Education Loans for UK: Eligibility, Loan Amount, Documents Required

Studying in the UK is a dream for many international students; however, securing an education loan for UK studies can be challenging, as  UK Student loans for international students (excluding those from the EU) are not available. International students often face higher tuition fees compared to home students, with laboratory-based degrees potentially costing up to £30,000 per year.

In addition to tuition fees, international students must demonstrate financial stability to obtain a student visa. Specifically, students need to have £1,015 per month for each month of study, up to nine months, if studying outside London. For those studying within London, this requirement increases to £1,265 per month. This means students must have between £9,135 and £11,385 saved in their bank account before applying for their student visa.  Securing an education loan for the UK can help meet these financial requirements.

Eligibility

To be eligible for an education loan for the UK, you generally need to meet the following criteria:

• You are an Indian Citizen: The applicant must be a citizen of India.

• Age Requirement: At the time of the loan application, you should be between the ages of 18 and 35.

• Good Academic History: Consistent academic performance.

• Admission to a Recognized UK Institution: You must have verified acceptance to a reputable UK university.

• Co-applicant with a Stable Income Source: You need a co-applicant (such as your spouse or parent) with a consistent source of income.

Students must first comprehend and meet the qualifying standards before applying for an Education Loan from their preferred money lending institution or bank. Various banks have different eligibility conditions. There are a few factors, however, that all money lending organizations (banks) consider:

• The student must be an Indian citizen.

• If the loan applicant is under 18, their parents must take out the loan.

• A strong academic background is required of the candidate.

• A recognized international university, institution, or college must have accepted the candidate.

• Because banks prefer courses that will assist people in obtaining employment, the applicant's chosen course must be technical or professional in nature.

When considering Education Loans for the UK, the amount you can borrow varies based on factors such as the lender, your profile, and the type of loan. For those seeking an education loan for a master's in the UK, options include both secured and unsecured loans. An education loan for the UK without collateral may offer different terms compared to secured loans, impacting the total amount available. Here are some common options for education loans for UK:

• Public Banks: Banks like SBI offer education loans up to INR 1.5 crore. These loans often come with favorable terms and lower interest rates compared to private lenders​.

• Private Banks:   Institutions like ICICI Bank, Axis Bank, and HDFC Bank provide education loan for UK up to INR 1 crore. Private banks may offer faster processing times and more flexible repayment options for an education loan for masters in the UK. However, these loans often come with higher interest rates, especially when considering education loans for the UK without collateral.

• Non-Banking Financial Companies (NBFCs): Companies such as HDFC Credila, Avanse, and InCred offer loans tailored specifically for education abroad, with amounts up to INR 50 lakhs. NBFCs might provide more personalized services and quicker loan disbursements.

• International Lenders: Prodigy Finance offers loans up to USD 100,000 for students pursuing higher education abroad. These loans are particularly beneficial for students who might not have access to traditional co-signers or collateral, making them a great option for a non-collateral education loan for the UK.

Interest rates for education loans for UK can range from 9.8% to 15.5% depending on the lender and the type of loan. Public banks generally offer lower rates compared to private banks and NBFCs. Here's a more detailed breakdown:

• Public Banks: Public sector banks like the State Bank of India (SBI) and Bank of Baroda typically offer lower interest rates ranging from 9.8% to 12%  for Education Loans for the UK. These banks often provide better terms for students pursuing education in premier institutions or courses.

• Private Banks: Private banks such as ICICI Bank, HDFC Bank, and Axis Bank offer interest rates that generally range from 10% to 13.5%. While these rates might be higher compared to public banks, they often provide more flexibility and quicker loan processing.

The following mathematical formula can be used to determine your education loan for UK.

EMI = [P x R x (1 + R) ^ n] / [(1 + R) ^ n - 1]

P= Principal loan amount

R= Applicable rate of interest

n= Number of monthly installments.

Navigating the loan process for Education Loans for UK involves several key steps to secure funding for your studies. Whether you're applying for an education loan for a master's in the UK or other programs, understanding the process can help streamline your application.

Choose Course and College: Select the course and university in the UK.

Estimate Costs: Calculate the total expenses, including tuition, living, travel, and other costs.

Compare Loan Options: Research and compare loan offers from various lenders to find the best fit. Processing times are generally shorter due to favorable ties between India and the UK.

Select Lender: Pick the lender with the most favorable terms.

Complete Application: Fill out the loan application form with accurate information.

Submit Documents: Provide required documents, including:

• Identification (passport, Aadhaar card)

• Academic records (transcripts, certificates)

• CAS (Confirmation of Acceptance for Studies) letter

• Collateral documents (if applicable)

• Tier-2 or Tier-4 student visa

Receive Sanction: After approval, get the loan sanction letter.

Visa Submission: Submit the sanction letter to the immigration office to obtain your visa.

Finalize Disbursement: After receiving your visa confirmation, submit it to the bank to complete the loan disbursement process.

Education loan sanction letter format for the UK

The format of an education loan sanction letter for the UK can vary between lenders. Some lenders may provide a detailed, 2-3 page sanction letter, while others may present one-page document.

