Education Loan For Abroad Studies

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Education Loan for Abroad Studies

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All you need to know about education loans for studying abroad

What are education loans?

An education loan is a financial aid that students apply for to fund their studies abroad. Different banks and financial institutions offer these loans at competitive interest rates, making quality education more affordable for students.

Studying at renowned universities, especially abroad, opens doors to numerous opportunities. However, the cost of such education can be substantial. To bridge the financial gap, education loans for studying abroad become invaluable, enabling students from all backgrounds to pursue their dreams at top-tier institutions across the globe.

With various banks and lenders providing education loans for abroad studies, choosing the right option can be overwhelming. This is where GyanDhan comes in as a guiding light. We help students find the best education loan for their study abroad needs, tailored to their unique profiles, ensuring a seamless and hassle-free loan approval process.

Types of Education Loans for Abroad Studies

Education loans are of two types, one that is taken with collateral i.e. a secured loan and one taken without collateral i.e. an unsecured loan. You need to understand the difference between the two before choosing the one that is right for you.

Secured education loan

  1. Requires the borrower to offer any collateral like immovable property, FD, Insurance Policy etc. against which the loan is offered.
  2. Lower rate of interest.
  3. The chances of approval are high.
  4. Longer repayment period.
  5. A higher loan amount can be availed.
  6. No repayment during the study period.
  7. Parental income is not required for approval.

Unsecured education loan

  1. The borrower does not need to offer any collateral to get this loan.
  2. Higher interest rate, usually 1.5% - 4% higher than the secured loan.
  3. Is a more risky proposition for the bank, hence is not so easy to obtain a loan without collateral from the bank.
  4. Comparatively shorter repayment period.
  5. Some repayment during the study period.
  6. Parental income is required for approval.

Types of Lenders Offering Education Loans for Abroad Studies

When considering student loans for studying abroad, you have three main categories of lenders to choose from: banks, Non-Banking Financial Companies (NBFCs), and international lenders. The lending choices within each category are as follows:

  1. Banks: Traditional financial institutions that offer education loans to students pursuing studies abroad and are further divided into public and private banks.
  2. NBFCs: Non-Banking Financial Companies are financial institutions that offer various financial services similar to traditional banks but operate without a banking license.
  3. International Lenders: Financial entities based outside your home country that specialize in offering educational funding for international students.

Key Features of Education Loan for Abroad Studies

Criteria PSB Private Banks NBFCs International Lenders
Best known for Secured loans Unsecured and secured loans Unsecured loans Unsecured without co-applicant
Popular choices SBI, UBI, and BOB Axis, ICICI, and IDFC HDFC Credila, Avanse, InCred. And Auxilo MPOWER and Prodigy
Interest rate Starting at 9.8% Starting at 10.85% Starting at 11.25% Starting at 11.00%
Maximum loan amount* INR 1.5 Cr INR 50 Lakh INR 75 Lakh 100,000 USD
Margin money* 10 - 15% 0 - 10% Nil Nil
Repayment tenure* Up to 15 years Up to 15 years Up to 20 years Up to 15 years
Repayment options Free or SI PSI, SI or EMI SI or EMI SI
Processing time* 10-15 days 5-7 days 5-7 days 5-7 days
Financial co-applicant required* No Yes Yes No
Tax benefit* Yes Yes Only HDFC Credila No

SI - Simple Interest; PSI - Partial Simple Interest; EMI - Equated Monthly Installment

Documents Required for Education Loan for Abroad Studies

Education loan requ ired documents vary from lender to lender and also depend on the type of education loan applied for. Here’re the general documents required by almost every lender:

KYC documents

  • PAN card
  • Driving license
  • Aadhar card

Address proof

  • Aadhar card
  • Valid water/electricity/ LPG Bill
  • Voter’s ID card
  • Current house lease agreement
  • Valid passport

Academic record documents (From Applicant)

  • 10th result
  • 12th result
  • Proof of admission
  • Under graduate result semester wise (If required)
  • Entrance exam result - abroad institutes (GRE, GMAT, TOEFL, IELTS etc.)

