Education Loan options for Abroad Education

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Education Loan options for Abroad Education 

An international degree sounds exactly the thing that would propel your career forward to a higher salary package. The dream of abroad education, however, does not come cheap. The cost attached to it deters people from pursuing abroad education. In the recent few years though, it has become relatively easier to get an abroad education loan as many lenders in the market are now offering student-friendly loans with an easier repayment schedule, longer loan tenure to reduce the financial burden. 

The diverse lenders in the market offer education loans for countries like the USA, UK, Canada, Germany, Singapore, and many more, and programs like undergraduate, post-graduation, and doctoral studies. The quantum of funds that a student can borrow depends on the type of lender and the loan. 

Let us dive further into different types of education loans that are available to students. 

Types of Education Loans 

There are mainly two types of education loans - 

  1. Secured Education Loans

  2. Unsecured Education Loans. 

Secured Education Loans are loans with collateral. The collateral acts as a security to the amount that is borrowed. There are three types of collateral that are generally accepted - Immovable security, liquid securities, and third-party-owned securities. House, flat, apartment, a plot with a boundary are counted as immovable collateral. Agricultural land, however, is not accepted as one. Next, Fixed Deposits and LIC Policies are accepted as liquid securities. Students who do not have any collateral to pledge can arrange for collateral owned by a relative or a friend. The quantum of funds that can be borrowed ranges from INR 10 lakhs to INR 1.5 crore. The most attractive feature of secured education loans is the low-interest rate, which starts at around 7.6% for women and around 8.1% for men. 

Unsecured Education Loans are loans without collateral. The basic requirement of getting an unsecured education loan is a co-applicant, along with a good CIBIL score. The income of the co-applicant is another important factor that is taken into account while approving the loan as interest repayments have to be made during the study period. Since there is no security pledged, the limit of funds that can be borrowed is a little less than the secured loans. The amount ranges from INR 10 lakhs to INR 40 lakhs (the limit can be increased but under a few criteria), with the rate of interest starting at 11.25%. Case exceptions are always there. 

Types of lenders

The market for loans has only grown in the last few years with abundant lenders to fulfill the financial needs of the public. There are public sector banks, private banks, as well as private lenders such as Non-Banking Financial Companies (NBFCs) offering student loans to study in India and abroad. While public sector banks only offer secured education loans above INR 7.5 lakhs, students can go for secured as well as unsecured education loans from other lenders. The students now also have the option of getting an education loan from international lenders. 

Expenses Covered

Education loans are a great way to fund higher education when personal savings and scholarships do not cover the cost. It is even better as most loans cover tuition fees, living expenses, accommodation, equipment purchases, and other course-related expenses such as examination fees, library fees, etc. Some education loan providers also cover the cost of travel under the education loan amount. 

Documents required

Students should arrange the documents at the start of their study abroad journey. While the list of documents might vary depending on the type of loan and lender, some common documents that are required are as follows - 

  • Academic documents such as mark-sheets of class 10th, 12th, graduation

  • Entrance test scores such as GRE. GMAT, TOEFL, IELTS, SAT, whichever is applicable

  • Admission proof along with the schedule of expenses

  • Residence proof of the applicant and the co-applicant

  • Identity proof of the applicant and the co-applicant. It can be a PAN Card, Aadhar Card, Voter ID, or passport. 

In the case of an unsecured education loan - 

  • Bank statements - Last six-month bank statement of the co-applicant

  • Income proof of the co-applicant

In the case of a secured education loan with immovable collateral - 

  • Property deed/chain of the sale deed

  • Approved building plan 

  • NOC from builder/society

Eligibility criteria for an education loan 

There are no fixed eligibility criteria for an education loan. Any student who is an Indian citizen can apply for the loan. Along with this, the co-applicant must have a bank account in India. For a secured education loan, the market value of the property must be more than the requirement. For an unsecured education loan, the income of the co-applicant must be enough to make interest repayments. To make this simple, students can check their eligibility on GyanDhan’s Loan Eligibility Tool

How to select the right lender for your education loan for abroad studies? 

With a myriad of options available, it can get overwhelming to select the lender that offers the best deal. And so, we are listing some of the points to keep in mind while applying for an education loan - 

  1. Interest rate - it’s common knowledge that a lower interest rate is more beneficial. Nationalized banks offer the most competitive rates.

  2. Fixed vs Floating interest rate -  Students should also consider the nature of the interest rate as most lenders offer a fluctuating interest rate, which can increase or decrease with respect to the market conditions. In the case of NBFCs, the increment can be big, whereas, in the case of banks, it is either NIL or negligible. 

  3. Moratorium period - it is the period where the applicant is not required to make any repayments. Most lenders give the study period, plus 6 or 12 months as the grace period. 

  4. Processing fee - it is the charge you pay to the lender for processing your loan application. Depending on the lender, it can range anywhere from 0% to 5%. 

  5. Interest subsidy schemes - there are several government schemes running to reduce the financial burden. Students should check if their loan comes under such schemes. 

  6.  Tenure of the loan - Usually, the loan tenure of an education loan ranges from 10 years to 20 years. However, it is highly advisable to calculate the total interest and difference in the EMIs before selecting the loan tenure. 

  7. Loans in INR vs USD - due to the fluctuation in the exchange rate of the currency, it is always advantageous to take loans in INR. 


We admit that the road to abroad education has several steps and stops. However, this whole process can be made infinitely easier by approaching GyanDhan. It is an education financing platform helping thousands of students get funds from the right lender for their abroad education. It has also partnered with several lenders and offers services such as online loan process, doorstep document pick-up service, among others, at no cost incurred to the student. The education loan counselors of GyanDhan help students get the best deal and service and to make their abroad education loan process hassle-free. 

Author Name: Aman Jain, GyanDhan

 

 


Please feel free to contact us at 9900426501 or 9900621169 for one-on-one free Overseas Education, IELTS/ PTE consultation. www.hurrayedutech.com


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