Education Loan for Studies Abroad
An education loan for studies abroad is a loan from a bank or NBFC that funds tuition, accommodation and living costs for students admitted to a recognised overseas university. It usually needs collateral or a guarantor above certain limits, and repayment starts after the course ends. This guide covers eligibility, documents, interest rates and how to apply.
This guide covers everything you need to know about education loans in India for studying abroad, including the loan application process, eligibility criteria, and required documents. We also provide insights into Indian banks offering student loans and the role of guarantors, helping students secure the funds needed for their educational journey abroad.
What is an Education Loan for Studying Abroad?
An education loan for studying abroad is a service or product provided by financial institutions or banks to help students cover the costs of pursuing higher education outside of their country. These loans typically cover expenses such as tuition fees, accommodation, and other related living expenses.
They are offered to students who meet certain eligibility criteria, such as admission to a recognised university abroad, and often require collateral or a guarantor. Repayment usually begins after the completion of the course, with flexible tenure options and interest rates.
Steps to Secure an Education Loan
If you're new to borrowing and need an education loan for overseas studies, the following roadmap will guide you through the process.
Step 1: Determine how much you need to finance your education.
Step 2: Compare various loan schemes and shortlist two to three options.
Step 3: Check the eligibility criteria for education loans.
Step 4: Gather the necessary documents for the loan application.
Step 5: Apply for education loans from banks and Non-banking Financial Companies (NBFCs).
Step 6: Upon document verification, the bank will disburse the approved loan amount.
Benefits of Education Loans for Studying Abroad
An education loan offers several advantages, particularly when family income and resources are insufficient to cover educational expenses. Here are some key benefits:
- Financial Flexibility: Education loans cover tuition fees and additional expenses without straining family finances.
- Wide Coverage of Expenses: These loans can cover university fees, living expenses, accommodation, and more.
- Flexible Repayment Terms: Banks offer flexible repayment options, including moratorium periods.
- Tax Benefits: You can claim tax deductions on the interest paid, reducing your taxable income.
- Improved Credit Score: Repaying an education loan on time helps build a strong credit history, which is beneficial for future loans.
Eligibility Criteria for Education Loans
Before applying for an education loan, it's essential to ensure you meet the eligibility criteria. These conditions are generally consistent across most banks, though individual institutions may have specific guidelines.
- The applicant must be an Indian citizen.
- If the applicant is under 18 years old, their parents must take out the loan.
- The applicant must have a solid academic record.
- The applicant must have secured admission to a recognised overseas institution.
- The course should be technical or professional, as banks prefer job-oriented programs.
Documents Required for Education Loans
To apply for an education loan, you'll need to provide the following documents:
- A completely filled-out loan application form.
- Passport-size photographs of the applicant and co-applicant.
- Photo ID of the applicant and co-applicant (e.g. Pan card , driving license, Aadhar card).
- Residence proof for both the applicant and co-applicant.
- Admission letter from the university or college.
- Six month's bank statements of the co-applicant.
- Income proof of the co-applicant.
- Collateral documents (property title deeds, approved building plans, NOCs if required).
Technical Documentation for Study Loans: In addition to the general documents, you may also need technical documents like property deeds, revenue documents (e.g., Khata or Patta), and urban clearance certificates.
How to Apply for an Education Loan?
Applying for an education loan can take time, so it's advisable to start early. Follow these steps:
Step 1: Ensure the course is recognised by banks.
Step 2: Determine how much you need to borrow.
Step 3: Compare education loans offered by different banks.
Step 4: Submit your loan application to the bank of your choice.
Step 5: Once approved, the bank will issue a loan document outlining the loan terms.
Step 6: After signing, the loan amount will be disbursed in instalments or as requested by the university.
Top Education Loan Providers in India for Studying Abroad
Some of the leading banks offering education loans for studying abroad include:
- HDFC Bank: Offers loans up to Rs. 20 lakh.
- ICICI Bank: Provides loans up to Rs. 3 crore for international courses.