Financial Documents from the Co-applicant

For salaried co-applicant

  • Salary slips of the last 3 months
  • Copy of Form 16 for last 2-3 years or copy of IT Returns for last 2-3 financial years, acknowledged by Income Tax Dept.
  • Bank account statement for the last 6 months (salary account).

For Self-employed co-applicant

  • Business address proof (If Applicable)
  • TDS certificate (Form 16A, if applicable)
  • Last 3 years ITR
  • Certificate of qualification (for C.A./ Doctor and other professionals)
  • Bank account statement for the last 6 months

Technical Documents for Collateral

  • Approved layout plan and permissions (if applicable)
  • NOC and allotment letter
  • Possession certificate (if applicable)
  • Copy of prior sale deeds
  • Conversion certificate where the property has changed from agricultural to non-agricultural use
  • Urban clearance certificate
  • Sale/gift/partition deed
  • Khata certificate and extract
  • Encumbrance certificate (EC)
  • Latest property tax receipt

Best Lenders to Get an Education Loan for Abroad Studies

A comprehensive comparison of some of the best lenders offering education loans is tabulated below. Detailed information on each lender’s loan amounts, interest rates, moratorium periods, and other essential factors is provided, enabling you to make informed decisions.

Public Banks

Basis of difference UBI SBI
Loan amount (unsecured) Up to INR 40 Lakh Up to INR 7.5 Lakh
Interest rate Starting at 9.8%* Starting at 11.15%*
Moratorium period Course + 12 months Course + 6 months
Processing fees No processing fee 10,000 INR + GST
Processing time Up to 7 days Up to 14 days
Unsecured loan eligibility Only for masters program N/A
Premiere institute list Have a list that can lead to fluctuation in interest rate N/A
Loan Approval Basis GRE / GMAT? No No

*Interest rate as of August 2023

Private Banks

Basis of difference IDFC First Bank ICICI Bank Axis Bank
Maximum loan amount Secured loans - INR 1 cr, Unsecured loans - INR 75 Lakh Secured loans - INR I cr, Unsecured loans - INR 40 Lakh Up to INR 40 - 75 Lakh
Interest Rate 11.50 - 12.25% 9.85 - 15.5% 11 - 11.5%
Margin Money Nil 0 - 15% 0 - 5%
Processing fees 1 - 1.25% 0.5 - 2% 0.75% of the loan amount + GST
Moratorium period Course period + 12 months Course period + 6 months Course period + 1 year
Repayment during the course duration Simple or Partial Interest Simple Interest (SI) Simple Interest (SI)
Loan tenure 12 years 8-12 years 15 years
Co-applicant minimum income INR 35,000 / per month INR 60,000 / per month INR 35,000 / month
Co-applicant age 32 years 35 years
Pre-approved college lists Colleges and universities are divided into three categories i.e. Platinum, Titanium, and Gold Colleges and universities are divided into four categories i.e A1, A1, A3 & A4
Loan approval basis GRE / GMAT? Yes No Yes

*Interest rate as of August 2023

NBFCs

Features HDFC Credila Avanse Auxilo InCred
Maximum loan amount INR 20 - 75 Lakh INR 20 - 75 Lakh INR 20 - 75 Lakh INR 20 - 80 Lakh
Interest rate* 11.25 - 13% 12.25 - 14% 12 - 13.25% 11.65 - 13.5%
Moratorium period Course period + 1 year Course period + 1 year Course period + 1 year Course period + 1 year
Repayment during the moratorium period Simple Interest (SI) or partial Simple Interest (PSI) Simple Interest (SI) or partial Simple Interest (PSI) Simple Interest (SI) or partial Simple Interest (PSI) Simple Interest (SI) or partial Simple Interest (PSI)
Processing fee 0.5 - 1.5% of the loan amount + GST 1 - 2% of the loan amount + GST 0.5 - 1.5% of the loan amount + GST 0.5 - 1% of the loan amount + GST
Loan tenure 12 - 15 years 12 - 15 years 12 - 15 years 12 - 15 years
Maximum Loan Amount INR 20- 75 Lakh INR 20- 75 Lakh INR 20- 75 Lakh INR 20- 80 Lakh
Margin Money Nil Nil Nil Nil
Minimum co-applicant income (negotiable for secured education loans) INR 30,000 - 60,000 INR 30,000 - 60,000 INR 20,000 - 40,000 INR 20,000 - 40,000

