Education Loan for Abroad Studies

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:

1. Financial Flexibility: Education loans cover tuition fees and additional expenses without straining family finances.

1. Wide Coverage of Expenses: These loans can cover university fees, living expenses, accommodation, and more.

1. Flexible Repayment Terms: Banks offer flexible repayment options, including moratorium periods.

1. Tax Benefits: You can claim tax deductions on the interest paid, reducing your taxable income.

1. 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.

1. The applicant must be an Indian citizen.
   

1. If the applicant is under 18 years old, their parents must take out the loan.

1. The applicant must have a solid academic record.

1. The applicant must have secured admission to a recognised overseas institution.

1. 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: 

1. A completely filled-out loan application form.

1. Passport-size photographs of the applicant and co-applicant.

1. Photo ID of the applicant and co-applicant (e.g. Pan card , driving license, Aadhar card).

1. Residence proof for both the applicant and co-applicant.

1. Academic records (mark sheets, certificates, GRE or GMAT or TOEFL or IELTS  score reports).

1. Admission letter from the university or college.

1. Six month's bank statements of the co-applicant.

1. Income proof of the co-applicant.

1. 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.

Interest Rates for Education Loans

Here are some interest rates for student loans provided by prominent Indian banks.

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:

1. HDFC Bank: Offers loans up to Rs. 20 lakh.

1. ICICI Bank: Provides loans up to Rs. 1 crore for international courses.

1. SBI: Offers up to Rs. 30 lakh with a loan margin of 15%.

1. Axis Bank: Provides loans up to Rs. 20 lakh with a margin of 15%.

1. 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:

1. Credila: A subsidiary of HDFC Bank, Credila offers loans at competitive floating interest rates, which can be repaid over ten years.

1. 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.

1. 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

1. SBI Student Loan Scheme: Indian students pursuing education domestically or abroad can avail of loans up to Rs. 20 lakh at competitive interest rates, with repayment terms extending up to 15 years.

1. 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.

1. 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.

1. Oriental Bank of Commerce Education Loan: This loan covers both domestic and overseas education, with flexible loan amounts depending on the fee structure and no prepayment penalties for early repayment.

Important Considerations for Education Loans Abroad

1. Moratorium Period: This is a grace period where no repayment is required. It varies across lenders and often extends until after the course completion.

1. Loan Margin: Public sector banks generally finance up to 90% of education costs, leaving the borrower to arrange the remaining 10%.

1. 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 up to Rs. 15 lakh for overseas education. Loans under Rs. 4 lakh do not require collateral, while loans exceeding this amount are subject to certain interest rate caps and collateral requirements.

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.

1. Accepted Collateral: Movable or immovable assets like property, fixed deposits, shares, or bonds are commonly accepted. Agricultural land is typically excluded.

1. 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.

1. 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.

1. 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.