Secured vs Unsecured Education Loan for Abroad Studies

    Updated on: 11 Sep 2023 14 min read

    Secured vs Unsecured Education Loan

    The surge in the number of students studying abroad has been remarkable, with a 68% increase from 444,553 students in 2021 to 750,365 students in 2022. This rise can be attributed to the exposure and career opportunities that studying at international universities can offer. However, pursuing education abroad comes with a hefty price tag that may be challenging for many students to afford. In such circumstances, education loans for studying abroad serve as a lifeline. Having a comprehensive understanding of the loan process and its various aspects is crucial to ensure that you make informed decisions. Since an education loan is a long-term commitment, knowing these products can significantly influence your future financial aspirations. The first step towards understanding it is knowing the types of education loans for abroad studies.

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    Frequently Asked Questions

    What is a secured and unsecured loan?

    Secured loans are those types of loans in which you will be required to pledge collateral while unsecured education loans are those in which you do not need to pledge collateral but need a financial co-applicant in most cases. 

    Is it necessary to pledge collateral for an education loan?

    No, you can get both - secured and unsecured education loans to study abroad. There are several lenders available in the Indian financial marketplace that can give you an education loan of up to 75 Lakhs INR without collateral. All you gotta have is a financial co-applicant that meets the minimum eligibility criteria.

    Which type of education loan is best, secured or unsecured?

    It is hard to choose one because the ultimate decision depends on individual requirements and needs. But it is recommended that in case you have collateral to pledge then you should go for a secured education loan. The main reason behind it is that you can approach public sector banks easily with secured education loans that have lower interest rates as compared to any other lenders. 

    Is Gram Panchayat property accepted as collateral?

    Yes, UBI is one of the lenders that can accept Gram Panchayat Property as collateral in some of cases which depends on the bank itself.

    Which type of lender should be preferred the most when taking an education loan?

    It is recommended that your first choice should be Public Sector Banks like SBI or UBI in case you have collateral to pledge. In case you do not have collateral to pledge then you can move to private banks like ICICI Bank, IDFC FIRST Bank, and more. The next in the list of preferences should be NBFCs like HDFC Credila, and Avanse, and if in case you are not eligible for both of these types of lenders then you can start your loan application process with international lenders like MPOWER Financing or Prodigy Finance.

    Which option is easier to obtain: a secured or unsecured education Loan?

    Both types of loans are easy to obtain with GyanDhan but if a differentiating point needs to be mentioned then it can be said that unsecured education loans take less processing time. This is because when you pledge collateral a few additional steps and a verification process need to be done by lenders that require a few extra days.

    Which type of loan/lender will give Tax Benefits?

    You can get tax benefits when you apply for an education loan. In the case of public sector banks, you can get tax benefits under section 80e and the same is eligible in the case of private banks as well. But when it comes to NBFCs then only HDFC Credila can provide you with tax benefits. International lenders are not eligible for any kind of tax benefits.

    What if an unsecured education loan is not paid?

    If an individual fails to repay an unsecured education loan, they are placed on the defaulter list, which can have a negative impact on their CIBIL score, leading to difficulties in obtaining future loans. Additionally, based on legislation, other legal actions can be taken against that individual.

    Which banks give unsecured education loans?

    If you are seeking an unsecured education loan, you can obtain it from -

    • Private Banks - ICICI Bank, Axis Bank, and IDFC FIRST Bank
    • NBFCs - HDFC Credila, Avanse, InCred, Auxilo
    • International Lender - MPOWER Financing and Prodigy Finance

Written by Yogender Panchal

Yogender is a tech enthusiast with specialization in digital marketing. He is currently working at Gyandhan a leading company which provides Education Loan who are studying Abroad. Playing Volleyball, driving a car, traveling, researching new online marketing trends are some of his interest areas that keeps his rejuvenated.

Photo aman jain
Reviewed by Aman Jain

Aman Jain graduated from IIT Kanpur, and currently functions as the CMO at GyanDhan. He is deeply passionate about creating equality in higher education and has directly interacted with 2 Lakh students in his 8-year-long journey.

Specializes in:
Education loan , Study Abroad Admissions

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