Foreign Education Loans for Abroad Studies: A Complete Guide for Students

Every year, millions of aspirants fly overseas for higher education. An immense increase has been noticed in the number of students preferring study centres abroad over their home countries. No doubt, the craze for overseas education is on the rise due to the life-changing opportunities available.

But everyone cannot access higher education abroad. Since there is a huge cost involved, we cannot ignore the cost of education and living expenses. A simple solution to fulfil your abroad education dream is none other than an education loan.

Students who are planning to finance their education with the help of an education loan must become familiar with the type of abroad education loan. Having precise information about a foreign student loan in India will prevent any misunderstanding in the future.

Type of Abroad Education Loan

Abroad, education loans are divided into two types: secured and unsecured.

Secured student loan to study abroad:

Secured education loans for overseas studies are also known as collateral-based education loans. Here, you have to pledge your personal assets, like a property house or plot, liquid assets, and LIC bonds, to the lender. Education loans with collateral have the following features:

• A higher sanction amount
• Long repayment duration
• Moratorium period
• Low interest rates
• Tax relaxation
• No stress of loan repayment during study time

Additionally, due to the security provisions, lenders are more likely to approve them than unsecured loans. You can avail of the collateral loan from both public and private banks.

Options for a Secured Education Loan

Underneath, we have enlisted the banks and names of NBFCs, along with the features of education loans they are offering to students based on collateral.

• Processing Time: Public banks may take 11 to 20 days to complete the entire education loan disbursement process. However, private banks and NBFCs may take 5–10 days and 5-7 days, respectively.
• Coverage of Expenses: A public bank may cover 85–90% of the total loan amount, while private banks also cover 80–85% of expenses. On the other hand, NBFCs offer 100% expense coverage of the education loan amount for overseas studies.
• Period for Repayment: Government banks usually provide 10 to 15 years of repayment time for secured loans, whereas private banks and NBFCs provide 8 to 15 years of loan repayment, respectively.

Document Required for a Secured Foreign Education Loan

An applicant would require the mentioned document if they were planning to apply for a secured education loan in India.

• Admission Proof: University Offer Letter (Conditional or Unconditional)
• Fee structure of an applied university
• Academic documents: a marksheet for the 10th, 12th, and graduation courses
• KYC Documents: passport, Aadhar card, PAN card, photographs of the applicant and co-applicant
• Bank statement of the co-applicant
• ITR details filed in the last 3 years
• Income tax document (Form 16) of the co-applicant
• Residence proof of the applicant and co-applicant
• Collateral documents you wish to pledge as security

Unsecured student loan to study abroad:

Unsecured education loans or loans without collateral don’t require you to provide any security to the lender. You can avail of this type of loan from private banks and NBFCs. Public banks also offer unsecured education loans, but the loan amount ranges from 4 to 8 lakhs, which may be insufficient for many international students. The procedure to get the unsecured loan is shorter and quicker.

Options for unsecured loans

• Processing time: In comparison to secured loans, unsecured loans take less time to process. Private banks usually take 5–7 days to complete the entire loan process and disbursement. On the other hand, NBFCs take 3–5 working days to complete the loan process.
• Time for Repayment: While a private bank provides 10 to 15 years’ time for loan repayment, an NBFC will give just 10 years to pay back the loan.
• Coverage Expenses: NBFC offers to cover 100% of the loan amount for the suitable profile of students, while private banks cover 80% to 90% of the loan amount.
• Income Requirement: Income is an important criterion in taking an unsecured education loan since you are not providing any security to the bank. An applicant or co-applicant should have monthly earnings of more than $35k to $40k.

Documents Required for an Unsecured Foreign Education Loan

• The university offers letters (conditional or unconditional).
• Fee structure of an applied university
• Academic documents: a marksheet for 10th, 12th, and graduation courses
• Bank statement of the co-applicant
• KYC Documents: passport, Aadhar card, PAN card, photographs of the applicant and co-applicant
• Income Tax Return filed in the last 3 years

When you file the application for an unsecured education loan, the lender may ask you to submit the above-mentioned documents. Without a collateral loan, you just have to submit a smaller number of documents in comparison to an unsecured foreign education loan.

Reasons behind rejection: 

Private lenders generally reject the loan for the two reasons mentioned underneath.

• Inadequacy in the monthly earnings of the applicant and co-applicant
• Poor CIBIL Score

What are the important factors to look out for in a foreign education loan?

When looking to apply for an education loan, applicants are required to be careful about the factors mentioned.

• Interest Rates
• Repayment Tenor
• Moratorium Period
• Expenses covered
• Margin Money 
• Tax benefits under Section 80E of the Income Tax

Most of us must be familiar with the term pre-visa disbursement. Apart from the above factors, many international colleges and universities demand first-semester fee remittances. As an applicant, it’s relevant for you to clarify your requirements with your lender to avoid misunderstandings in the future.

EDUCATION LOAN GURU: Your guide for education loans abroad

Applying for the right kind of education loan and meeting all your requirements takes a lot of effort and time by the students. An expert in the field will show you the right direction and guide you through the process of getting an education loan. So, an individual who is looking for an education loan abroad can contact Education Loan Guru for stress-free and smooth loan application processing.