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Education Loan for Abroad Studies
- Costs: Studying abroad can cost ₹40 lakhs to ₹1 crore, including tuition, living expenses, travel, and more.
- Loan Types:
- Secured Loans: Lower interest rates (9.5%-10%), require collateral like property.
- Unsecured Loans: No collateral needed, higher rates (10.5%-13.5%), based on academic and credit profile.
- Eligibility: Indian citizens aged 18-35 with 50%+ in exams, admission to recognized foreign universities, and a strong CIBIL score (700+).
- Lenders: Banks like SBI, ICICI, and NBFCs like Prodigy Finance and Propelld offer tailored loan options.
- Interest Rates: Range from 8.1% to 15.2%, depending on the lender and loan type.
- Repayment: Flexible terms, tax benefits under Section 80E, and a 6-month grace period after graduation.
Quick Comparison
Education loans cover tuition, living expenses, travel, and more. Choose wisely between banks and NBFCs based on your needs. Ready to apply? Keep reading for step-by-step guidance!
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Education Loan Basics for Study Abroad
Who Can Apply
Indian citizens aged 18–35 who have scored at least 50% in their HSC exams and secured admission to a recognized foreign university are eligible for education loans for studying abroad.
For unsecured loans, banks often look for a parental income exceeding Rs. 6 lakhs. However, if the applicant has a GRE score above 300, they might qualify for unsecured loans up to Rs. 50–60 lakhs, even without standard income documentation.
A strong CIBIL score (above 700) is essential for both the applicant and the co-applicant. Additionally, the course chosen should have good job prospects to improve the chances of approval.
Secured vs Unsecured Loans
Deciding between secured and unsecured loans can greatly influence the terms and ease of obtaining the loan. Here's a quick comparison:
For secured loans, banks typically consider 80–85% of the property's value when determining the loan amount. This makes them a good choice for students needing larger sums at lower interest rates. Public sector banks often start their secured loan interest rates at 9.5%.
Unsecured loans, on the other hand, depend heavily on the applicant's academic achievements and the co-applicant's financial situation. Non-Banking Financial Companies (NBFCs) provide unsecured loans with interest rates ranging from 10.5% to 13.5%. For more information on loans without collateral, check out our detailed blog.
Now that you know the differences, let’s move on to the loan application process.
Also, you might be interested to know more about Education Loans without Collateral.
Beginners Guide to Abroad Education Loan
Loan Application Steps
Education loans can take different amounts of time to process. Secured loans usually need 45–60 days without help, while unsecured loans take about 15–20 days. Professional assistance can speed up the process for both.
Documents Needed
To apply for an education loan, you'll need to gather documents in several categories. Here's a breakdown:
For secured loans, you might also need property-related documents like title deeds, encumbrance certificates, and a NOC from the builder if applicable. Submit self-attested photocopies unless originals are specifically requested.
Once your documents are ready, you're set to move on to the application process.
Also, you might be interested to know in detail about a general overview of documents required for education loan.
No. We Don't Need a Plethora of Documents. Just 4 Documents and Your Education Loan is Disbursed.
How to Submit Your Application?
The loan application process involves a few key steps:
- Research and Choose a Lender
Compare lenders to find the one that best fits your needs. - Organize Your Documents
Gather and prepare all the required paperwork. - Submit Your Application
Submit your application through the lender's preferred method, whether online or in person.- For secured loans, you'll need to:
- Fill out the application form and attach supporting documents.
- Arrange for property valuation and legal checks.
- Complete the mortgage process after visa approval.
- For unsecured loans, focus on:
- Highlighting strong academic achievements.
- Ensuring your co-applicant has stable income and good credit.
- Providing all necessary financial records.
- For secured loans, you'll need to:
Keep an eye on your application status and respond quickly if the lender asks for more information. Missing or incomplete documents are a common reason for delays or rejections.
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Payment Terms and Interest
Understanding payment terms and interest rates is essential for managing loan repayment effectively.
Payment Options
Here are some common repayment options for student loans:
- Moratorium Period: This is a grace period after graduation during which you’re not required to make full loan payments. However, interest continues to accumulate during this time.
- Interest-Only Payments: During your studies, you only pay the interest on your loan. The principal repayment is deferred until after graduation.
- Full Deferral: You can postpone payments on both the principal and interest while studying full-time. Keep in mind, though, that unpaid interest may be added to the loan balance, increasing the total repayment amount.
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Current Interest Rates
Interest rates depend on various factors like the lender, loan type, credit score, and whether you have a co-signer. Here’s a quick look at current rates for education loans to study abroad:
For example, if you borrow ₹50,000 at 10% annual interest, your monthly interest would be approximately ₹411.
