How to Get Education Loan for Abroad Studies

In today's world, anyone aiming to build a strong career, gain global exposure, and experience a multicultural environment is likely to consider studying abroad. However, turning this dream into reality often comes with a significant financial burden. This is where education loans play a crucial role by bridging the financial gap.

Overseas education loan generally covers a range of expenses, including tuition fees, living costs, travel, insurance, and other academic-related expenditures.

What is Education Loan for Foreign Studies?

Education loan for abroad studies are credit facilities designed specifically to finance higher academic pursuits of students. Under education loan for abroad studies schemes, financial institutes provide funding to cover costs related to pursuing approved full-time Graduation, Post-Graduation, or professional courses at recognized overseas institutes.

Study loan for abroad covers a variety of expenses like college or university fees, examination applications, purchasing books and supplies, reasonable accommodation and commuting costs during the study tenure to ensure uninterrupted progress.

BENEFITS OF AVAILING AN EDUCATION LOAN

Taking student loans for overseas study provides many benefits. Besides financial assistance, it comes with systemic advantages enabling students to study stress free and realise their full potential.

1. MEET RISING COSTS OF QUALITY EDUCATION - With top global universities charging high fees, an education loan is a viable funding avenue for students.
2. FLEXIBLE AND CUSTOMISED FINANCING - Education loan for abroad studies provide customised financing aligned to specific requirements of courses and universities. Lenders offer tailored loan schemes for pursuing degrees internationally, and loan repayment schedules are based on the personalised needs of students.
3. SPECIALISED LOAN SCHEMES - Students can access specialised student loan for study abroad schemes based on their chosen course types. Specific schemes are designed to cover a wide range of financial needs, from visa application fees to travel expenses, ensuring comprehensive support throughout the study abroad journey.
4. TAX BENEFITS - Borrowers can avail tax benefits on interest paid on study loan for abroad under section 80E of the Income Tax Act.
5. MORATORIUM PERIOD - Most lenders offer moratorium periods after course completion before borrowers need to begin paying the loan EMIs. This period helps students focus on their job search to achieve income stability post-studies before the repayment starts.

ELIGIBILITY CRITERIA FOR APPLYING FOR AN EDUCATION LOAN

Mentioned below are the education loan for abroad eligibility requirements:

To enable the seamless processing of study loan for abroad applications, students need to submit scanned copies of the following documents -

1. Identity and Residency proof: Passport, PAN CARD, Voters ID, Driving License.
2. Academic Credentials such as 10^th, 12^th marksheets and Graduation marksheets, University admission letter, Standardised test scores such as IELTS, TOEFL, GRE, GMAT, SAT.
3. FINANCIAL DOCUMENTS - Three years ITR, last 3 months salary slips, last two years form 16, bank statement of at least six months, business proof and balance sheet.

Steps to follow to apply for an education loan: Thoroughly research tuition fees, living expenses, travel costs and other requirements associated with your overseas education. This research will help you determine the total cost of your education abroad.

Based on these findings, you can customize the loan amount that you need. Once you have a clear understanding of your requirements, follow these steps to apply for an overseas education loan:

1. Application form - Start the online application for a student loan by filling in basic details on the lenders website or by visiting the financial institution in person.
2. Document submission - Submit the required documents to the lender after receiving confirmation of your basic loan eligibility.
3. Verification - The lender will then verify your education loan application and the submitted documents.

Once approved, the sanctioned loan amount will be disbursed into your bank account.

Types of Study Loans Available

Indian students can choose between two main types of loans:

1. Collateral Loans

What is a Collateral Education Loan?

A collateral overseas education loan is a secured loan that requires the borrower to pledge an asset as security with the lender. This asset acts as a guarantee, reducing the financial risk for the bank or financial institution. In exchange, lenders often offer better terms, such as lower interest rates, higher loan amounts, and longer repayment periods.

This type of loan is ideal for students aiming to pursue higher education in countries like the USA, UK, Canada, Australia, or Germany, where education costs can be substantial.