- SBI: Rs. 7.50 lakh to Rs. 3 crore depending on the scheme.
- Axis Bank: Provides loans up to Rs. 20 lakh with a margin of 15%.
- Punjab National Bank: Offers loans under the PNB Udaan scheme for various courses abroad.
Education Loans from NBFCs
In addition to nationalised banks, students can access education loans from Non-banking Financial Companies (NBFCs) to study abroad. These companies provide full tuition coverage, with loans generally requiring collateral for amounts over Rs. 7.5 lakh. Here are some NBFCs offering loans for overseas education:
- Credila: An independent NBFC — HDFC Bank fully divested its stake in Credila by March 2024, so it is no longer an HDFC Bank subsidiary, offering competitive floating rates, repayable over ten years.
- International Student Loan Program (ISLP): Designed for students aiming to study in the US, this program allows loans starting from $1,500, with repayment terms of up to 25 years.
- Global Student Loan Corporation (GSLC): GSLC provides loans to international students studying in the US without the need for a co-signer.
Crowd-funded Companies as Loan Providers
Some companies specialise in offering loans to students attending specific institutions, providing loans in the currency of the student's destination country. Borrowers must repay the loan in the same currency.
Education Loan Schemes from Indian Banks for Studying Abroad
- SBI Student Loan Scheme: Rs. 7.50 lakh (extendable up to Rs. 3 crore under SBI's Global Ed-Vantage scheme) for domestic or foreign education at competitive rates, up to 15-year repayment.
- SBI Global ED-VANTAGE Scheme: Offers loans up to Rs. 1.5 crore for full-time overseas courses, with repayment commencing six months after course completion.
- HDFC Bank Education Loan for Foreign Education: Loans up to Rs. 20 lakh are available for students wishing to study abroad, offering tax benefits and the option to secure the loan before admission.
- Oriental Bank of Commerce Education Loan: Oriental Bank of Commerce merged into Punjab National Bank with effect from 1 April 2020; its education loan schemes, including for overseas study, are now offered under PNB (see PNB Udaan above).
Important Considerations for Education Loans Abroad
- Moratorium Period: This is a grace period where no repayment is required. It varies across lenders and often extends until after the course completion.
- Loan Margin: Public sector banks generally finance up to 90% of education costs, leaving the borrower to arrange the remaining 10%.
- Effect of Exchange Rates: Be mindful of currency exchange fluctuations, as they may impact the final loan disbursement.
UGC's Educational Loan Scheme
The University Grants Commission's 'Vidya Lakshmi' portal allows students to apply for loans as per each participating bank's own scheme limits rather than having one fixed cap of its own, for overseas education. Loans under Rs. 4 lakh require no collateral; loans exceeding this amount face interest rate caps and collateral requirements.
The government's PM-Vidyalaxmi scheme, approved by the Union Cabinet, offers collateral-free and guarantor-free education loans with an interest subvention for meritorious students admitted to top-ranked institutions, and can be accessed through the Vidya Lakshmi portal.
Students from minority communities pursuing postgraduate or doctoral studies abroad can apply for the Ministry of Minority Affairs' Padho Pardesh scheme, which provides a full interest subsidy on the education loan during the moratorium period.
Collateral Rules for Education Loans Abroad
Most education loans for studying abroad require collateral, which could include assets like property, fixed deposits, or life insurance policies. The collateral acts as security for the lender in case of default.
- Accepted Collateral: Movable or immovable assets like property, fixed deposits, shares, or bonds are commonly accepted. Agricultural land is typically excluded.
- Loans Without Collateral: Loans up to Rs. 4 lakh can be obtained without collateral, while loans up to Rs. 7.5 lakh requires a third-party guarantee. For loans exceeding Rs. 7.5 lakh, collateral is mandatory.
- Guarantor's Responsibility: A guarantor for an education loan is legally obligated to repay the loan if the borrower defaults. For loans exceeding Rs. 4 lakh, a guarantor may be required by the bank.
