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By Prabhadri Suman|Updated On - 2023-06-08 05:04:25
Want to study abroad without collateral? Get Detailed information about loans without collateral for studying abroad can be found on Edmissions.
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Students who aspire to pursue higher education abroad but lack the financial means can benefit significantly from student loans. Millions of students are fulfilling their dreams of studying abroad today, thanks to the provision of education loans.
Education loans can be of two types: secured and unsecured. A secured loan is one that comes with collateral, whereas an unsecured loan does not. A collateral loan is where a specific asset is pledged as security to the lender against the borrowed amount. This asset could be in real estate, fixed deposits, land, gold, etc.
Several banks in India provide unsecured loans for study abroad, up to a certain amount. Students who don’t have the resources to provide any collateral will benefit from this type of loan. However, not everyone qualifies for a loan without collateral to study abroad . Moreover, a study-abroad loan without collateral has a slightly higher interest rate and shorter repayment period.
Most international students and their guardians apply for education loans only if they have an asset to pledge as collateral. However, contrary to popular perception, taking an education loan without collateral has its own set of advantages. They are as follows:
Education loans for studying abroad are granted after a thorough scrutiny of the applicant’s academic profile and suitability, more so in the case of non-collateral loans. The eligibility criteria for receiving an unsecured loan or education loan without collateral are given below:
Let us now take you through the step-by-step procedure to apply for a study-abroad education loan without collateral:
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Documentation is crucial to applying for an education loan to study abroad. One must be very meticulous in keeping all the requisite documents in order. Listed below are the required documents for completing a loan application.
When applying for an overseas education loan without collateral, income proof of the financial co-applicant becomes very crucial. Here’s what works as valid income proof to obtain an unsecured education loan:
For salaried co-applicant: | For business income: |
ITR Form 16 Salary slip Salary account detail Saving account details |
ITR Profit & loss account Balance sheet Business registration certificate Business current account |
Lenders for foreign education loans without collateral can be categorized into public and private lenders. It is observed that private lenders allow a larger sum as non-collateral education loans.
Some prominent lenders include public sector banks like SBI, Bank of Baroda, etc., private banks like Axis Bank, ICICI Bank, HDFC. Other lenders include NBFCs (Non-Banking Financial Companies) and some foreign lenders. The interest rates usually lie between 10-16%.
Here are details of banks which offer education loans and the amount allowed without a collateral:
Bank name | Loan amount allowed without collateral |
HDFC Bank | Up to Rs. 7.50 lakh |
HSBC Bank | Up to Rs. 5 lakh |
State Bank of India (SBI) | Up to Rs. 7.50 lakh |
Bank of India | Up to Rs. 7.50 lakh |
ICICI Bank | Up to Rs. 20 lakh (UG) and Rs. 40 lakh (PG) |
Punjab and Sind Bank | Up to Rs. 4 lakh |
IDBI Bank | Up to Rs. 4 lakh |
While an unsecured loan has loads of benefits, there are some costs to bear for these benefits too. They are as follows:
Moratorium period: A moratorium period is when the student starts using the loan amount but is not obliged to start repaying them. It covers the students' course duration and 6-12 months more. Usually, private lenders do not give any no-payment moratorium period. Students are mandated to start repaying at least the interest amount, partially or in whole.
Processing fee: Public banks do not charge any processing fee for an unsecured education loan. Private banks charge up to 1% on the loan amount plus GST; for some, it is Rs. 15,000 (GST excluded). NBFCs charge a processing fee of 1-1.5% plus GST on the loan amount, and foreign lenders charge a minimum of 2% plus GST on the loan amount.
Loan insurance: For private lenders, it is mandatory to have loan insurance, which is 1-1.5% of the loan amount for private banks and 2% or above for NBFCs.
Besides failing to meet the basic eligibility criteria set by lenders, there are other reasons why lending institutions sometimes reject students' loan applications. The reasons are usually one or more of the following:
Undergraduate program:
Private lenders prefer funding a postgraduate program because the course length is shorter than an undergraduate program. NBFCs may consider funding undergraduate studies if a student's financial co-applicant has an excellent income source. Foreign lenders do not fund undergraduate programs at all.
Age of the applicant and co-applicant: NBFCs are not willing to offer loans for students above 27 years. They can consider up to 30 years as far as the other profile parameters are suitable. Also, NBFCs won't accept the application if the co-applicant is retired or about to be retired in 3 years.
FOIR: FOIR means ‘fixed obligation to income ratio.’ Private banks reject the loan if the co-applicant does not meet the FOIR norm, that is, if the co-applicant's EMI obligations are too high.
If you meet all the conditions and provide all the required documentation, obtaining an education loan for international studies without collateral may be simple. It also becomes crucial for you as an international student to comprehend the conditions of the uncollateralized foreign study loan. You can even connect with our professional overseas education consultants to learn about a foreign education loan without collateral so you can apply for one successfully!
If you're interested in studying abroad, you can reach out to the Edmissions team at edmissions.com . We will assist you with the application process. For any further queries, you can contact their specialists at [email protected] .
For a quick overview related to study abroad, click here.
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