In this article, we will cover every detail related to education loans for studying abroad. We will cover every aspect for all those who are looking for an education loan to study abroad.
Loans are frequently seen as bad debt. This expression implies that you are borrowing money for something whose value will diminish over time.
Education Loans
Education Loans for Abroad Studies: Studying abroad can be a life-changing decision, however, this doesn’t come easy. For most students, the idea of studying abroad comes with the promise of a new life experience in an unfamiliar country. For students from low-income families, however, this goal can be out of reach. Those who want to pursue higher studies abroad, but find it difficult to arrange for funds, now have the option to make arrangements for funding their education. Be it the process to apply for a loan, eligibility, or documents required for it. We will also cover various other aspects related to student loans like Indian banks giving student loans or the role of a guarantor.
Benefits of Education Loan
There may be times when the family’s income and resources are insufficient to cover the cost of the student’s education. In such cases, banks or other financial organisations must be approached for a student loan (NBFC). You can utilise a student loan to pay for all or part of your education expenses. A student who takes out a study abroad education loan is guaranteed to be able to complete their degree programme without encountering any financial issues.
Loans are frequently seen as bad debt. This expression implies that you are borrowing money for something whose value will diminish over time. An education loan is unique from other forms of loans since it is an investment in the borrower. Through this, you will eventually make far more money than you borrowed.
Eligibility criteria to apply for the education loan
The first and foremost thing is to check whether you are eligible to apply for an education loan or not. Provided below are the general terms and conditions that are usually followed by any bank in the process of granting an education loan. Note that individual banks could have their eligibility guidelines which would have to be adhered to when applying to that particular bank.
- The candidate must be an Indian national.
- If the applicant is under 18 years old, then his or her parents will have to take out the loan.
- The candidate must have a strong academic record.
- The candidate must have been accepted to a reputable overseas university, institution, or college.
- Since banks favour courses that are job-oriented, the applicant’s chosen course must be technical or professional in nature.
- Underwriting norms are the standards set out by loan providers to guarantee that only safe and secure loans are made available. They are also important as they are used to determine whether or not to provide a person with a study loan for overseas study, as well as how much money the firm is prepared to loan and at what interest rate.
What documents are required for applying for Education Loan to Study Abroad?
Before applying for an education loan, the applicant must be completely aware of the documents required to apply for a study loan abroad. The following documents are required to apply for an education loan for abroad studies:
Filled application form
- Photographs: Passport-size photographs of the applicant and the co-applicant.
- Photo ID: Photo ID of the applicant and the co-applicant. It can be a PAN card, driving license, Voter ID card, Aadhar Card, or Passport.
- Residence proof: Resident proof of the applicant and the co-applicant
Academic documents
- Mark sheet and certificates of the applicant
- Mark sheet (Score Report) of GRE, GMAT, TOEFL, IELTS, etc. whichever is applicable (The total academic standing and professional experience, in addition to the GRE score, are important considerations when applying for a loan.)
- Admission proof: Admission letter shared by the university or college.
- Bank statements: Last six months’ bank statements of the co-applicant
- Income proof: Income proof of the co-applicant (A foreign education loan can be obtained depending on a number of variables, including the financial situation, location, and assets of your co-applicant).
In the case of collateral (immovable property), it can be flat, home, or non-agriculture land the following documents are required:
- Property title deed
- Building approved plan
- NOC for a mortgage from a builder or society
- Document type
- Applicant
- Co-applicant
- Date of Birth
- Birth Certificate, Passport, Voter card with DOB, College Passing Certificate, PAN Card, Driving license, Aadhaar Card
- Residence Proof (if owned)
- Electricity Bill, Municipal Tax Receipt, Share Certificate, or Title Deed (with Flat No.)
- Residence Proof (for a rented property)
- Registered Rent agreement (with utility bill), Landline phone bill, Post Paid Mobile Bill, Bank statement., Passport, Driving License, Voter ID, and Aadhaar card
- Aadhaar
- Aadhaar card
- PAN Card
- Copy of PAN / Form 60 if PAN is not available
- Signature
Signature verification from the bank, Passport, Driving License, and PAN Card (all IDs should match with your current signature)
Relationship proof
- Passport, Pan, Aadhaar card, Marriage certificate, Birth certificate, Legal heir certificate, Ration card, or any other acceptable documents
- Academic documents
- 10th,12th, UG or PG mark sheets, degree or provisional degree certificate, and applicable entrance test scores
- Registration certificates for Professionals (CA, Doctor)
- Income proof – Salaried
- Documents to establish 3 years of work experience where ever applicable and available
- Latest 3 salary slips, Bank Statement of last 3 months, Form 16,
- Self-employed:
- 2 years ITR with the statement of income, Income certificate from Tehsil/collector’s office
- Office Address
- Form 16/ Salary slip/ Letter from HR/ Snapshot of site/Identity card
- Admission proof
- Invite/admission letter from University/college and Fee structure
Technical Documentation
Apart from the above-mentioned documents, aspirants also need to have some other technical documents to avail of a student loan.