*Interest rate as of August 2023

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Frequently Asked Questions

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What determines the interest rate on an education loan?

The interest rate on an education loan is determined by various factors, including the applicant's creditworthiness, co-applicant's financial profile, loan amount, loan tenure, type of interest rate (fixed or floating), and the lender's internal policies. Students with a strong credit history and co-applicants with stable financial backgrounds are more likely to secure a lower interest rate.

Define margin money concerning education loans.

Margin money in education loan refers to the portion of the total educational expenses that the borrower needs to finance from their own funds. It is the percentage of the course cost that is not covered by the loan and needs to be borne by the student or their co-applicant. The remaining amount, after deducting the margin money, is financed through the education loan.

How long is the moratorium period for education loans?

The moratorium period for education loans is the time during which the borrower is not required to make any loan repayments. It typically starts from the course completion date and extends for a certain period afterward, allowing the student to focus on finding employment and settling into their new career. The duration of the moratorium period varies among lenders but is usually around 6 to 12 months.

What is the purpose of education loan insurance?

Education loan insurance provides financial protection to the borrower and their family in case of unforeseen events, such as the borrower's untimely demise or permanent disability. This insurance coverage ensures that the loan does not become a burden on the family, as the insurance company settles the outstanding loan amount, allowing the borrower's educational aspirations to be fulfilled even in their absence.

What are the different types of interest rates available for education loans?

Education loans typically offer two types of interest rates - fixed and floating. In a fixed interest rate, the rate remains constant throughout the loan tenure, providing stability in repayment amounts. On the other hand, in a floating interest rate, the rate fluctuates based on market conditions, potentially leading to varying monthly installments.

What does autopay mean in the context of education loans?

Autopay, in the context of education loans, refers to a convenient payment method where the borrower authorizes the lender to deduct the monthly loan installment automatically from their bank account on a specified date. This automated payment ensures timely repayment and reduces the chances of missing deadlines, helping students manage their loan obligations efficiently.

What is the role of a guarantor in an education loan?

A guarantor plays a significant role in an education loan. If the borrower defaults on payment, the guarantor has a legal obligation to repay the loan amount. If the loan amount exceeds INR 4 lakh, the bank may ask for a guarantee from a third party. In such cases, the guarantor holds the liability to repay the entire loan amount to the bank in case the borrower is unable to do so.

What is the maximum loan limit for study loan for abroad?

In secured student loans for studying abroad, one can get up to INR 1.5 cr. In overseas education loans without collateral, students can apply for study loans of up to INR 75 Lakh. This loan amount limit can increase or decrease depending on the applicants and co-applicants profile, country, course, etc.

How can one avail tax benefits on education loans?

In India, under Section 80E of the Income Tax Act, individuals can avail tax benefits on the interest paid on education loans. The entire interest amount paid during the financial year is eligible for deduction without any upper limit. However, the principal amount repayment does not qualify for tax benefits.

Explain the concept of an education loan top-up.

An "education loan top-up" allows borrowers who have an existing education loan to obtain additional funds over and above the original loan amount. This option is beneficial when students require extra financial assistance due to increased educational expenses or unforeseen circumstances. The top-up amount is added to the existing loan, and the borrower continues to repay the combined loan amount as per the agreed terms.

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