Student loans for studying abroad

What are student loans for studying abroad?

A student loan for abroad is a product specifically designed to assist students in paying for post-secondary education and the corresponding fees- tuition, classroom supplies, and living expenses- to study abroad. It may differ from other loans because the interest rate may be significantly lower, and one may reschedule the repayment terms while the student is still enrolled.

Why are educational loans beneficial?

Sometimes a family’s earnings and savings are insufficient to cover the cost of a student’s education. In these cases, one must obtain a student loan from a bank or a non-banking financial institution (NBFC). A student loan can cover all or part of the educational costs. As a result, an education loan for studying abroad ensures one can complete a university education without any financial constraints.

Types of education loans

There are two types of study loans for abroad that can be helpful when looking for an education loan to study overseas-

Secured loans

In this loan for international studies, the borrower pledges some of their assets as collateral. When a person obtains a secured loan, they must mortgage their property to the bank or financial institution. Furthermore, the borrower’s mortgaged property cannot be agricultural land.

Unsecured loans

Unsecured loans are those that the borrower’s assets cannot secure. Financial institutions may offer these under a variety of guises or marketing packages. One must meet several requirements to obtain an unsecured loan.

Eligibility

Below are the eligibility criteria for student loans for studying abroad-

Browser’s profile

The GRE score is essential when applying for an international student loan. Along with the GRE score, overall academic performance and work experience are crucial factors in obtaining a loan.

Co-borrower’s profile

The profile of the co-borrower is also crucial when applying for a student loan to study abroad. The financial background, location, and owned assets are all important considerations when applying for a foreign education loan.

University ranking

The ranking of the university to which you have applied is also important. The higher the university’s ranking, the better the chances of receiving a loan. Top universities worldwide also provide better jobs, increasing the security of foreign education loans.

Underwriting norms

Underwriting norms are guidelines established by loan vendors to ensure that loans are safe and secure. They are issued to determine whether or not the person is eligible for a study loan abroad, the amount of loan the company is willing to issue, and the interest rate at which one can issue the study loan abroad.

Documents

The below documents are a must when applying for student loans for studying abroad-

KYC documents

• PAN card
• Driving license
• Aadhar card

Address proof

• Valid water/electricity/ LPG bill
• Voter’s ID card
• Current house lease agreement
• Valid passport

Academic record documents

• 10th Result
• 12th Result
• Proof of admission
• Undergraduate result semester-wise (if necessary)
• Entrance exam result – Abroad institutes (GRE, GMAT, TOEFL, etc.)
• Entrance exam result- Domestic institutes (CAT, CET, GMAT, CMAT, JEE, NEET, GRE, etc.)

Top educational loan providers

Below are some of the best public education loan providers for studying abroad-

Name of bank	Loan amount	Rate of interest per anum
State Bank of India	Up to 1.5 crores	10.55%
Allahabad Bank	50 lakhs	7.15% to 10.5%
Axis Bank	40 lakhs or more, depending on the need	Up to 4 lakhs- 15.2%Up to 7.5 lakhs- 14.7%Above 7.5 lakhs- 13.7%
HDFC	Up to 30 lakhs	14%
Credila	No limit. It depends on the requirement	12.10% or a higher floating rate (depending on the risks points of the applicant)
IDBI Bank	Depends on the need	Up to 7.5 lakhs- 11.25% Above 7.5 lakhs- 11.85% For education at premier foreign universities- 9.85%
Indian Overseas Bank (IOB)	Up to 40 lakhs	Depending on the bank’s discretion
Bank of Baroda	1,50,00,000	8.50-9.15%

Avanse Financial Services	No limit. It depends on the requirement	11.5% or higher floating rate (depending on the risk points of the applicant)
Syndicate Bank	Up to 40 lakhs	6.90 to 8.80%
Canara Bank	Up to 40 lakhs	6.90 to 8.80%

State Bank of India

The State Bank of India provides the SBI Student Loan Scheme to Indian nationals who want to study abroad. They offer education loans for studying abroad to job-oriented professionals, technical graduation degree courses, or post-graduation degree and diploma courses offered by reputed colleges/universities such as MCA, MBA, MS, and so on. Prospective students can apply for four types of education loans from the State Bank of India-

• Scholar Loan
• Global Ed-Vantage
• Student Loan
• Skill Loan

Punjab National Bank

The PNB Saraswati scheme provides deserving students with education loans to pursue higher professional and technical education in India and abroad. The following are the main features of the PNB education loan scheme-

• Courses are approved.
• Graduation- For professionally or technically oriented courses offered by reputable universities.
• MCA, MBA, MS, and other postgraduate degrees
• Degree or diploma courses such as aeronautical, pilot training, shipping, and so on, provided that the competent regulatory bodies abroad recognize them for employment in India or abroad.
• Repayment period- Up to ten years for loans of INR 7.50 lacs or less and up to fifteen years for loans exceeding INR 7.50 lacs.
• A 5% margin applies to loans exceeding Rs. 4 Lacs.