- Title deed (all the pages to be attached)
- Copy of approved layout plan and permissions case specific
- Revenue document (Khata / Patta)
- BDA ALLOTMENT -NOC AND ALLOTMENT LETTER
- Non Encumbrance certificate
- Possession Certificate (In case the flat is taken from a builder)
- Latest Property tax receipt
- Copy of Prior sale deeds
- Conversion certificate
- Urban clearance certificate (Case-specific)
Legal documentation
In addition to the standard and technical documents, aspirants also need to have a list of legal documents for getting an education loan.
- Sale /gift/partition deed in favour of customer – Minimum 13 years
- Khata Certificate and extract in the name of the current owner
- Encumbrance certificate – Minimum 13 years reflecting all sale transactions
- Latest Property tax receipt
These requirements can vary as per the banks’ regulations.
What is the procedure for getting an education loan for Studying Abroad?
From loan application to approval and disbursement, the entire loan process is time taking, so it is always advisable to apply for a loan a little early. Follow these steps for applying for a student loan:
- Check whether the course in which you are going to study is recognized by the banks or not.
- Figure out how much loan amount you require and how much you are going to arrange on your own.
- Compare the student loan provided by different banks for studying abroad and go for the one which caters best to your needs.
- After finalizing the bank and the loan amount, fill out the loan application form and approach your bank.
- As soon as your loan is approved, the bank will issue a loan document that includes various elements of the loan.
- After signing the loan document, the bank will disburse the amount in installments or as asked by the university.
Top Education Loans Providers in India for Studying Abroad
HDFC Bank
HDFC Bank is one of the largest private banks offering education loans abroad. The maximum loan amount offered by the bank is up to INR 20 lakhs. To avoid the last-minute rush, the bank offers study loans abroad even before the student has secured admission to the university.
State Bank of India
SBI offers a maximum amount of INR 30 lakhs as an education loan for studying abroad with a loan margin of 15%. The Interest rate charged on the loan amount is up to 2% on the current base rate of SBI. Further, the loan repayment tenure can be 1 year to 15 years.
Axis Bank
Axis bank offers study loans abroad at competitive interest rates. A margin of 15% has to be arranged by the borrower if the loan amount exceeds INR 4 lakhs. The bank offers a maximum of INR 20 lakhs and covers different costs like tuition, accommodation, and books.
Punjab National Bank
PNB Udaan is the education loan scheme offered by the Punjab National Bank to students going to study abroad. The bank offers foreign education loans for students going to pursue graduate, post-graduate, job-oriented professional, and technical courses. The borrower needs to show a loan margin of 15% for the loan amount of above INR 4 lakhs. Also, the bank offers the base rate as the interest rate on loans taken for pursuing an education at the top 200 universities across the world.
Study Abroad Education Loan from NBFCs (Non-banking financial companies)
Apart from the nationalized banks, student loans can also be availed from non-banking financial companies/institutions (NBFCs). Non-banking institutions offer complete tuition fees to students. Borrowers need to provide collateral as security to the banks as the loan amount is generally more than INR 7.5 Lacs. Students looking for education loans for abroad studies can now have the option to secure a loan from NBFCs. Some of the NBFCs options are:
Credila: Credila is part of the renowned HDFC bank and provides loans to Indian students wishing to study abroad. The loans are given at a competitive floating rate of interest and can be repaid within 10 years.
Avanse: Part of the DHFL group, it is considered one of the most popular non-banking financial institutions in India. Student loans from Avanse cover tuition fees up to 100% and other expenses. Apart from this, the interest rates are floating and the processing fee can go up to 1 to 2 percent of the loan amount.
International Student Loan Program (ISLP): This programme is specially designed for international students who want to study in the US. Through this programme, students can borrow an amount of as little as $1500 and can extend the repayment period up to 25 years. The loan disbursed under this program covers tuition fees and other expenses.
Global Student Loan Corporation (GSLC): The GSLC offers loans to international students to pursue their higher studies in the US without the requirement of any co-signer.
Crowd Funded Companies as Loan Providers
Some companies have a focus on funding for students. These businesses exclusively offer loans to students attending particular institutions in order to maintain security. They provide loans in the local currency of the nation the student will be attending school in. The borrowed money must be returned in the same currency.