The education loan sanction letter format for the UK generally includes:

• Addressed to the borrower and co-borrower

• Comprehensive details about the loan for future reference

• A date and validity period specified

To support your application for an education loan for the UK, you will need to provide the following paperwork:

1. Identity Proof: Aadhar card, voter ID, passport, or driving license.

2. Address Proof: Bank statement, rental agreement, ration card, utility bill, or telephone bill.

3. Age Verification: Aadhar card, voter ID, driver's license, or passport.

4. Loan Application Form: Completed form from the bank.

5. Photographs: Two passport-sized photos.

6. Income Proof: Salary slips or Form 16 for salaried individuals.

7. Financial Documents: Current pay stub and most recent income tax assessment order.

8. Bank Statement: For the past six months.

9. Co-Borrower’s Assets and Liabilities: Brief statement.

10. Foreign Exchange License: Duplicate copies.

11. Educational Records: Results of recent qualifying test in India.

12. University Acceptance: Letter of unconditional acceptance or similar documentation.

13. Cost Estimate: List of projected course costs.

14. Scholarship Proof: Copies of scholarship letters, if applicable.

Education loans for the UK offer tax benefits under Section 80E of the Income Tax Act, allowing you to deduct the interest paid on the loan from your taxable income. This deduction is available for up to 8 years or until the interest is fully repaid, with no upper limit on the amount. The loan must be taken from a recognized financial institution for higher education, including an education loan for masters in the UK. The benefit extends to loans for your spouse or children. Note that only the interest component is deductible, not the principal.

The loan payback period usually starts six to twelve months after you finish your studies or, whichever comes first when you find work. When it comes to repaying their loans, different lenders grant different moratorium periods to applicants. You can repay the loan in monthly installments.

Repayment of education loans for the UK typically begins after a moratorium period, which includes the duration of the course plus an additional 6-12 months. The loan tenure generally ranges from 5 to 15 years, depending on the lender and the amount borrowed. For an education loan for a master's in the UK, some lenders also offer the option to make partial interest payments during the study period to alleviate the overall interest burden.

For UK Student Loans:

• Public Bank Loans for International Students: Repayment starts one year after completing the course. The entire loan must be repaid within 15 years from the start of the repayment period.

• Private Bank Loans for International Students: Repayment begins either during the course plus an additional year or 6 months after securing employment. The loan must be repaid in full within 15 years.

Loan Providers (banks, private companies, NBFCs)

Public Banks:

• State Bank of India (SBI): Offers education loans for UK with competitive interest rates and flexible repayment options. SBI's loan products often include coverage for tuition fees, travel, and living expenses.

• Union Bank of India: Provides education loans with favorable terms, including various repayment plans and interest rate options.

Private Banks:

• ICICI Bank: Offers education loans with customized repayment plans and interest rates. ICICI’s loans cover tuition fees, accommodation, and other study-related expenses.

• Axis Bank: Provides education loans for UK with flexible repayment options and comprehensive coverage for education costs, including international studies.

• IDFC First Bank: Offers education loans with competitive interest rates and the option to make partial interest payments during the study period.

Non-Banking Financial Companies (NBFCs):

• HDFC Credila: Specializes in education loans for both domestic and international studies. Offers customized loan products with flexible repayment options.

• Avanse Financial Services: Provides education loans with a range of coverage options, including tuition fees, travel, and living expenses.

• Auxilo: Offers education loans for UK with quick disbursement and flexible repayment options, catering to both undergraduate and postgraduate studies.

International Lenders:

Prodigy Finance: Provides UK student loans for international students based on future earning potential rather than traditional credit checks. It covers tuition and living expenses, with flexible repayment terms.

Q1. Is the RBI's lending moratorium, which was enacted in response to the Covid-19 epidemic, also relevant to student loans?

Yes, the RBI's moratorium due to the COVID-19 pandemic applied to various loans, including education loans for UK. Borrowers could defer repayments for three months initially, with an extension for an additional three months. This covered loans due between March 1 and August 31, 2020.

Q2. Will I receive the same amount of money on my education loan in India and abroad for the same level course?

No, the amount of education loan you receive in India and abroad can differ. Loans for studying abroad may offer higher amounts to cover international expenses, while domestic loans might have lower limits.

Q3. Is it possible to transfer my college loan to a bank with cheaper interest rates?

Yes, you can transfer your college loan to a bank with cheaper interest rates through refinancing. Compare rates and terms from different lenders, and apply for refinancing if you meet the eligibility criteria. If approved, your existing education loan for UK will be paid off, and you'll start new payments under the better terms.

Q4. What are the 4 types of student loans UK?

In the UK, there are four types of student loans:

1. Student Loan Plan 1 (SLP1):  For students starting undergraduate courses before September 2012 in England or Wales, and for students in Northern Ireland and Scotland.

2. Student Loan Plan 2 (SLP2): For students starting undergraduate courses in England and Wales from September 2012 onwards.

3. Student Loan Plan 4 (SLP4): For students in Scotland starting their undergraduate courses from September 2021 onwards.

4. Postgraduate Loan Plan: Available for students pursuing postgraduate master's or doctoral courses.

Q5. How to get a study loan for the UK?

To get a study loan for the UK, research and compare lenders, gather necessary documents like identification and admission letters, and apply for the loan. Once approved, finalize the disbursement by providing your visa confirmation.

Q6. Can Indian students get student loans in the UK?

Yes, Indian students can get an education loan for UK through private banks and financial companies, as UK Government loans are generally not available for non-EU international students. Some universities may also offer their own loan schemes for talented students.