How to Get a Second Education Loan 2025?

What if a student who has already taken an education loan to finance their undergraduate education wants to take another education loan to pursue their post-graduation? Many students face this situation when planning further studies and wonder if it is possible to take a second loan in this case. This question often comes up in the minds of students who wish to pursue further education, in India or abroad, but are not sure if they will get one. Students also encounter several questions like, “Can we take education loan from two banks?” or “Can I get education loan in 3rd year?” Such queries often pop up in the minds of the students. This blog will answer all your queries related to a second education loan.

What is a Second Education Loan?

A second education loan is borrowing money to finance higher education expenses. In other words, if a person has already secured an education loan for their first degree or course and then decides to pursue further education, they might need additional funding to cover the costs of the new course. However, it is required on the part of the student to close their first education loan to secure another education loan from a different bank. Therefore, “Can I get a student loan if I already owe one?” is only possible if you either close or transfer the loan balance to the new lender.

Eligibility Criteria for a Second Education Loan

To be eligible for a Second Education Loan, the student must fulfill the following eligibility criteria.

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  Any student who has secured admission to a recognized university/college.
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  These loans are offered to postgraduate students.
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  The student should have maintained a good academic record during the tenure of their previous education loan.
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  The collateral value should be more than the loan amount.
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  The co-applicant must have a steady income and CIBIL score.

Learn how refinancing education loans can lower interest rates, reduce monthly payments, and simplify repayment. Discover top strategies and steps to make refinancing work for you!

Borrowing a Second Education Loan from the Same Bank: Secured Education Loans

A student may visit the same bank where they had taken their first education loan and explain the additional requirements for a second education loan. Simply put, if you approach your bank from where you have secured an education loan and are willing to finance your higher education, then you would require a top-up loan. However, whether advancing you a second education loan or not depends on multiple factors like your credit history, academic record, financial strength of the co-applicant, outstanding loan amount, etc.

A student who has taken a secured education loan needs to ensure that the value of the collateral they have pledged for the first loan is enough to cover both loans. This will enable them to get their second loan sanctioned easily. In case the collateral value is not sufficient, they need to check whether the bank allows them to pledge new collateral (of a family member or even a non-family member) for the second education loan.
 

A student applying for a second education loan will fall under either of the following two categories -

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  Repayment has not started: This situation is applicable to students who have just finished their undergraduate studies and are about to start their post-graduate program in a month or so. Students can immediately apply for a second loan during the moratorium period. Once the second loan gets sanctioned, the moratorium period of the second education loan will start. This way, the student will be able to get a loan holiday for both loans.

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  Repayment has begun: In this situation, the borrower will have to continue to repay the EMI for the first education loan as agreed. As a thumb rule, the second loan amount that a student can take will be the maximum limit minus the outstanding amount of the first loan.

For example, a student who was eligible to take an education loan of INR 30 Lakh took INR 20 Lakh for his first education loan and has repaid INR 15 Lakh. This means that his outstanding loan amount for the first education loan is INR 5 Lakh. So, he would now be eligible to take a second education loan of INR 25 Lakh (INR 30 Lakh - INR 5 Lakh). This can, however, vary from bank to bank.

It is evident from the above discussion that it is wiser to plan and apply for a second education loan before repayment for the first education loan starts. 

Borrowing a Second Education Loan from a Different Bank: Secured Education Loans

What if the bank from which you had taken your first education loan is unwilling to sanction a second education loan? Well, don’t worry, and approach another bank. For such a scenario, there are two options -

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  Take a fresh loan from a different bank once you have closed your existing loan. 
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  Students can also transfer their first education loan to the new bank and then apply for an additional second education loan from the new bank. The student will incur some loan transfer charges, but that would be a negligible amount.

Borrowing a Second Education Loan: Unsecured Education Loan

Can I take education loan in second year? Well, the answer to this question is “yes”. However, you need to meet some requirements before you fill out the loan application for the second education loan. 

Co-Applicant:

Students who went for an unsecured education loan for their first education loan will need to look beyond government banks for a second education loan and apply to private banks or NBFCs for the same.

However, if a student wants to withdraw the second time at better interest rates, then they need to look for a co-applicant with good financial requirements. Therefore, a good credit score and stable income can help secure a better deal in the repayment and interest rates.

No Objection Certificate (NOC):

While applying for the second education loan, submission of a NOC is mandatory before withdrawing the second education loan. Otherwise, try refinancing or a balance transfer of your loan if the existing lender is reluctant to top up on your education loan. 

Comparison Between First and Second Education Loans

The basic features of first and second loans are known; however, differentiating between them isn’t easy. Therefore, refer to the table below and draw a parallel difference between them.

Loan Providers Offering Second Education Loans

You can’t withdraw education loans from multiple lenders; yet, you have a few popular names in the list that provide second education loans at a better interest rate. They even offer the facility of a top-up in case the currency fluctuations affect your budget while you studying abroad. 

Common Challenges and Mistakes When Applying for a Second Education Loan

If you are willing to apply for a second education loan, you might face numerous challenges since the process for a second education loan can be complex. This section will guide you through the common challenges that students often face while applying for a second education loan.

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  Borrowers with a poor repayment history might struggle to qualify for a second education loan.
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  You should avoid a high debt-to-income ratio as it can make the lender reluctant to approve a second education loan.
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  You might be required to pledge another high-value collateral to secure an education loan for the second time.
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  Students often encounter the question, “Can I increase my student loan amount?” However, lenders may restrict the amount of the loan based on the existing debt.
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  You will be required to submit additional documentation, such as previous loan statements.

Impact of Credit Score on Getting a Second Loan

Your credit score matters a lot while determining your eligibility criteria for a second education loan. Lenders generally feel reluctant to advance you a second education loan, hence, they consider your creditworthiness, and based on your credit history, lenders advance your loan.

Role of Credit Scores in Multiple Loans:

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  A higher credit score increases your chances of approval.
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  You can get better terms if you have a good credit history.
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  A good credit score also helps you to secure a higher loan amount.

Tips to Improve Creditworthiness:

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  Repay your existing loan to build a good credit score.
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  Maintain a lower debt-to-income ratio, thus avoiding additional debt to maintain financial stability.
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  Review your credit report for errors and resolve them immediately.

The primary benefit of the second education loan is that students seeking low interest rates can get better deals. However, the best time to apply for the education loan is when you settle and start earning, which will help you get favorable terms. Thus, before going for the second loan, ensure that you are considering eligibility, loan terms, and financial implications. 

If you are in search of assistance, then you can take the help of GyanDhan. We connect students with suitable lenders and customize education loans according to their specific needs. With our commitment to transparency and personalized assistance, we will be your guiding light through the complexities of second education loans. To start your education loan journey with us, check your loan eligibility.

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