Some of the loan schemes offered by Indian banks for Studying Abroad
SBI Student Loan Scheme: This scheme can be availed by Indian students who have secured admission to any institute in India or abroad. A maximum of INR 20 lacs can be availed at a nominal interest rate and it has to be repaid within 15 years. Also, if the loan amount is more than INR 7.5 Lacs, then borrowers need to furnish collateral as security. The repayment starts after one year of completion of the course.
SBI Global ED-VANTAGE Scheme: This loan can be availed by Indian students who wish to pursue a full-time course abroad. Students can avail of a loan of up to INR 1.5 crore and have to repay it within 15 years. The borrowers need to provide collateral to secure this loan and will have to start repayment after 6 months of completion of the course.
HDFC Bank Education Loan for Foreign Education: This loan scheme can be availed by Indian students who wish to pursue studies abroad. The maximum amount available in this scheme is INR 20 lacs at a nominal rate of interest. Also, it offers tax benefits to the borrower and it can be sanctioned before admission as well.
Oriental Bank of Commerce Education Loan for Study in India and Abroad: This loan scheme is offered to students who wish to pursue their higher studies in India or abroad. If the student wishes to pursue his studies in the US, then the amount of the loan will depend on the fee structure of the institute they have applied to. The highlight of this scheme is that it does not charge a prepayment penalty from the borrowers and also gives insurance coverage as well. The margin for the loan amount exceeding INR 4 Lacs is 15% on the loans taken for studying abroad.
Apart from this, there are more student loan providers in India for studying abroad.
Things to remember while taking an Education Loan for Abroad Studies
Moratorium period: This is the time during which the borrower need not make any repayment to the bank. This period varies from bank to bank and could last up to some time after completion of the course.
Loan Margin: Usually, banks do not provide the complete amount i.e. 100 percent of the money needed to fund the education. The majority of the public sector banks issue 90% of the total amount, the remaining 10% has to be arranged by the aspirant himself.
Effect of Exchange Rate: Always calculate the amount which you will be receiving at the time of disbursement, as any change in the exchange rate can affect the amount you will be receiving.
UGC’s Educational Loan Scheme
The University Grants Commission has come up with an education loan portal called ‘Vidya Lakshami’ which has been developed under the guidance of the Department of Higher Education (Ministry of Human Resource Development), Department of Financial Services, (Ministry of Finance) and the Indian Banks Association (IBA). Loans up to Rs 15 lakh can be provided to students for studying overseas. Upto Rs 4 lakh, there’s no need for collateral or margin. Also, the interest rate cannot go beyond the Prime Lending Rates (PLR). As far as loans above Rs 4 lakh is concerned, the rate of interest cannot exceed PLP plus 1%. The period of repayment remains between 5-7 years. After the studies are completed, a grace period of one year can be provided.
Collateral Rules
What is Collateral?
Any property whether movable or immovable, which can be offered to a bank as a security for a loan is collateral. Most Indian banks demand collateral as security to reduce the risk involved in paying off the credit. Learn everything about collateral here.
Which type of instruments are accepted as collateral?
Any type of liquid assets like bonds, FD, shares or any immovable property like the house, any commercial property, or just land can be classified as collateral. One important point to keep in mind is that agricultural land is not accepted as collateral. Even shares, bonds, bank deposits, mutual fund units, gold, debentures, bank deposits, life insurance policy, and government securities, are also accepted as collateral.
How can I get an education loan to study abroad without collateral?
Education loan has come as a big relief to those who want to pursue quality education but face a big challenge while arranging the funds. Now students can avail of a loan of up to INR 4 lacs without collateral. For loans, up to INR 7.5 lacs, parents or guardians are made joint borrowers and a third party guarantee is obtained. For a loan exceeding INR 7.5 lacs property or any other asset is required as collateral.
How much can you borrow against collateral?
If you want to take the loan with your immovable property as collateral, in that case, the bank’s representative will verify your property and prepare a report on whether it can be mortgaged or not.
Also, the bank’s representative will evaluate your property. Based on this report, the loan amount will be approved.
What is the responsibility of a guarantor in an Education loan?
Becoming a guarantor for a loan is a huge responsibility as the guarantor will have a legal obligation to pay in case the borrower defaults on his payment. If the loan amount exceeds INR 4 lacs, then the bank may ask for a guarantee from a third party. If the borrower is not able to repay the loan amount irrespective of the circumstances, in that case, the guarantor holds the liability to repay the complete amount to the banks.
Read the agreement carefully
This is one of the most important aspects to look after while taking a loan. We always suggest you go through the terms and conditions of the loan carefully and then move ahead with it. This is one factor we stress, as you should always be clear with all the conditions mentioned in the loan agreement. If you have any doubts regarding anything then always consult the experts apart from the bank representative.
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