How to Secure an Education Loan for Studying Abroad?

Steps to Apply for an Education Loan for Studying Abroad in 2024

Studying abroad can be a transformative experience, offering new perspectives and opportunities. However, the financial burden can be a significant challenge, especially for students from low-income families. Fortunately, education loans provide a viable solution to fund your studies abroad, making your dream achievable.

In this article, we will explore the essential details of securing an education loan in India for studying abroad. From understanding the application process, eligibility criteria, and required documents, to selecting the best loan providers, we cover everything you need to know to finance your education overseas.

Steps to Get an Education Loan

Securing an education loan to fund your study abroad endeavors can be a significant step towards achieving your academic and career goals. Here's a detailed guide to help you navigate the process:

1. Assess Your Financial Needs:

• Calculate Total Costs: Determine the total cost of your study abroad program, including tuition fees, accommodation, living expenses, travel expenses, and other miscellaneous costs.

• Create a Budget: Develop a detailed budget to understand your monthly expenses and estimate the total amount you'll need to finance your studies.

• Consider Scholarships and Grants: Explore scholarship opportunities and government grants that can help reduce the overall cost of your education.

2. Research Loan Schemes:

• Compare Lenders: Research various banks, non-banking financial companies (NBFCs), and government-backed education loan providers.

• Consider Interest Rates: Compare interest rates offered by different lenders and choose the one that offers the most competitive terms.

• Repayment Terms: Evaluate the repayment terms, including the loan tenure, moratorium period, and interest calculation method.

• Additional Features: Look for additional features such as co-borrowers, guarantors, and partial disbursement options.

3. Check Eligibility Criteria:

• Review Requirements: Carefully review the eligibility criteria set by the lenders you've shortlisted.

• Ensure Compliance: Ensure that you meet all the necessary requirements, such as being an Indian citizen, having secured admission to a recognized university, and meeting income criteria.

4. Gather Required Documents:

• Prepare Documentation: Collect all the necessary documents, including:

  • Identity proof (passport, Aadhaar card, driving license)

  • Academic records (mark sheets, certificates, admission letter)

  • Income proof (salary slips, income tax returns)

  • Collateral (if required)

  • Proof of address

• Organize Documents: Ensure that all documents are in order and easily accessible.

5. Apply for the Loan:

• Submit Application: Fill out the loan application form provided by the lender and submit it along with the necessary documents.   

• Provide Additional Information: Be prepared to provide additional information as requested by the lender, such as details about your study program, financial situation, and future career plans.

6. Verification and Disbursement:

• Document Verification: The lender will verify your documents to ensure that you meet the eligibility criteria.

• Credit Evaluation: Your credit history may be assessed to assess your creditworthiness.

• Loan Approval: If your application is approved, the lender will disburse the loan amount in installments or as per the agreed-upon schedule.

Additional Tips:

• Start Early: Begin the application process well in advance to allow sufficient time for documentation and processing.

• Explore Government Schemes: Research government-backed education loan schemes that may offer favorable terms and conditions.

• Consider Co-Borrowers or Guarantors: If you have difficulty meeting the eligibility criteria, consider involving a co-borrower or guarantor.

• Negotiate Interest Rates: Don't hesitate to negotiate with lenders to secure a competitive interest rate.

• Plan for Repayment: Create a repayment plan to ensure you can manage the monthly installments.

By following these steps and conducting thorough research, you can increase your chances of securing an education loan and realizing your study abroad dreams.

Also Read: Discover the Top-Rated IAS Coaching Institutes in India

Advantages of an Education Loan for Abroad Studies

An education loan can be a valuable financial tool for students seeking to pursue higher education abroad. It offers several advantages that can make your study abroad experience more accessible and manageable.

1. Financial Flexibility:

• Covering Total Costs: Education loans can cover a wide range of expenses, including tuition fees, accommodation, living expenses, textbooks, and other study-related costs.

• Avoiding Personal Savings Depletion: By using an education loan, you can avoid depleting your personal savings, ensuring financial stability for the future.

2. Flexible Repayment Terms:

• Moratorium Period: Many lenders offer a moratorium period, during which you are not required to make any loan repayments. This allows you to focus on your studies and build your career before starting to repay the loan.

• Flexible Repayment Schedules: Lenders often provide various repayment options, such as monthly, quarterly, or annual installments, to accommodate your financial situation.

