Students are increasingly choosing an education loan to study abroad because of the convenient repayment terms and the wide range of expenses covered by these loans. The top education loan providers include HDFC Bank, State Bank of India, Axis Bank, and many more.
The cost of higher education abroad is one of the greatest challenges faced by study abroad aspirants. Every year thousands of students apply for education loan to study abroad. In comparison to a personal loan, an education loan comes with a lower rate of interest, and if you qualify for a government-subsidized loan, you will have to pay even lower rates.
A growing number of students are opting for education loans rather than tapping into their parents' personal savings because of the easy repayment terms and the range of expenses covered. This article provides details about loan requirements, procedure, and education loan providers in India for those looking to apply for an education loan to study abroad.
How to Apply for Education Loan for Abroad Studies
The entire loan process, from application to approval to disbursement, is lengthy, so it's best to apply a little early. These steps will guide you through the loan application process:
- Make sure that the course you are going to study is recognized by the banks.
- Determine how much you require from a loan and how much you will be able to secure by yourself.
- Compare the student loans offered by different banks to study abroad and choose the one that best suits your needs.
- Having selected the bank and the loan amount finalized, fill out your loan application and approach your bank.
- Following your loan's approval, the bank will issue a loan document that details the loan's terms.
- Upon signing the loan document, the bank will disburse the amount in installments or as requested by the university.
Requirements for Education Loan to Study Abroad
Before applying for an education loan to study abroad, it is important to understand the eligibility criteria and the documents required for these loans so that students can select the best possible funding options for their studies abroad. Detailed information about eligibility criteria, required documents and collateral rules are provided below.
Eligibility Criteria for Education Loan to Study Abroad
The first and the most important step is to check whether you are eligible for an education loan. Indian banks usually check the applicant's eligibility for a loan based on the following criteria:
- The applicant should be an Indian citizen.
- Applicants must be at least 18 years old; otherwise, their parents will take the loan.
- It is essential that the applicant has a good academic background.
- Admission to a recognized foreign university/college is required.
- The applicant's chosen course should be technical or professional, as banks tend to give preference to job-oriented courses.
Documents Required for Education Loan to Study Abroad
A bank verifies and cross-checks the following documents before it approves an education loan
- KYC: KYC documents include a photo identity proof of the candidate, like the Aadhaar Card and the PAN Card.
- Valid passport: To apply for an educational loan to study abroad, you must possess a valid passport.
- Address Proof: You must submit the permanent and present residence proofs with your application.
- Education proof: It includes all academic certificates from classes X, XII, and the degree. If you have any gaps in qualifications, you will also be required to submit the gap certificate at the bank. In case of work experience, you should submit an offer letter, ITR, salary slips, and a work experience certificate.
- Certificate from University: To obtain an education loan, you will have to submit the offer letter received from the university. Additionally, you would have to show the fee structure and scores of any entrance tests you took, including GRE, GMAT, IELTS, TOEFL, or any other entrance test.
Documents of Co-Applicant
Along with the documents listed above, the documents of the co-applicants must also be submitted at the bank. Co-applicants act as guardians for applicants. The list of documents of the co-applicant that are required by the bank are listed below:
- Photo Identity Proof
- Proof of Address
- Proof of Salary
- The Bank Statement of the Salary Account
- Income Tax Return
- Proof of Business (if applicable)
Collateral Rules
Collateral is a movable or immovable property that can be pledged as security for a loan. It is requested by Indian banks to reduce the risk associated with repaying a loan. Here is everything you need to know about collateral.
Types of Instruments Accepted as Collateral
Collateral can include liquid assets such as bonds, FDs, shares, or movable properties such as houses, commercial properties, land, etc. Remember that agricultural land cannot be used as collateral. Shares, bonds, debentures, bank deposits, life insurance policies, gold, mutual fund units, and government securities are also used as collateral.
Education Loan to Study Abroad Without Collateral
Education loans have proved to be a great relief for those who wish to pursue quality education but face challenges when it comes to arranging the funds. You can now avail of student loans up to INR 4 lacs without providing collateral. A third-party guarantee may be obtained for loans up to INR 7.5 lacs, where parents or guardians will be joint borrowers. In case of loans exceeding INR 7.5 lacs, an asset or a property is required as collateral.
How much can you Borrow Against Collateral?
If you wish to take the loan using your immovable property as collateral, a bank’s representative will verify and evaluate your property to understand if it can mortgaged. The loan amount will be approved on the basis of the report created by the bank representative.
