The cost of international education has surged, with countries like the US, UK, Canada, and Australia becoming top destinations for Indian students, further driving demand for affordable financing options.
According to the Ministry of External Affairs, over 1.3 million Indian students studied abroad in 2024, and the number is expected to increase. This makes it even more critical to choose the right education loan with the lowest interest rate.
While many banks and lenders offer overseas education loans, the interest rates vary significantly. In this guide, we will explore banks and financial institutions providing the lowest interest rate abroad education loans, compare their loan terms, and more.
Key Takeaways
- SBI and Bank of Baroda offer the cheapest loans, starting at 9.4% and 8.75%.
- Axis Bank and ICICI Bank offer rates from 9.5% to 10.5%, with quicker processing.
- Public banks have lower rates but require a 10% margin; private banks offer more flexibility.
- Public banks like SBI provide tax deductions on interest under Section 80E.
- Rates are expected to rise slightly, but public sector banks will remain the most affordable option.
Why Interest Rates Matter When Taking an Education Loan for Studying Abroad?
Interest rates on education loans significantly influence the total amount you end up repaying. Even a 1% difference in interest can result in thousands of rupees in additional costs over the course of a long-term loan.
For example, if you borrow ₹40 lakh for studying abroad at an interest rate of 9% compared to 12%, you'll end up paying nearly ₹6 lakh more over the loan's tenure. Therefore, finding out the cheapest education loan providers for abroad studies is crucial for reducing your long-term financial burden.
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Public Sector Banks Providing Lowest Interest Education Loans
Public sector banks in India have long been the preferred option for students seeking affordable interest rates for study abroad loans. The main reason is the government's active involvement in subsidising education loans, making them more accessible to students.
State Bank of India (SBI)
Bank of Baroda (BOB)
Union Bank of India (UBI)
The State Bank of India (SBI) offers various education loan options, including the SBI Global Ed-Vantage Loan, with interest rates as low as 9.40% per annum. Additionally, the bank provides flexible repayment options and a long tenure (up to 15 years), making it one of the most affordable options in the market.
Key Features:
- Interest rate starts at 9.40% per annum
- Loan amount is up to ₹1.5 crore
- Available for undergraduate, postgraduate, and doctoral programs at approved universities worldwide.
- Margin money is 10% of the loan amount
- Processing fee is ₹10,000 (non-refundable)
- Tax Benefit: Section 80E allows a tax deduction on the interest paid, making SBI a highly favourable choice.
The Bank of Baroda (BOB) offers interest rates starting at 8.75%. Its Baroda Scholar Loan is designed for students pursuing MCA, MBA, and MS programs at top institutions. BOB also provides loans for professional courses like CPA and CIMA.
Key Features:
- Interest rate starts at 8.75% per annum
- Loan amount is up to ₹80 lakh
- Available for students pursuing a variety of graduate and professional courses.
- Margin money is 0% to 10%
- Processing fee is ₹10,000 (refundable)
With its lower interest rate and minimal margin money, BOB is a strong contender for students seeking affordable education loans.
Union Bank of India (UBI) offers interest rates starting from 9.80%. The bank's offerings include secured loans up to ₹1.5 crore and unsecured loans for up to ₹40 lakh. UBI's Special Union Education Loan Scheme is available for students attending prestigious universities abroad.
Key Features:
- Interest rate starts at 9.80% per annum
- Loan amount is up to ₹1.5 crore (secured), ₹40 lakh (unsecured)
- Available for undergraduate, postgraduate, and doctoral programs at globally recognised universities.
- Margin money is 10% to 15%
- Processing fee is ₹10,000 (refundable)
UBI's combination of low interest rates and flexible repayment options makes it an attractive option for students.
Private Sector Banks with Competitive Interest Rates
While public sector banks offer the lowest interest rates, private sector banks are also catching up, providing competitive options with streamlined processes and digital conveniences.
Axis Bank offers interest rates starting from 9.50%. It provides loans for studying in the US, UK, Australia, and other popular destinations for Indian students.
Key Features:
- Interest rate starts at 9.50% per annum
- Loan amount is up to ₹75 lakh
- Available for various undergraduate and postgraduate programs.
- Margin money is 15%
- Processing fee is ₹10,000 (refundable)
Axis Bank offers digital convenience and quick processing, making it a suitable option for students who need a hassle-free loan experience.
ICICI Bank offers interest rates starting at 10.50%. Although slightly higher than public sector banks, ICICI offers higher loan amounts (up to ₹1 crore) and tailored solutions for students pursuing courses such as MBA, MS, and other technical programs.
Key Features:
- Interest rate starts at 10.50% per annum
- Loan amount is up to one crore
- Available for various professional and technical courses.
- Margin money is 15% to 20%
- Processing fee is ₹10,000 (refundable)
ICICI's flexible repayment terms and higher loan limits make it an ideal choice for students with higher financial needs.
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Interest Rate Trends for Education Loans 2025
In 2025, the interest rate scenario for education loans is likely to be shaped by a range of global and domestic factors, including inflationary pressures and changes in monetary policy.
Public sector banks are expected to continue offering the lowest interest rates, driven by government subsidies and education-focused mandates. However, private banks and NBFCs may begin offering more personalised loan terms with better digital experiences and faster approval processes.
While public sector banks like SBI and Bank of Baroda will remain the leaders for affordable education loans, students seeking more flexibility or faster processing may lean toward private banks such as Axis Bank and ICICI Bank, which offer slightly higher rates but better convenience.
Explore Myths and Facts about Education Loans. Get the real insights before making your loan decisions.
How to Choose Best Education Loan Provider with Lowest Interest?
To secure the lowest interest rate on your overseas education loan, it's essential to:
Evaluate Different Lenders
Compare interest rates, processing fees, and repayment terms across multiple banks and financial institutions to find the best option for your needs.
Check Eligibility Criteria
Ensure that you meet the loan eligibility requirements for your preferred lender.
Consider the Loan Amount
Some banks offer lower interest rates for smaller loan amounts, so factor in how much you genuinely need.
Look for Tax Benefits
Opt for loans that offer tax exemptions under Section 80E to reduce your financial burden further.
Seek Expert Advice
Platforms like Propelld can provide student loans directly, offering solutions and guidance to meet your financial needs.
Securing the lowest interest rate abroad education loan is essential for managing the financial impact of international education. In 2025, public sector banks such as SBI, Bank of Baroda, and Union Bank of India will remain the top choices. Private banks, such as Axis Bank and ICICI Bank, offer convenient and fast processing options, albeit at slightly higher rates.
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