3. Tax Benefits:

• Interest Deductions: In many countries, the interest paid on education loans is eligible for tax deductions. This can significantly reduce your overall tax liability and make the loan more affordable.

4. Building Credit History:

• Positive Credit Score: Timely repayment of your education loan can help build a strong credit history. A good credit score can open doors to future financial opportunities, such as home loans or car loans.

5. Investment in Your Future:

• Return on Investment: Education loans can be considered an investment in your future. A higher education can lead to better career prospects, higher earnings, and greater job satisfaction.

6. Global Exposure:

• International Opportunities: Studying abroad can provide you with valuable international exposure, networking opportunities, and cultural experiences that can enhance your career prospects.

7. Specialized Education:

• Access to Specialized Programs: Education loans can enable you to access specialized programs and institutions that may not be available in your home country.

8. Career Advancement:

• Enhanced Job Prospects: A degree from a prestigious international university can significantly improve your job prospects and earning potential.

9. Personal Growth:

• Cultural Experiences: Studying abroad can broaden your horizons, foster cultural understanding, and promote personal growth.

By understanding the advantages of education loans, you can make an informed decision about whether financing your study abroad is the right choice for you.

Eligibility Criteria for Education Loans in India

Before applying, check if you meet the general eligibility criteria for an education loan:

• Indian Nationality: The applicant must be an Indian citizen.

• Age Criteria: If the applicant is under 18, their parents must apply for the loan.

• Academic Record: A strong academic background is required.

• Admission Proof: The applicant must have secured admission to a recognized university abroad.

• Course Type: The course should be technical or professional in nature, as banks prefer job-oriented programs.

Documents Required for Education Loan to Study Abroad

Here is a list of documents typically required when applying for an education loan:

• Loan Application Form: Duly filled and signed.

• Photographs: Passport-size photos of the applicant and co-applicant.

• Photo ID Proof: PAN card, driving license, voter ID, Aadhar card, or passport.

• Residence Proof: Documents like a utility bill, rental agreement, or Aadhar card.

• Academic Documents: Mark sheets, certificates, and entrance exam scores (GRE, GMAT, TOEFL, etc.).

• Admission Letter: Proof of admission from the university.

• Bank Statements: Last six months’ bank statements of the co-applicant.

• Income Proof: Salary slips, IT returns, or bank statements of the co-applicant.

• Collateral Documents (if applicable): Property title deed, approved building plan, NOC from the builder, and other related documents.

Interest Rates of Banks for Student Loans

Here’s a comparison of education loan interest rates from various Indian banks:

How to Apply for an Education Loan?

To ensure a smooth loan application process, follow these steps:

1. Check Course Eligibility: Verify that the course you wish to study is recognized by the banks.

2. Determine Loan Amount: Calculate how much loan you need and how much you can arrange independently.

3. Compare Loans: Evaluate different loan offers and choose the one that best fits your requirements.

4. Submit Application: Fill out the loan application form and submit it to your chosen bank.

5. Loan Approval: Once approved, the bank will issue a loan agreement detailing the terms.

6. Disbursement: After signing the agreement, the bank will disburse the loan amount in instalments or as required by the university.

Top Education Loan Providers in India for Studying Abroad

Several banks and NBFCs in India offer education loans for studying abroad. Some popular options include:

• HDFC Bank: Offers up to INR 20 lakhs and provides loans even before securing admission.

• ICICI Bank: Provides loans up to INR 1 crore with interest rates starting at 9.50% per annum.

• State Bank of India (SBI): Offers loans up to INR 30 lakhs with flexible repayment terms.

• Axis Bank: Provides loans up to INR 20 lakhs with competitive interest rates.

• Punjab National Bank (PNB): Offers loans for students attending top universities worldwide.

Student Loans from NBFCs

Non-banking financial companies (NBFCs) also provide education loans, often covering 100% of tuition fees and other expenses:

• Credila (HDFC): Offers loans with a floating interest rate and a 10-year repayment period.

• Avanse: Covers tuition fees and other expenses with floating interest rates and a processing fee.

• International Student Loan Program (ISLP): Specifically for studying in the USA, with loans starting at $1500.

• Global Student Loan Corporation (GSLC): Offers loans without requiring a co-signer for studying in the USA.

