Study abroad Education loan: How it works to your advantage

Once you have decided what and where you will pursue your education abroad comes the second and most difficult part- arranging and managing the funds required to study outside India. Education loan is an important element to manage funds to study abroad compared to other financial aids like scholarships and grants. Pursuing education outside your home country is a costly proposition. In 2013, HSBC published a report in which Australia was deemed the world’s most expensive place to pursue education. In fact, the combined average cost of university fees and living expenses puts the cost of education in Australia at more than $38,000 per year for international students.

The USA at $35,000 was the second most expensive country while UK with an annual cost of $30,000 was the third. Interestingly, according to the United Nations Education, Scientific and Cultural Organisation (UNESCO), the USA and UK attract three in ten international students. With more than 3 million people pursuing higher education outside their own country, it is a possible conclusion that despite high cost of education students are not being deterred from studying abroad.

Education loan-- a fair option?

The first thing that comes to a student’s mind while arranging funds for his education abroad are Scholarships and Financial aids. However, given the huge competition in international education, it is not always possible to secure such benefits. As such, education loans to study abroad have become an easier way to secure funds. The following points will help you gain some insight into why exactly you should consider applying for an education loan for studying abroad:

1. Education loan is one of the priority sector under which banks are required to lend by the Reserve Bank of India.
2. Students applying for education loan for study abroad can avail tax benefits under section 80 (E) of Income Tax Act 1961. Some of the highlights of this Act are:
a. Loan should be taken from approved financial institution
b. Loan should be for full-time studies for any graduate or postgraduate course.
c. Deduction is allowed for a continuous period of eight years.

Click here to get the details of the benefit

3. The loans provided for education usually cover the following areas:
a. Institution Fee
b. Hostel Fee
c. Examination Fee
d. Library and Laboratory Fee
e. Purchase of Books
f. Equipment and Instruments
g. Caution or Refundable Deposit
h. Passage money to the host country.

4.Most of the banks provide an average of 7 to 12 years for the candidates to repay the education loan.
5.An aspirant can expect to be provided with atleast 20 to 40 lakh rupees for pursuing studies abroad.

What are Study Abroad Education Loans?

The study abroad education loans, pay expenses for overseas studies so that many students can pursue top destinations such as the US, UK, Australia, Canada, Netherlands, Ireland, and Germany without funding issues.

Study Abroad Student Loans India: Highlights

Which bank is best for education loans abroad?

The bank's best education loans in India are chosen for low interest, benefits and easy payback plans. Most students apply for government loans rather than private ones because of more advantages.

Here are the banks best for education loans abroad:

• State Bank of India Education Loan

• Canara Bank Education Loan

• Punjab National Bank Education Loan

• ICICI Bank Education Loan

• Axis Bank Education Loan

• Kotak Mahindra Bank Education Loan

• HDFC Bank Education Loan

In India, there are many commercial banks, which provide education loans to students who want to study abroad. Some of them are:

1. State bank of India: India’s largest bank provides education loan for courses abroad upto a maximum of Rs.30 lakhs. An interesting fact is that SBI provides a Top up loan or second loan within the overall limit. This is a big advantage for students studying abroad as they could experience sudden fund crises.
2. HDFC Credila: HDFC has partnered with Credila-an education loan specialist. With upto 100% financing, Credila provides doorstep service of education loans. HDFC Credila provides loans for around 4000 institutes across 36 countries worldwide. Its standout facility is that the education loans can be sanctioned even before confirmation from the institute.
3. Indian Overseas Bank: Known as Vidya Jyoti, the loan department of Indian Overseas Bank provides loan upto Rs 40 lakhs for students studying abroad. It provides loans for pursuing both professional and technical courses abroad.

Most banks in India provide education loans to study abroad. While the criteria imposed by most banks are same, it is the maximum loan limit and the corresponding interest rates that differ.

