Education loan for study abroad made easy

In the year 2020, even as the pandemic raged across the world, almost more than 2.5 lakh students enrolled into foreign universities, starting off mostly in an online mode. Even amidst the sense of financial insecurity, almost 40% of these students took education loans. This speaks volumes of the popular trust on student loans. So you are right in thinking about funding your education by means of such loans and the following account will provide you a good overview of the entire process to help you get started.

Do I need a loan?

This is one of the first things to assess. Following are some of the common categories of students who apply for loans:

1.I do not have enough funds

Pursuing higher education abroad can be an incredibly rewarding experience, both academically and personally. However, the high costs associated with foreign education can often pose a significant financial burden on students and their families. This is where foreign education loans come into play.

Foreign education loans are specifically designed for students who wish to study abroad but cannot afford the exorbitant tuition fees, accommodation expenses, and living costs. These loans provide financial assistance to cover all these expenses and enable students to fulfill their academic aspirations without worrying about the financial implications.

2.I have the funds but do not want to strain my savings

Many others, even with hefty savings, think of taking a loan, which is actually a wise decision for the future. Moreover, foreign education loans offer various benefits such as flexible repayment options, lower interest rates, and longer repayment periods. They also help build credit history and improve credit scores, which can prove beneficial in the long run.

3.I do not want to impose on my parents/ guardian

Many students do not want to burden their parents financially. This is a fantastic way to think and the student then becomes greatly self-dependant in the years to come. This also helps in forming a positive impression on future employers, who highly appreciate the student’s independent attitude. In fact, sometimes parents think the same way and want their children to take up their own academic responsibilities in the form of student loans to inculcate this independent streak in them.

What does an education loan cover?

Depending on the amount sanctioned, a study abroad education loan usually covers tuition fees and other expenses such as:

• Living expenses

• Campus fees

• Books and stationary

• Health Insurance

• Travel tickets

Who is a cosigner?

When a student applies for an education loan, there is need for someone to guarantee the repayment of the loan. Such a person, who guarantees to pay in case of default on the part of the applicant at any step of the process, is referred to as the cosigner. The person can be the parents or a relative of the applicant. By being a cosigner, one can get tax benefits under section 80E.

Am I eligible to apply for an education loan?

Good question! Before jumping into the application process, it's important to understand the eligibility criteria to apply for a loan. In simple terms, eligibility refers to the requirements that must be met in order to qualify for a loan. Let's look at the various criteria that helps determine if you're eligible for an education loan.

Citizenship- to apply for loans from Indian lenders, both applicant and cosigner must be Indian citizens

Related document proof: Aadhar card, voter ID card, valid passport

Academic achievement- A minimum of 60% aggregate is expected in terms of high school grades. If you have finished a higher degree, an above-average GPA leads to higher sanction amount.

Related document proof: 10th and 12th standard marksheets; semester-wise marksheets from undergraduate degree, if applicable.

Admission to a recognized university: each lender has a list of universities in their database and an admit from one of these is required to get loan approval

Related document proof: confirmed offer letter from the University

Test scores: a GRE score of 310+ is considered to have a favourable influence over loan applications. In the absence of GRE scores, TOEFL/ IELTS scores can also be considered.

Related document proof: official score cards

Financial background of Cosigner: the cosigner needs to have a stable monthly income of INR 40,000 and above, secured savings as well as a permanent job position. A retired individual as a consignor is usually not preferred, but the chances are also dictated by their financial stability in terms of savings and assets.

Types of loans

Education loans can broadly be classified into two types – secured and unsecured.

Secured loans – they are the ones that are given only upon furnishing collaterals. Property, fixed deposits, as well as life insurance can qualify as collaterals.

Following are the advantages of secured loans:

• Lower interest rates

• Higher sanction amounts

• Longer repayment time

Unsecured loans- these do not require any collaterals but in this case the cosigner’s credit history as well as financial standing is taken into account.

When the consignor is financially stable (stable permanent job holder with high savings), these loans require less paper work compared to secured loans. However, some drawbacks of unsecured loans include:

• Higher processing charges

• Higher interest rates

• Partial repayments may be needed during the study period

Steps to apply

Decide on the amount of loan you wish to take.

Decide on whether you wish to take a secured or unsecured loan based on the documents you can or cannot furnish.

Compare the various lenders. The comparison should first be between public banks and private lenders and once you select a category, look further into the following criteria before selecting one lender:

• Loan interest rate

• Moratorium

• Maximum loan amount (this should cover your loan requirements)

• Average sanction time and processing fee

• Repayment terms

Once you select a lender, please get in touch with the right person and carefully fill out the forms. It is extremely important to get hold of the right person, since the entire loan approval process, including accuracy of submitted documents is dependant on this step.

Submit the forms along with the necessary documents such as those mentioned before.

Wait for loan approval.

Popular lenders

Lenders can be classified into public banks and private including entities either operating independently or linked to private banks or private banks. A comparison of the various loan related parameters for popular lenders is given below

Parameter:

State Bank of India( Public)

Loan Range: Upto 1.5 crore

Rate of Interest: 11.59%

Repayment: One year after the course completion or 6 months after securing a job, whichever is earlier. Upto 15 years repayment time.

Secured/ Unsecured (values in INR): Mostly secured. Unsecured loan amount is below 7.5L.

Bank of Baroda( Public)

Loan Range:Upto 1.5 C

Rate of Interest: 10.4-11.15%

Repayment: 6 months after the course completion or 1 year after securing a job, whichever is earlier. Upto 15 years repayment time.

Secured/ Unsecured (values in INR):Mostly secured. Unsecured loan amount is below 7.5L.

HDFC Credila( Private):

Loan Range:>1 L-75 L

Rate of Interest: 9-12 %

Repayment: 1 year after course completion. The total repayment time is flexible and decided on a case-by-case basis.

Secured/ Unsecured (values in INR):Both. Unsecured upto 75 L.

Axis Bank( Private): Loan Range:7.5L-50L

Rate of Interest: 10.5-12%

Repayment: 6 months after course completion. Upto 15 years repayment time.

Secured/ Unsecured (values in INR):Both. Unsecured upto 40L

Avanse( Private) Loan Range:10L- 75L

Rate of Interest: 12-16%

Repayment: 6 months after course completion or 3 months after getting a job, whichever is earlier. Upto 10 years repayment time.

Secured/ Unsecured (values in INR):Both. Unsecured upto 75L.

Prodigy Finance( Private)

Loan Range: Upto 80% of course fee

Rate of Interest: 6.7-11% (variable interest rates, can go up higher)

Repayment: 6 months after course completion. Upto 20 years repayment time.

Secured/ Unsecured (values in INR):Unsecured

Blossom Abroad Advantage

As you must have realized by now, being able to get a loan sanctioned from the right place at the right time depends on so many factors. First of all, the entire process needs to be targeted towards your requirements and this is no one-solution-fits-all service. Next, you need to be able to complete the entire process, not only by optimizing current processing times, but also planning well for a hassle-free repayment process in the future. As has been pointed out previously, this is all made possible, if you are connected with the right person at the right time. At Blossom Abroad, we can give you advice on how much education loan to take, depending on your current financials and future plans. Furthermore, we can connect you with the right loan advisor from the highly recommended pool of lenders, since many of them have worked in association with us over time. Contact us now so that we can help you with your loan process. Do keep in mind that we also help with the entire visa process, even beyond the financials. Hope to meet you soon!