Pay Back your Foreign Education Loan Before returning to India


Education at prestigious foreign universities sounds so fancy and admirable. Pursuing higher education at universities abroad will have a life-changing impact on your life and career. Your career will surely reach new heights, and your life will become more qualitative. However, education abroad is admirable, but in reality, you need to make a lot of effort to secure admission and manage the finances at foreign education institutions. Students who are able to secure admission may find the expenses of studying abroad not so easy to arrange. It is now simple to manage tuition costs without concern for those who find it tough to pay, thanks to flexible options like an overseas education loan.

Benefits of Taking an Overseas Education Loan

Obtaining a foreign education loan has certain advantages for students:

  • Expenses like tuition fees and living costs are easy to arrange because of foreign education loans.
  • You will be able to safeguard your long-term savings for emergencies.
  • The family will remain free from financial burdens.
  • Freedom for the students to pay off their own expenses and become more responsible
  • Income tax benefits under Section 80E
  • A moratorium period as additional relaxation after completion of the study period to find a well-paying job.
  • There was no tension over loan repayment during the study period.
  • Repayment duration provides applicants with time to repay the loan for that duration.

Why is repayment of student loans for study abroad important?

Repayment of student loans for study abroad is an important consideration. Loan repayment begins after completing the course duration, or in some cases, the post-moratorium period. The repayment period begins right after you start paying your loan interest or direct EMIs to your lender. In India, applicants will find variations in education loan repayment.

Paying back your loan on time within the given duration will have a positive impact on your CIBIL profile and make you eligible for taking another loan in the future.

Moratorium Period in the Repayment Process

A moratorium period is specified as the additional relaxation of 6 months or 1 year given to the borrower on completion of their study period to find a job; students are not obliged to pay the loan EMIs during this period. In some cases, only interest is payable during the moratorium period.

The interest payment can begin after the moratorium period; however, the EMI payments will strictly start after the moratorium period. Depending largely on the terms and conditions laid down by the NBFCs or banks regarding the moratorium period, let’s have a brief look at the procedures for loan repayment for different lenders:

Procedure for Repaying NBFC Loans

NBFCs provide the education loan to study abroad without any collateral; this is one of the major benefits of taking the loans from NBFCs. Depending upon the academic profile and earning of the co-applicant, unsecured loans are shorter in duration when it comes to loan disbursement, require less documentation, and have other benefits over acquiring the loan from an NBFC.

When does loan repayment begin in NBFCs?

If you are taking the abroad education loan from a private lender like NBFC, unlike government banks, they offer a moratorium period, but its duration is not long-lasting; it is only 6 months, unlike government banks (1 year). This period is not payment-free; NBFCs accept partial interest payments during the moratorium period as well.

Partial interest payments will involve 2/3 or half of your total interest being paid monthly. For instance, if your interest payments are 10,000 INR every month, during the moratorium period you will be required to pay 4000 to 5000 INR to the lender. However, after the moratorium period, an individual needs to make a full payment of monthly interest.

There is flexibility provided to the borrower; if they want to begin the EMIs of the principal amount sooner, they are required to send a letter to their lender regarding this. An extension of the loan repayment period can be provided to the candidate if the lenders agree to do so.

How much time would the NBFCs provide you to pay back your education loan to study abroad?

A private lender grants 10 to 12 years for loan repayment. This period includes the moratorium period.

Factors involved in the repayment of education loans from NBFCs are:

  • The income of the co-applicant is a crucial factor in an unsecured education loan. To start the loan repayment, a borrower can follow these steps to repay their loan.
  • The applicant and co-applicant ask the lender for the auto-debit of loan EMIs from their salaries.
  • If they want to pay the EMIs before the moratorium period, they can ask the lender to do the same.

Before loan disbursement, applicants must confirm whether their lenders are charging prepayment penalties. By doing so, applicants can plan for the early repayment of the loan amount.

Loan repayment process for government banks

Government banks have provided the longer repayment duration with no EMIs or interest payments during the moratorium period. These are some of the flexibilities provided by the public sector banks to students. Due to their flexible repayment terms, government loan repayment is considered quite convenient.

We have broken down the loan repayment procedure into 3 segments, including loan repayment time, the beginning of loan repayment, and the benefits of prepaying the loan if taken from a government bank.

Repayment period for student loans obtained from a public sector bank

Usually, the government offers a payment-free moratorium period. In these cases, the repayment period begins following the conclusion of the course and the moratorium period. In contrast to NBFCs, the moratorium period has been extended up to one year, and borrowers who take out education loans from public sector banks receive an additional six months of relaxation.

Duration of Loan Repayment

Public sector banks grant 10 to 15 years as repayment duration for student loan for study abroad, inclusive of the moratorium period. But flexibility is provided to students in case they want to pay back their debt soon.

Prepayment Benefits of an Education Loan

  • Education loans, which were initially looked at as financial tools, will soon become a burden if not paid on time. Interest payments and EMIs take away a large part of our monthly earnings.
  • During the study period, students can take up part-time jobs to earn extra money and save some pennies for loan repayment.
  • Use your moratorium period to save for the student loan for study abroad repayment.
  • Calculate your interest payments and loan EMIs even before the disbursement of the loan. The prior calculation of expenses and future payments will give you an estimate of how much of the loan amount you would actually be required to pay when the disbursement of the loan begins.


In the initial stages, education loan repayment may seem difficult, but making efforts and planning in the right direction is the key to achieving this goal. At Education Loan Guru, we would highly recommend that students choose the shorter duration-based education loans. Longer duration-based education loans might seem lucrative, but if you dig deep into this, it will make your loan repayment more burdensome. For a longer duration, you will be bound to pay more interest on the same amount. If you have borrowed the same amount but for a shorter duration, a 2-year gap has simply reduced the lakhs from the total interest payment.


By Education Loan Guru