IBA benefits for higher education

The Indian Banker’s Association, in its model loan scheme, 2012, for education loan to study abroad lists the following subjects as eligible for a fund benefit.

• Graduation : For job oriented professional/ technical courses offered by reputed universities.
• Post-graduation: MCA, MBA, MS, etc.
• Courses conducted by CIMA- London, CPA in USA etc.
• Degree/diploma courses like aeronautical, pilot training, shipping etc, provided these are recognised by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.

According to the IBA scheme, even if a student is able to avail scholarships and funds he/she can be considered for education loan and, if required, such benefits may be used for computing the loan amount. As per the new scheme, banks can also issue capability certificate for students going abroad for higher studies as some of the foreign universities require the students to submit a certificate from their bankers about the sponsors’ solvency or financial capability.

Types of Study Abroad Education Loans

To pay for your studies abroad, you can select the education loans. It can be supported by loans from private or public banks, Non-banking financial companies and other organisations. Generally, there are two primary types of education loans:

1. Secured Education Loan: When providing secured student loans in India, the banks may request to provide collateral. The collateral is an asset a borrower promises to a lender to confirm a loan, it might be anything like real estate property, a house or an assured fund. The banks provide protected education loans, interest rates are less than unsecured loans.

2. Unsecured Education Loan: Loans are provided without any collateral. As a result, interest rates are greater than secured education loans.

Education loans are attractive to students not only from economically backward classes but also for students from middle and high-income families as it ensures easy repayment facilities and access to funds. Timely availability of loans has also set the education loans sector on an upward rise. With the global economy experiencing volatility in recent years, education loans provide security to students whose personal funds might dry up due to sudden crises.

Hence, one of the biggest benefits of an education loan is that students studying abroad can devote their time to pursue dreams while leaving the banks to worry about the cost of their dream!

Education loan for abroad eligibility

Checking your eligibility to qualify for an education loan must be important. The following lists the common eligibility requirements for education loans abroad:

• Your nationality must be Indian.

• If you are below 18 years old, your parents are only eligible to get a study loan for overseas education.

• Your age must be between 16 and 35.

• You confirm a stable income background.

• Pay your bills and payments on time to prove financial commitment.

• You must have a good academic performance.

• You are required to enrol in a recognised university, school, or college.

• Choose technical or professional courses (banks preferred).

• Collateral may be needed for secured loans.

• A co-applicant with a solid financial background might be required for unsecured loans.

• Ensure to provide valid required documents.

Documents required for study abroad education loan in India

Prepare the following necessary documents mentioned in the table to grab a study abroad education loan in India.

How to apply for study abroad education loan?

If you are trying to get an education to study internationally, follow this method:

• Step 1: Examine interest rates, repayment rules and qualifying requirements then, shortlist the bank that provides study abroad education loans.

• Step 2: Gather all necessary documents for the education loan application.

• Step 3: Fill out the application with accurate information.

• Step 4: Submit them with relevant documents (the process is done online, sometimes in person).

• Step 5: The lender will examine your details. Once the loan is accepted, read the amount value, interest rate, and payment plans.

• Step 6: Sign the agreement if you accept the terms and conditions.

Education loan for abroad interest rate

The interest rate of a student or education loan in foreign can differ based on the bank, the borrower's credit history and the loan amount. Approximately the education loan interest rate ranges between 11 to 14 per cent. The following are common education loans for abroad interest rates:

Study abroad education loan interest rate

Factors to consider for study abroad education loan

Applicants want to think about the important following factors when they apply for study abroad student loans are given below:

• Notice interest rates, every year government banks' interest rates fluctuate and vary depending on the lender.

• The loan’s payback period should fit with your expected future revenue. Although longer tenure may result in reduced payments every month, the total amount of interest paid will be higher.

• With a moratorium period, some lenders allow you to postpone repayment until the course ends.

• Processing fees can range between six per cent to zero, depending on the lender.

• May be eligible to minimise the interest rates.