Crowd-Funded Companies as Loan Providers

Some companies specialize in providing loans exclusively to students attending specific institutions. These companies issue loans in the local currency of the student's country, and repayments must be made in the same currency. This approach helps maintain security and manage financial risks associated with currency fluctuations.

Loan Schemes Offered by Indian Banks for Studying Abroad

1. SBI Student Loan Scheme

   • Eligibility: Indian students who have secured admission to any recognized institution in India or abroad.

   • Loan Amount: Up to INR 20 lakhs.

   • Interest Rate: Nominal.

   • Repayment Period: 15 years.

   • Collateral Requirement: Required if the loan amount exceeds INR 7.5 lakhs.

   • Repayment Start: One year after course completion.

2. SBI Global ED-VANTAGE Scheme

   • Eligibility: Indian students pursuing full-time courses abroad.

   • Loan Amount: Up to INR 1.5 crore.

   • Repayment Period: 15 years.

   • Collateral Requirement: Required.

   • Repayment Start: Six months after course completion.

3. HDFC Bank Education Loan for Foreign Education

   • Eligibility: Indian students pursuing studies abroad.

   • Loan Amount: Up to INR 20 lakhs.

   • Interest Rate: Nominal.

   • Tax Benefits: Available.

   • Repayment Start: Can be sanctioned before admission.

4. Oriental Bank of Commerce Education Loan for Study in India and Abroad

   • Eligibility: Students wishing to pursue higher studies in India or abroad.

   • Loan Amount: Based on the fee structure of the institution for studies in the US.

   • Features: No prepayment penalty; insurance coverage provided.

   • Loan Margin: 15% for amounts exceeding INR 4 lakhs for studying abroad.

Things to Remember When Taking an Education Loan for Studying Abroad

• Moratorium Period: This is a period during which the borrower is not required to make any repayments. The duration varies by bank and may last until some time after course completion.

• Loan Margin: Banks typically do not provide 100% of the required amount. Most public sector banks offer 90%, and the remaining 10% must be arranged by the borrower.

• Effect of Exchange Rate: Consider the impact of exchange rate fluctuations on the amount disbursed and ensure you calculate the effective amount received.

UGC's Educational Loan Scheme

The University Grants Commission (UGC) offers an education loan portal called 'Vidya Lakshami', developed in collaboration with the Department of Higher Education, the Department of Financial Services, and the Indian Banks Association (IBA).

• Loan Amount: Up to INR 15 lakhs.

• Collateral and Margin: No collateral or margin is required for loans up to INR 4 lakhs. For loans above INR 4 lakhs, the interest rate cannot exceed the Prime Lending Rate (PLR) plus 1%.

• Repayment Period: 5-7 years with a possible grace period of one year after course completion.

Collateral Rules for Student Loans for Studying Abroad

Banks often require collateral for student loans to study abroad. Collateral serves as a security measure for lenders and typically includes assets such as property, fixed deposits, or life insurance policies with a surrender value.

• Definition of Collateral: Collateral refers to any property, whether movable or immovable, offered as security for a loan. It reduces the risk for lenders.

• Accepted Instruments: Liquid assets like bonds, fixed deposits, shares, and immovable property such as houses and commercial properties are accepted. Agricultural land is not accepted, nor are shares, bonds, gold, debentures, and mutual fund units.

How to Get an Education Loan for Studying Abroad Without Collateral

• Loans Up to INR 4 Lakhs: Available without collateral.

• Loans Up to INR 7.5 Lakhs: Requires a joint borrower (typically a parent or guardian) and a third-party guarantee.

• Loans Exceeding INR 7.5 Lakhs: Requires collateral, such as property or other assets.

Borrowing Against Collateral

When using immovable property as collateral, the bank’s representative will assess and evaluate the property. Based on this evaluation, the loan amount will be approved.

Responsibility of a Guarantor for an Education Loan

A guarantor has a significant legal responsibility and must repay the loan if the borrower defaults. For loans exceeding INR 4 lakhs, a third-party guarantee may be required. If the borrower fails to repay, the guarantor is obligated to cover the outstanding amount.

Conclusion

Securing an education loan for studying abroad requires careful planning and research. By understanding your financial needs, comparing loan options, and ensuring you meet eligibility criteria, you can find the best education loan to support your academic journey abroad.