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Many students dream of studying abroad because it can broaden their knowledge and help them obtain global exposure. However, the cost of education has always been a hurdle for the Indian family. Education loans remain the only hope to finance students’ study abroad dreams, but getting an education loan is complex.
There are many factors you need to consider if you want to apply for an education loan. This blog discusses them, the various types of education loans, and their eligibility requirements. Let’s dive in.
When you take out an education loan, you borrow money from a lender to fulfill your study abroad dreams. This money can help you manage living expenses, tuition fees, travel costs, and other financial costs associated with university. Most government and private banks offer educational loans.
1. Education loans protect your family's savings and assets. You need not liquidate your fixed deposits and mutual funds to fund your studies.
2. Lenders offer students a sufficient amount of time to repay the loan. Most banks also provide a moratorium period. This means that students do not need to repay the loan during their course. It gives them the freedom of repayment.
3. The loan interest amount can be claimed for a tax deduction.
4. Education loans are approved without a long waiting period.
There are two types of education loans available for students:
A secured loan urges you to pledge valuable assets as a security. These assets can be vehicles, homes, investment bonds, and jewelry. The borrowing amount depends on the value of the asset. However, the submitted assets must be free against other loans.
The benefits of these loans include a higher loan amount with low interest rates. Repayment is made easier with EMIs that span over an extended period of time.
An unsecured loan refers to borrowing money from a lender without collateral. Students who do not own assets can benefit from this loan. However, they would benefit from strictly meeting the eligibility criteria for this loan.
Unlike a secured loan, the education loan interest rate is higher in unsecured loans. Additionally, you can borrow a considerable sum without collateral, but the repayment time is much shorter and less flexible.
The education loan eligibility criteria for most lenders are as follows:
-> The applicant applying must be an Indian citizen.
-> The applicant must be 18 years of age at the time of the loan application.
-> The applicant must have an excellent academic track record.
-> The applicant must have proof of admission to an international university. The document must mention the name of the country and the course chosen.
-> If a co-borrower is being added to the loan, they must be an Indian citizen with a bank account.
It is advisable to consult with your bank or lender to confirm the eligibility requirements. These requirements may differ from lender to lender.
The documents required to be submitted by you and the co-applicant are:
1.Filled application form
2. Passport-size photographs
3. Proof of personal details:
4. Residence proof:
5. A document that proves the co-applicant’s relation with you.
6. Academic transcripts:
7. Scholarship documents
8. Bank statement history
9. Income proof of the co-applicant (salary proof, form 16)
10. All documents related to the collateral if applying for the secured loan
1. Calculate the loan amount required for your study abroad program.
2. Research banks and lenders and choose the best offers.
3. Visit the chosen bank to get a loan application form.
4. Fill out the application form and attach the necessary documents mentioned above.
5. Remember to get information from the lender on their loan’s terms and conditions. A bank employee may help you process your application.
6. Once your education loan is approved, wait for the loan amount to be disbursed in your bank account.
An education loan calculator is an e-calculator that helps calculate the loan interest and EMI against the borrowed sum.
Before applying for an education loan, you must try using a loan calculator to plan your repayment. Most calculators online are free of cost. The details you need to fill in to use a loan calculator are:
1. The required loan amount
2. Loan tenure
3. Interest rate offered by the lender
For instance, in HDFC’s education loan calculator, enter ten lakhs for five years, with an interest rate of 10.5% in the calculator. The EMI calculated will be Rs. 21,420 per month. If you require any assistance with finding an education loan for your needs, consider reaching out to education abroad specialists.
Various factors affect education loan interest rates. They are:
1. Your academic record and credit score
2. The co-applicants credit score
3. Nature of the education loan
4. Loan processing fee
|
Bank |
Loan Amount |
Repayment Time |
Interest Rate |
|
Indian Overseas Bank
|
15 lakhs to 30 lakhs |
Maximum 180 months after the study period |
11.40% |
|
State Bank of India |
Up to 1.50 crores |
Up to 15 years |
11.15% |
|
HDFC Bank |
There is no limit to abroad studies |
Up to 15 years |
14.1%+1.5% processing fee |
|
ICICI Bank
|
Up to 2 crores |
Up to 10-12 years for post-graduate studies |
14.3% |
Education loans are a game-changer for students who want to study abroad. They help many students achieve their career goals. If you’re eligible for an education loan, pick a bank that offers a high loan amount at a reasonable interest rate.
Ready to study abroad? Connect with our education consultants for visa or scholarship assistance, as well as selecting an appropriate university.