Canara Bank

Canara Bank sponsors the IBA Model Education Loan Scheme, which provides education loans to Indians studying in India and abroad. On overseas education loans, the bank offers a 15% margin with a repayment period of up to 15 years. The payback holiday is equivalent to the course length plus one year. One can use the loan to finish a high school or college degree program. Borrowers would be required to provide security for loans exceeding Rs.7.5 lakh.

Private banks

Axis Bank

Axis Bank provides study loans in foreign countries at competitive interest rates. If the loan amount exceeds INR 4 lakhs, the borrower must arrange a margin of 15%. The bank provides a maximum of INR 20 lakhs and covers various costs such as tuition, housing, and books.

Bank of Baroda

BOB offers domestic and international services to its retail and business customers. For many years, the Bank of Baroda’s BOB Education Loan has enabled thousands of students to pursue their dream of studying abroad. 

The BOB Education Loan gives female students a 0.5 percent interest rate reduction. Furthermore, as a scheduled commercial bank, Bank of Baroda offers various interest subsidy schemes, including the Central Scheme of Interest Subsidy (CSIS) for economically weaker sections, the Dr. Ambedkar Central Sector Scheme of Interest Subsidy for other backward classes and economically backward classes, and the Padho Pardesh interest subsidy Scheme for minority communities.

ICICI Bank

To meet the requirements of a diverse customer base, ICICI provides a wide range of credit products and banking and financial services. Because the bank understands students’ professional goals, it has designed its ICICI foreign education loan to ensure that each student thrives on their path to the future. 

Students can achieve their goal of obtaining a world-class academic achievement in top universities worldwide with a collateral-free loan of up to Rs.40 lakh, tax savings on interest paid u/S 80(E), customizable tenure and repayment options, and competitive ICICI Bank education loan interest rates.

Non-banking financial companies

Non-banking financial institutions offer both secured and unsecured loans. Unsecured loans are typically larger than those provided by banks. Non-banking institutions make loans ranging from 100 to 120% of the mortgage value. Incred and Auxilo are two NBFCs. Below are some of the NBFCs-

Credila- A division of the renowned HDFC bank, Credila offers loans to Indian students who want to pursue their studies overseas. The loans can be fully returned within ten years and offered at a competitive floating interest rate.

Avanse- As a member of the DHFL group, one can regard it as one of India’s most well-liked, non-banking financial institutions. Avanse student loans cover various costs and up to 100% of tuition. The processing fee may be up to 1 to 2 percent of the loan amount, and the interest rates are variable.

The International Student Loan Scheme (ISLP)- It is a program specifically created for international students who wish to pursue academic studies in the United States. Students can borrow as little as $1500 with this program and prolong the payback time by up to 25 years. The loan provided under this program covers the tuition fees and other costs.

The Global Student Loan Corporation (GSLC)- Offers loans to international students to continue their higher education in the US without needing a co-signer.

Incred- InCred is an NBFC that provides study abroad loans of up to INR 40 lakhs without requiring collateral. This loan’s interest rate ranges from 11.75% to 16% p.a. Applicants must pay simple interest or partial interest during the study period, and the maximum loan term is ten years. The processing fees for this loan are typically 1% to 1.25% of the loan amount.

Auxilo- Auxilo is a pro-education NBFC that offers study-abroad loans. This scheme allows an optimum loan of INR 40 lakhs as an unsecured education loan. The interest rate ranges from 12.70% to 18% p.a., and the processing fees range from 1% to 2% of the loan amount (plus GST). There is no penalty for early payment.

Things to remember while applying for education loans abroad

Moratorium period- The borrower is not required to make any bank payments. This period varies by bank and may last for some time after completing the course.

Loan Margin- Typically, banks only provide part of the amount, i.e., 100 percent of the funds required to fund education. Most public sector banks lend 90% of the total amount, with the remaining 10% arranged by the aspirant.

Exchange Rate Influence- Always calculate the amount you will receive at the disbursement, as any change in the exchange rate can influence the amount you will receive.

Key takeaways

• Secured and unsecured loans are the two types of education loans.
• KYC documents, address proof, and academic documents are necessary when applying for student loans for studying abroad. 
• The State Bank of India, Axis Bank, and Punjab National bank are among the best educational loan providers to study abroad.

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FAQs

Q1. Which banks give education loans easily?

Answer- SBI, Bank of Baroda, Axis Bank, and HDFC Bank are among the banks that provide education loans efficiently.

Q2. Why do banks reject education loans?

Answer- Most lenders have stringent policies regarding the CIBIL scores of education loan applicants and their co-applicants regarding education loans. In most cases, a CIBIL score of less than 600 is one of the reasons for an education loan rejection.

Q3. What is the lifetime max for student loans?

Answer- Undergraduate students have a lifetime aggregate limit of $57,500, of which no more than $23,000 can be in subsidized loans. Graduate students have a lifetime borrowing limit of $138,500, with no more than $65,500 in subsidized loans.