Types of Acceptable Collateral

Lenders typically accept the following assets as collateral:

• Residential Property: Land, house, or flat in the borrower’s or co-borrower’s name.
• Non-Agricultural Land: Vacant plots not used for farming.
• Fixed Deposits: With a lien marked in the bank's name.
• Life Insurance Policies: Certain types with a surrender value.
• Government Bonds or NSCs (in some cases).

Agricultural land is usually not accepted, and the property must have clear ownership with legal documents.

Key Features of Collateral Loans

• Higher Loan Amounts Based on the asset's valuation, banks can approve education loans ranging from ₹20 lakhs up to ₹1.5 crores or even higher.
• Lower Interest Rates As the loan is secured, interest rates are generally lower than those of unsecured loans.
• Tax Benefits Under Section 80E of the Income Tax Act, the interest paid on education loans can be claimed as a deduction.
• High Approval Chances Strong collateral improves the chances of loan approval, even if the co-applicant has a modest income or credit history.
• Longer Repayment Tenure Repayment periods can extend up to 15 years, with a moratorium period during the course duration and an additional 6–12 months post-completion.

Who Should Consider a Collateral Loan?

• Students planning to pursue high-cost courses abroad (MBA, MS, MBBS, etc.).
• Those seeking large loan amounts (above ₹7.5 lakhs).
• Families who can offer legal property or other acceptable assets as collateral.
• Applicants looking for better interest rates and flexible repayment.

Important Points to Remember

• The property or asset will remain mortgaged until the loan is repaid.
• Valuation and legal verification of the collateral are mandatory and done by the bank.
• Some processing time (2–4 weeks) may be needed due to documentation and property assessment.
• Non-repayment can lead to the asset being seized by the lender, so it's essential to borrow responsibly.

2. Non-Collateral Education Loans

A non-collateral loan is an unsecured loan that doesn’t require any assets as security. An abroad education loan without collateral is sanctioned based on factors like your academic performance, the course you’re pursuing, and the co-applicant’s financial profile.

Key Features

• No Collateral Needed: No need to pledge property or assets.
• Loan Amount: Typically covers up to ₹7.5 lakhs for India and ₹40-50 lakhs for abroad studies, depending on the lender.
• Flexible Repayment: Loans usually have flexible terms, with a moratorium period until after your course.
• Higher Interest Rates: Since these loans are unsecured, the interest rates can be higher than secured loans.

Eligibility Criteria

• Admission to a Recognized University: You must have a confirmed seat at a reputable institution abroad.
• Co-Applicant Requirement: A parent or guardian with a stable income and good credit history.

Benefits

• Quick Processing: No property documents, so approval is faster.
• No Asset Risk: No fear of losing property in case of default.
• Tax Benefits: Interest paid is eligible for tax deductions under Section 80E.

FAQs

What is the rate of interest on education loans for overseas studies?

Depending on the lender, collateral, and applicant profile, abroad education loan interest rate usually ranges between 9% and 14% annually.

Do education loans have a tax benefit?

Yes, interest paid on student loans is tax-deductible (no limit, for a maximum of 8 years) under Section 80E of the Income Tax Act.

Can students acquire a loan before securing admission?

Pre-admission loans or pre-visa loans are provided by certain lenders, nevertheless, final disbursement usually requires an admission letter.

What is the maximum loan amount that students can get?

Based on the country, course, and institution, loan amounts differ. Depending on the course fees and cost of living, loans usually range from ₹10 lakhs to ₹1 crore (or comparable amount in other currencies).

What are the eligibility requirements for an education loan for abroad studies by Indian government?

The eligibility requirements for an education loan for abroad studies by the Indian government generally entail admission to an accredited overseas university, Indian citizenship, a solid academic performance, a co-applicant with a steady income, and adhering to the bank's credit and documentation guidelines.

For further assistance or queries students can contact us, Edwise International, and avail our wide range of services for students on destinations like Universities in UK, study in UK, study in USA, study in Ireland, study in Canada, study in Australia, study in New-Zealand, study in Singapore, study in France, study in Germany and many other countries.