Factors Influencing Interest Rates:
- Your credit score and that of your co-signer
- Whether the interest rate is fixed or variable
- The loan amount and repayment term
- Whether the loan is secured with collateral
Tips to Get Better Rates:
- Compare offers from multiple lenders
- Bring in a co-signer with a strong credit history
- Opt for secured loans when possible
- Set up automatic payments to reduce rates in some cases
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Choosing a Loan Provider
Picking the right loan provider for studying abroad is a key step in your financial planning.
Banks vs NBFCs
Traditional banks and NBFCs offer different loan options, each with its own pros and cons. Here's a quick comparison:
Banks are a good choice if you:
- Have a solid credit score
- Can provide collateral
- Need a larger loan amount
- Want tax benefits under Section 80E
- Are okay with a longer approval process
NBFCs work well when you:
- Need quick approval
- Have fewer documents
- Want flexible eligibility terms
- Don’t have collateral
- Need full cost coverage
Among these options, Propelld stands out with features designed specifically for students.
Also, do check out more details about NBFC Education Loans.
Propelld Loan Features
Propelld offers a student-focused loan experience with several key advantages:
- Fast Processing: Loans are approved much faster, often with disbursals within 7 days.
- No Collateral Needed: Borrow up to ₹50 Lacs without providing collateral. Check out more details in their article on education loans without collateral.
- Academic-Based Approval: Your future potential matters more than your credit history.
- Complete Fee Coverage: Covers tuition and other related expenses in full.
- Flexible Repayment Options: Includes moratorium periods and customized plans to suit your needs.
"While many financial institutions look at only the past record to make the credit decision, Propelld look at the future potential and seek a 360-degree approach." – Masai School
Propelld's digital-first process streamlines everything - from application to approval - making it especially convenient for students heading abroad. By focusing on academic achievements instead of traditional credit metrics, Propelld provides opportunities for students who might not qualify for standard bank loans.
Other Important Factors
Understanding tax benefits and regulatory guidelines can help you better plan your education loan.
Tax Deductions
Section 80E of the Income Tax Act, 1961 allows you to claim tax deductions on the interest paid for education loans taken for studying abroad. Here's what you need to know:
- Entire interest amount: You can claim a deduction for the full interest paid on the loan.
- Time limit: The deduction is available for up to 8 years or until the interest is fully repaid, whichever comes first.
- Who can claim?: Both the student and the co-applicant (like a parent or guardian) are eligible.
- Principal excluded: Only the interest portion is covered; the principal repayment does not qualify.
To make the most of this benefit, keep proper records of your interest payments, obtain your annual interest certificate, and ensure your lender is approved.
RBI Rules
In addition to tax benefits, the Reserve Bank of India (RBI) has guidelines to ensure fair and transparent loan processing for overseas education. These rules protect borrowers' rights and promote clarity in the loan process.
Key borrower rights include:
- Banks must process loan applications regardless of where you live.
- If a loan is unfairly rejected, you can escalate the issue to the RBI Ombudsman.
- Lenders are required to clearly outline interest rates and terms.
- Banks should follow the Model Education Loan Scheme (MELS) framework.
These rules ensure that banks act fairly, making it easier for you to select a lender that aligns with transparent practices. Always refer to the latest MELS guidelines and your bank’s policies for the most accurate and updated information.
Summary
This section outlines the key steps and considerations for obtaining an education loan to study abroad. Securing the right loan involves evaluating providers, terms, and required documentation to make a well-informed choice.
When it comes to interest rates, fixed rates offer stability for financial planning, while floating rates might start lower but can change based on market conditions. Secured loans generally come with interest rates that are 1.5% to 4% lower than unsecured ones.
To improve your chances of approval, ensure the following:
- A strong academic record and admission to a recognized overseas institution
- Complete and accurate documentation
- A solid CIBIL score
- Availability of 10-15% margin money
Loan processing typically takes between 2 to 6 weeks.
Education loans often cover tuition, accommodation, travel, and living expenses. They usually include a 6-month moratorium period, a repayment term of 10-15 years, and tax benefits under Section 80E.
It's a good idea to consult your college’s financial aid office to clarify loan terms. Applying to multiple lenders at once can hurt your credit score, so avoid doing so. Choosing reputable institutions and courses aligned with your career goals can also boost your chances of approval and long-term success.
Use these insights to make smart and efficient decisions as you prepare for your international education journey.
Why Propelld?
Propelld offers easy and flexible education loans with quick approval and low interest rates. It provides customised repayment options, making higher education more accessible without financial stress.
The following are the primary benefits of Propelld.
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