Types of Education Loans for Abroad Studies

    Updated on: 16 Jan 2023

     


    A degree from a foreign university gives an unparalleled edge in career growth. It acts like a trampoline and provides you kickstart that very few Indian colleges can. It is no surprise that huge numbers of students aspire for higher education abroad. But overseas studies come at a high cost that is not possible to bear for all. Abroad education loans become a savior in such a situation and help students fund their studies abroad. However, understanding the education loan options and choosing the right option can be a herculean task. 

    Students and parents need to do their homework or get in touch with an abroad education counselor to comprehend the education loan products better. The first step towards understanding it is knowing the types of education loans for abroad studies.  

    In this blog, we have differentiated the types of abroad education loans on the basis of collateral and lenders. 

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    Types of Education Loans on the Basis of Collateral

    • Secured Education Loans: A secured education loan or a loan with collateral is one where the applicant has to offer tangible or intangible security. The security pledged to the lender can be in the form of immovable property, Fixed Deposit, LIC insurance policy, etc. This form of loan takes longer for approval as the bank has to verify all the documents related to the collateral being pledged. Nonetheless, it has lower education loan interest rates, longer repayment periods, and no repayment during the study period. This education loan also has higher chances of being approved and parental income is not a determinant when it comes to loan approval.
    • Unsecured Education Loans: In unsecured education loans, the applicant does not have to pledge any collateral. This type of education loan is best for students who do not have any security to offer. However, it should be kept in mind that an unsecured education loan has a higher rate of interest (as compared to secured loans) and is harder to get approved. Unsecured education loans also have a shorter repayment period and require some repayments to be done during the study period as well. In addition to this, a minimum co-applicant income is mandatory for education loans without collateral.

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    Types of Education Loans on the Basis of Lenders

    1. Loans from Public-Sector Banks: Public-sector banks or government banks in India provide education loans to study abroad aspirants majorly on the basis of collateral pledged as a security. Students can get unsecured loans up to INR 7.5 Lakhs from government banks. For an amount more than this, applicants need to provide collateral as a security. Public-sector banks offer better interest rates than private lenders. Education loans from government banks provide the tax benefits under Section 80E. Some of the major public-sector banks offering abroad education loans are:
    2. Loans from Private Banks: Private banks in India can offer students both secured and unsecured loans to study abroad. The amount that can be sanctioned depends on various factors such as country, course, applicant’s profile, co-applicant’s financial profile, etc. Private-sector banks offer higher interest rates than government banks but better interest rates than NBFCs and international lenders. ROI typically starts from 11% p.a. Education loans from private banks also provide the tax benefits under Section 80E. The time taken in processing an education loan from private banks is lesser than the government banks. Some of the major private-sector banks offering abroad education loans are:
    3. Loans from Non-Banking Financial Companies (NBFCs): NBFCs offer loans both secured and unsecured education loans to study abroad. The loan amount that can be sanctioned varies on the basis of various factors such as country, course, applicant’s profile, co-applicant’s financial profile, etc. Interest rates of loans from NBFCs are on the higher side in comparison to private banks and government banks. The interest rate of education loans from NBFCs typically starts from 11.5% p.a. and can go up to 16% p.a. Education loans from NBFCs don’t provide the tax benefits under Section 80E. The time taken in processing an education loan from NBFCs is lesser than the government banks and private banks. Some of the major NBFCs offering abroad education loans are:
    4. Loans from International Lenders: There are a few international lenders that offer abroad education loans to Indian students. The loan product offered by them doesn’t require any collateral or co-applicant. However, there is a limited list of colleges and countries for which the international lenders offer education loans. International lenders offer the loan amount in foreign currencies depending upon the target study destination of the applicant. Some of the major international lenders offering loans for foreign studies are:

    Criteria

    Secured Education Loan from PSBs

    Unsecured Education Loan from Private Banks

    Unsecured Education Loan from NBFCs

    Rate of Interest

    7.75%* p.a. onwards

    11%* p.a. onwards

    12%* p.a. onwards

    Maximum Loan

    1.5 Crore

    40 Lakhs

    50 Lakhs

    Chances of Approval

    Higher

    Low (Depends on country & college)

    Average

    Expenses covered

    70% to 100%

    90%-100%

    100%

    Interest Repayment during the moratorium period

    No

    Yes, Simple Interest

    Yes, Simple or partial interest

    Moratorium Period

    6 months after completion of course

    1 year after completion of course

    1 year after completion of course

    Co-applicant income

    Not Considered

    Extremely Important

    Extremely Important

    Repayment Period

    Longer (SBI and BOB offer up to 15 years)

    Longer (Axis Bank offers up to 15 years)

    Shorter (up to 10 years)

    Processing Time

     More (Up to 30-50 days, with GyanDhan- only  15 days)

    Average (15-20 days, with GyanDhan- only 7 days)

    Shorter (Within 10-12 days, with GyanDhan- 2 to 3 days)

    *Interest rates as of 21st May 2021

    Avoid all the hurdles of abroad education financing by simply contacting GyanDhan. Enjoy the benefit from our streamlined education loan process and get an overseas education loan from the comfort of your home. We offer students free expert help in getting education loans to study abroad. Our education loan counselors understand the students’ academic and financial profiles and then tell them about the best loan options available for them. We have partnerships with top lenders in the market, including public sector banks, private banks, NBFCs, and international lenders. With GyanDhan, you can keep all your worries about your abroad education loan application aside. To know if you are eligible for an overseas education loan, check your loan eligibility now! 

     

     

     

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