How to Get an Education Loan for Study Abroad in India?

Education Loan for Study Abroad in India

Studying abroad can be a life-changing decision. However, this doesn’t come easy. Students who want to study abroad find it difficult to arrange huge funds. Now you have different options to arrange funds for your education.

What is Foreign Education?

Quality education is necessary for a fulfilling and flourishing life. For many, it is equal to graduating from an internationally renowned university. However, the cost of education is escalating speedily. The cost of studying at esteemed foreign institutions is already rising.

Education Loan for Foreign Education

Studying in a foreign country can be a life-changing decision, but you have to do a lot of research to reach that decision. Those who find it difficult to arrange for funds to pursue higher studies abroad now have the option to explore various education loans.

In this blog, we will cover all details regarding education loans. Be it the procedure to apply for a loan, eligibility or documents required. We will also cover various other aspects related to student loans from Indian banks and educational NGOs.

Why Take Education Loan for Study Abroad?

Generally, when you plan to take an education loan for your education abroad, you need to consider many expenses, including college fees, costs for accommodation, necessities such as laptops, books, coaching fees, etc.

Here are the advantages of an education loan for studying abroad:

Lower Interest Rates

Are you thinking of taking personal loans for financing education abroad? The interest rates are predominantly higher compared to education loans. The interest rates on education loans are lesser. Also, Government banks provide an additional concession of 0.5% to all female students.

Moratorium holiday-Pay after your course completion

It is one of the significant advantages of education loans. Unlike personal loans, where a borrower is expected to start paying the incurred EMIs next month, education loan schemes come with a moratorium period. The moratorium period in which the student is not required to make any payments to the lender.

A broad range of expenses covered

Education loan to study abroad covers almost every essential expense that a student might need to complete their education. It comprises travel tickets, tuition fees, university fees, house rent, food expenses, living expenses, a laptop, etc.

Education Loan Interest Subsidy

The Central Government has launched several Education Loan Interest Subsidy schemes to help the loan applicants belong to financially backward families.

The subsidy schemes are mentioned below.

  • Central Sector Interest Subsidy Scheme
  • The Padho Pardesh Education Loan Interest Subsidy Scheme
  • Dr. Ambedkar Central Sector Scheme of Interest Subsidy

The benefits of these subsidy schemes include the waiver of the education loan interest charged during the moratorium period. Post the moratorium period students have to start the repayment of EMIs by themselves.

Tax Benefit under Section 80E

In Section 80E of the Income Taxof 1961, the loan applicant or the co-applicant can avail of the education loan income tax exemption. In other words, the loan applicant or the co-applicant can proclaim a certain percentage of the interest paid towards their education loan as deductible from the total income.

Make your CIBIL Score

CIBIL is the credit information report, a summary of your credit history to date. CIBIL score generally ranges from 300 to 900. A score above 750 is considered a good CIBIL  score. Timely repayment of EMIs will build the required score and will help you get a loan easily in the future like a home loan, car loan, etc.

Features of Education Loans

  • Any individual aged between 18 to 35 years can avail of an education loan to pursue studies abroad at any approved university.
  • Students can easily get education loans for management courses, engineering courses, medicine, graduate and postgraduate, etc.
  • The expenses covered under an education loan contain exam fees, tuition fees, lab and library fees, travel, books and equipment, and many more.
  • Borrowers have to get in a margin of 5% to 15% for loans taken for foreign studies.
  • In the time of the moratorium period, borrowers have to pay the interest, with the principal payment beginning when the loan tenure begins.
  • Education loans can be paid in monthly instalments through Electronic Clearing Service or post-dated cheques to the bank.
  • Normally, banks approve education loans with a tenure of up to seven years, inclusive of the moratorium period.
  • A co-applicant has to be picked for education loans taken for full-time courses. Co-applicants can include parents, siblings, spouses, or other family members.
  • No security amount is required for education loans taken up to ₹ 4 lakhs. A third-party guarantor has to be provided for education loans between ₹ 4 lakhs to ₹ 7.5 lakhs, & tangible collateral security is required for loans above ₹ 7.5 lakhs.
  • The Government of India has also introduced an Education Loan Interest Rate Subsidy Scheme for the weaker section of society.

Eligibility Criteria for Loans to Study Abroad

The first thing you need to check is whether you are eligible to apply for an education loan or not. The general terms and conditions that are followed by any bank in the process of granting an education loan are given below, kindly note that individual banks could have their eligibility guidelines to be adhered to when applying to that particular bank.   

  • The candidate should be an Indian citizen.
  • The candidate must have attained the age of 18, or else the parents or guardians will have to take the loan.
  • The candidate must have an exemplary academic record.
  • The candidate must have confirmed admission from a recognized international institute.
  • The course chosen by the candidate must be a technical or professional one, as banks give preference to job-oriented study programs.

