Abroad Education Loans: A Collateral Free Approach

Education loans have entirely changed the way higher education was seen in India. Earlier financial incapability was seen to be a significant hurdle for a majority section of the population that, despite being talented, lacked the resources to materialize their true potential. In a less transparent environment, loans were restricted to a select few, but the system has completely transformed. Even those students who don’t have the collateral to pledge can go to the world’s top universities and touch the zenith of success. The banking system in contemporary times is so efficient that you can get loans up to INR 60 lakh within a week.

Now we will give a detailed picture of getting a loan for abroad education when you don’t have any collateral to pledge. We will be providing all the details regarding the process, interest rates, repayment, etc.

What’s the status of education loans for abroad studies in India?

Earlier, there were only select banks lending for abroad education, and there were many apprehensions on lending. Now the scenario is completely revamped, and there are plenty of lenders providing loans for abroad education. However, when it comes to collateral-free lending, the lenders are primarily private banks, NBFCs, and Foreign lenders. Public Sector Banks are yet to venture into this space. Although they do lend up to INR 7.5 Lakh in education loan without collateral, this has no use when it comes to abroad education. 

Private banks have completely taken over faces base, and they have really good schemes that provide loans for abroad education covering a wide range of expenses. Not only the application process is simple rather the criteria for the grant of a loan are also less, and they are sanctioned in very little time. The interest rates and the repayment tenure are also very feasible for students, coupled with the fact that the Moratorium period is also from 6 months to 1 year. So if you have a good course in the exams like GRE, TOEFL, IELTS, etc., then getting the loan increases substantially. There are other criteria on which the banks make the assessment, but the student’s academic record and the institution where they got the admission also play a crucial role in finalizing the loan.

What are the eligibility criteria for students and co-applicants?

The eligibility criteria vary from one financial institution to another. Some are less strict in assessing the requirements, and some are more, but there are certain criteria that one can find in all of them. These criteria are different for the student and co-applicant. There are some relaxations for sure if you go through fintech companies working in the space as they streamline the whole process and get some concessions in terms of eligibility requirements. 

Eligibility For Students

  • The student must have attained 18 years of age, and this is something that is non-negotiable. In the case of students below the age of 18, a guardian will have to be there. 
  • The applicant must have secured a seat under a UG or PG or any recognized program into an institution that is on the list of the institutes to which they provide the loan. 
  • Different banks and NBFCs put other academic criteria to grant the loan. One must fit into those criteria, and banks rarely compromise on this in cases of unsecured loans. 
  • The marks obtained in the exams like GRE, GMAT, TOEFL, etc., also play an important role, and a score above 300 substantially increases your chances of getting the loan sanctioned.

Eligibility For Co-Applicants

  • The co-applicant must have to have a stable source of income as this is paramount to the sanctioning of the loans.
  • The ITR, Income Statement and all the relevant documents must be of the preceding or current financial year.
  • All the documents that are provided must be of the co-applicants only, and there shouldn’t be any discrepancy whatsoever.

The reason for such stringent criteria is to minimize the risk associated with the loans. If any untoward incident happens then, banks are at considerable risk. The rising NPAs (Non-Performing Assets) have also increased scrutiny. However, the chances of getting the loan sanctioned increase if you are approaching through Fintech companies working in this space then they will do the negotiations, which you will not be doing in case of rejection of the loan application. Banks don’t usually entertain follow-ups in case of loan rejections. 

How to choose the perfect abroad education loan without collateral?

Taking a loan for studies abroad has a long-term financial impact, extending to almost a decade or more. Thus it is always wise to choose the best loans among all the possible options. Loans differ from one lender to another, and some criteria might be good with one lender and some with others. 

Based on the needs, one should choose the best loan while taking into consideration the following criteria:

  • The rate of interest of the loan. The rate of loan varies from one lender to another, and even a slight change in the interest rate can make a substantial difference in the amount to be paid. 
  • The loan tenure or the repayment period. Most lenders give a repayment period of around ten years. While in some cases, like Prodigy finance, they give the applicants the option to pay in 7,10,15, or 20 years. At the same time, Axis Bank provides a repayment period of 20 years. 
  • The loan amount that a bank or NBFC or an international lender is ready to lend. The maximum loan amount must meet the needs of the applicant. 
  • The moratorium period or the repayment holiday is the time after the completion of studies when the applicant has to start paying the loan. Banks and NBFCs give the repayment holiday from six months to one year. So one should choose a loan that gives a long repayment holiday. 
  • The processing fee is another condition that an applicant should compare among the lenders. The processing fee is usually high in the case of international lenders, and it can go as high as 5% of the loan amount. 

Going abroad for higher studies hasn’t been more convenient. If a student is meritorious, there are multiple options for students to go overseas, and financial institutions always help such students in getting a world-class education. An informed decision with the help of experts can make this seemingly arduous task a cakewalk.

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