- Read the Loan Agreement Carefully: Before committing to a loan, thoroughly review all terms and conditions. Seek expert advice if necessary and ensure clarity on the repayment terms, interest rates, and any other stipulations in the agreement.
Summary
In summary, an education loan for abroad studies helps Indian students fund tuition, living costs and other expenses at recognised overseas universities, with eligibility, collateral and interest rates varying by lender. Comparing banks and NBFCs on interest rate, loan margin and collateral requirements before applying can reduce the overall cost of financing. Explore the loan options in this guide and use BankBazaar to compare education loan offers before you apply.
FAQs on Education Loan for Abroad Studies
1.Which is the best bank for an education loan for abroad studies?
There is no single best bank for an education loan for abroad studies, as the right choice depends on your course, university and collateral position. Public sector banks such as SBI, Bank of Baroda, Punjab National Bank and Indian Bank are often preferred for their lower rates, while private banks like HDFC Bank, ICICI Bank and Axis Bank suit applicants with a strong credit profile. Compare a few lenders before deciding.
2.What courses are eligible for an education loan for studying abroad?
Most banks and NBFCs offer an education loan for abroad studies for undergraduate and postgraduate programmes at a recognised overseas university. Job-oriented and professional courses are generally preferred by lenders. Always confirm with the lender whether your specific course and institution qualify before applying.
3.What is the maximum amount available under an education loan for abroad studies?
There is no single fixed cap on an education loan for abroad studies; the maximum amount depends on the lender, the course and whether collateral is offered. Loans backed by adequate collateral generally allow a higher sanctioned amount than collateral-free loans. Check the current limit with your chosen bank or NBFC before applying.
4.How do I apply for an education loan for abroad studies?
You can apply for an education loan for abroad studies by comparing lenders, confirming your course and university are recognised, and submitting the application with the required documents to your chosen bank or NBFC. The lender verifies your eligibility and collateral, if applicable, before issuing a sanction letter. Disbursement usually follows in line with the university's fee schedule.
5.Can I get an education loan for studying abroad without collateral?
Yes, lenders offer a collateral-free education loan for abroad studies up to a threshold amount, beyond which a guarantor or collateral is typically required. The exact thresholds and requirements vary by lender and loan amount, so check the specific slabs with your bank. Parents or guardians usually need to be co-applicants regardless of the loan amount.
6.Does an education loan for abroad studies cover the entire cost?
An education loan for abroad studies can cover the entire cost of tuition, accommodation and living expenses with some private banks and NBFCs. Public sector banks typically expect the student to self-finance a portion of the cost, known as the loan margin, with the loan funding the remainder. Confirm the margin requirement with your lender before budgeting.
7.What is the moratorium period on an education loan for abroad studies?
The moratorium period on an education loan for abroad studies is the grace period during which the borrower is not required to make repayments. It typically covers the course duration and a short period after completion, though the exact length varies by lender. Interest may still accrue during this period unless a subsidy scheme applies.
8.What is loan margin in an education loan for abroad studies?
Loan margin in an education loan for abroad studies is the portion of the total cost the borrower must fund from their own resources, with the lender financing the rest. Public sector banks commonly set this margin for overseas study, while some private lenders and NBFCs offer full funding. Check the applicable margin with your chosen lender.
9.How do exchange rate changes affect an education loan for abroad studies?
Exchange rate movements can affect an education loan for abroad studies because the loan is usually sanctioned and disbursed in Indian rupees while fees are paid in a foreign currency. A weaker rupee can increase the effective cost of tuition and living expenses funded by the loan. Monitoring currency trends helps in planning disbursements and repayments.
10.What is the role of a guarantor in an education loan for abroad studies?
A guarantor in an education loan for abroad studies is legally responsible for repaying the loan if the primary borrower defaults. Lenders typically require a guarantor once the loan amount crosses a certain threshold, in addition to or instead of collateral. Discuss the guarantor requirement with your lender based on your loan amount.
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