abroad Scholarships for Indian Students
• Education loan vs Self funding
• Education loan EMI calculator

Now that you are aware of the alternative options available to get an abroad education loan with low or parental income, you can carefully consider and shortlist suitable loan providers and alternative approaches mentioned. By exploring these possibilities, you can successfully obtain a loan for your abroad education, even if you don't meet the conventional eligibility criteria of having a parental income. If you need further guidance or assistance in choosing the best option for your situation, GyanDhan is here to help. Take advantage of their expertise, check your loan eligibility, and receive valuable advice for your abroad education loan.

Frequently asked questions

• Education loan 
• Student loan 
• Study abroad 

First published date: 30 May 2023