Required Documents of Loans to Study Abroad

Before applying for an education loan, the candidate must be completely aware of the documents required to apply for a study loan abroad. The following documents are required to apply for an education loan to study abroad.

  • Application form
  • Passport size photographs of the applicant and the co-applicant.
  • Photo ID of the applicant and the co-applicant. It can be a PAN card, driving license, Voter ID card, Aadhar Card, or Passport.
  • Resident proof of the applicant and the co-applicant
  • Academic documents:
  • Mark sheet and certificates of the applicant
  • Mark sheet of GRE, GMAT, TOEFL, IELTS, etc. whichever is applicable
  • Admission letter shared by the university or college.
  • Last six months bank statements of the co-applicant
  • Income proof of the co-applicant
  • In the case of collateral (immovable property), it can be flat, home, or non-agriculture land the following documents are required:
  • Property title deed
  • Building approved plan
  • NOC for a mortgage from a builder or society

The Step-by-Step Process For Loans for Foreign Education

Application for loan, approval and disbursement, the entire loan process is time-consuming. So it is always advisable to apply for a loan a little early. Follow the general steps for applying for an education loan:

  • Check whether the course you are opting for is recognized by the banks or not.
  • Find out how much loan amount you require and how much you can arrange on your own.
  • Compare the loan provided by various banks for studying abroad and check which is the best for your needs.
  • After choosing the bank and the loan amount, fill out the loan application form and approach your bank.
  • When your loan is approved, the bank will issue a loan document that includes various components of the loan.
  • After signing the loan document, the bank will disburse the amount in instalments or as asked by the university.

Top Indian Banks Offering Loans for Foreign Education

Top Indian Banks Providing Education Loans
State Bank of IndiaBank of Baroda
HDFC BankPunjab National Bank
Canara BankAxis Bank

6 Things to Remember When Taking Education Loans for Study Abroad

  1. Moratorium Period

It is the time when the borrower need not make any repayment to the bank. This period varies from bank to bank and could last up to some time after completing the course.

  1. Loan Margin

Usually, banks do not provide the total amount needed to fund education. Most public banks issue 90% of the total amount, and the remaining 10% has to be arranged by the applicant.

  1. Exchange Rate

Calculate the amount you will receive at the time of disbursement, as any change in the rate may affect the applicant’s amount.

  1. Collateral Rules of Loans for Study Abroad

Whether movable or immovable, any property can be offered to a bank as a security for a loan is collateral. Most Indian banks demand collateral as security to reduce the risk involved in paying off the credit. Any liquid assets like bonds, FD, shares, or immovable property like the house, commercial property, or just land can be classified as collateral.

  1. Guarantor Obligations

Becoming a loan guarantor is a great responsibility as the guarantor will have a legal obligation to pay if the borrower doesn’t. If the loan amount surpasses INR 4 lakhs, the bank may ask for a guarantee from a third party. If the borrower cannot repay the loan amount irrespective of the circumstances, in that case, the guarantor holds the liability to reimburse the entire amount to the banks.

  1. Maximum Loan Amount

The banks set no limit for education loans for students to study abroad. Most of the banks provide loans maximum of up to INR 20 to 30 lakhs. If the loan is more than INR 20 lakhs, the interest rate increases respectively.

Education Loans for Studying Abroad – FAQs

Q1. How can I get a loan to study abroad?

Ans: You can approach any bank which are offering education loan at low interest. You can also approach any NBFCs and NGOs who are providing education loans to study abroad.

Q2. Can I get 100% loan to study abroad?

Ans: There is no limit set by the banks for education loans for students to study abroad. The majority of the banks offer loans of up to INR 20-30 lakhs.

Q3. Is it worth it to take a loan to study abroad?

Ans: Studying abroad is a once-in-a-lifetime chance to experience new things that you should not miss. In other words, it is definitely worth your time and money.

Studying abroad can be a life-changing decision for everyone. Those who want to pursue studies abroad, but find it difficult to arrange for funds, have the option to get education loans to study abroad.

Looking For Interest-Free Loan Scholarships to Study Abroad?

Sakal India Foundation has been working for Student welfare, Educational Aid, and Mentoring since 1959. Interest-Free Education Loan Scholarship is the main initiative run under SIF’s schemes to encourage students who want to pursue their higher education abroad.

SIF offer an interest-free loan for students who plan to pursue a master’s abroad. Their vision was to provide small loans to deserving students who have performed well academically. Applications from all over India and their strict screening by the select committee of our trustees & experts have raised the standard in selecting deserving candidates. You can write to contactus@sakalindiafoundation.org for any query related to the Interest-Free Loan.

About Author

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Sakal India Foundation

The idea of setting up an organisation to encourage and assist needy and deserving students with grants and scholarships to pursue higher education was conceived by the late Dr. N. B. Parulekar the managing editor of daily Sakal.

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