Top Education Loan Providers in India to Study Abroad
In the last five years, reports from the RBI showed that the cost of higher education abroad has increased by 44 percent. Fortunately, a number of Indian banks are offering attractive education loan schemes to help students finance their studies abroad. The table given below lists the top education loan providers in India along with the maximum loan amount that they can offer:
| Name of the bank | Maximum loan amount |
|---|---|
| HDFC Bank | 20 lakhs |
| State Bank of India | 30 lakhs |
| Axis Bank | 20 lakhs |
| Punjab National Bank | Sanctioned according to borrower’s requirement |
| Bank of Baroda | 20 lakhs |
| Canara Bank | 20 lakhs |
| IDBI Bank | 20 lakhs |
| Avanse Financial Services | Customized according to the requirement of the borrower |
HDFC Bank
A student can obtain education loans at a preferential interest rate from HDFC Bank for reputed universities. It is one of the leading private banks offering education loans abroad. The bank offers a maximum loan amount of INR 20 lakhs, and the processing fees are up to 1.5% of the loan amount. Borrowers benefit from flexible security collateral. Co-borrowers may live in a different city than the borrower, but they must be relatives of the borrower. Even before students have secured admissions to universities abroad, the bank offers study loans abroad to avoid last-minute rushes.
State Bank of India
International higher education is supported by SBI for professional and technical graduate and postgraduate courses. As an education loan, SBI offers a maximum of INR 30 lakhs at a loan margin of 15% for students who wish to study abroad. There is a requirement for collateral security for loans over Rs. 7.5 lakhs. Interest rates for the loan amounts are applicable up to 2% on the current base rate set by the SBI. Additionally, the loan repayment tenure can range from 1 year to 15 years. There is a moratorium period provided by SBI during which the entire interest can be repaid such that the monthly installment is just the principal amount upon starting the repayment period.
Axis Bank
Students can apply for loans from Axis Bank for technical, professional, or career-oriented courses. Axis bank's education loan process is hassle-free, and it offers study loans abroad at competitive interest rates. A maximum loan amount of INR 20 lakhs is offered by the bank, covering costs like tuition fees, accommodation, books, etc. There are no processing fees, and the interest rate ranges from 16.5% to 17.5%, with special rates for women. Furthermore, if the loan exceeds INR 4 lakhs, a margin of 15% has to be arranged by the borrower.
Punjab National Bank
Students who plan to study abroad can take advantage of PNB Udaan, an education loan scheme offered by the Punjab National Bank. Student loans are available from the bank for graduate, postgraduate, technical, and job-oriented courses. Borrowers taking loans above INR 4 lakhs need to demonstrate a margin of 15%. Additionally, the bank provides the base rate as an interest rate on loans taken to pursue education at some of the world's leading universities. Borrowers of PNB education loans can choose a tenure of up to 15 years. There are several expenses covered by the PNB loan, including university fees, travel expenses, exam fees, lab fees, library fees, book/equipment fees, and other related expenses.
Bank of Baroda
Education loans are sanctioned under the Baroda Scholar scheme for students securing admission to reputed foreign universities. The maximum amount of education loan that students can be taken through the Bank of Baroda is Rs 20 lakhs. After getting employment, borrowers can get a holiday or moratorium period of six months to one year. There is no requirement to provide security for loans below Rs. 4 lakhs. In addition, tangible collateral security is required for loans above Rs. 7.5 lakhs, while third-party guarantees are required for loans between Rs. 4 lakhs and Rs. 7.5 lakhs.
Canara Bank
Canara Bank also provides study loans to students who intend to study abroad. The student must borrow an education loan with a co-borrower, and a 100% collateral security is necessary for loans greater than Rs. 7.5 lakhs. A maximum loan amount of Rs. 20 lakhs is available from Canara Bank. A loan margin of 15% applies to loans above Rs. 4 lakhs. For loans up to Rs. 7.5 lakhs, the repayment tenure can be up to 10 years, while for loans above Rs. 7.5 lakhs, it can be up to 15 years. For loans below Rs. 4 lakhs, security is not required. Additionally, loans between Rs. 4 lakhs and Rs. 7.5 lakhs must be backed by a third-party guarantee.
IDBI Bank
Education loan through IDBI helps cover expenses like university fees, travel expenses, exam fees, lab fees, library fees, computer costs, book/equipment fees, and other educational expenses. IDBI Bank sanctions loans based on the borrower's needs and without any security for loans under Rs. 4 lakhs. A loan of up to Rs. 20 lakhs can be borrowed. There is a maximum repayment term of 10 years for loans up to Rs. 7.5 lakhs and of 15 years for loans above Rs. 7.5 lakhs.
In addition, third-party guarantees are required for loans between Rs. 4 lakh and Rs. 7.5 lakh. The education loan must be taken with a co-borrower. Loans exceeding 7.5 lakhs require 100% collateral security.
Avanse Financial Services
Avanse provides various loans, such as a pre-visa disbursement loan, a fast-track loan, a pre-admission loan, and a certificate of availability of funds. The borrower must provide KYC documents, course fees, collateral documents, income documents, etc. when applying for an Avanse education loan. You can customize the maximum loan amount according to your particular needs, and the loan period can range from 12 months to up to 120 months. With an Avanse education loan, you can cover tuition, travel, living expenses, books and equipment fees, as well as other related expenses.
