Summary
- What is a loan?
- Benefits of education loan
- Choosing Education Loans for Studying Abroad
- Indian students; educational loan eligibility
- Documents required to apply for a loan
- Tips to follow before applying for educational loans
- Components of loans granted by banks
- Loan programmes provided by Indian banks for study abroad
Studying abroad is a dream for many students. However, these dreams are sometimes shattered due to the lack of funds or finances. Studying abroad can be an expensive affair which entails several heads of cost.
- College tuition fees
- Boarding and lodging in a foreign country
- Traveling expenses
- Visa costs
- Miscellaneous expenses
Managing funds for all these heads can be a difficult task. However, all is not lost. Students can apply for loans to overcome financial burdens while studying abroad.
A loan is defined as the lending of money by one party to another party on the understanding that the borrowing party will return the loan amount with interest to the lending party within a stipulated period.
Here, the borrower shall be in debt to the lender as long as the loan amount remains outstanding in the books of accounts.
Now, you may ask how to get a loan for abroad studies? This question entails a detailed step-by-step procedure.
A personal meeting with your study abroad consultant will be able to give you a deeper insight into the details of how to get loans for your studies abroad.
However, through this blog, we have tried to give you a rough idea of what you may encounter during the process.
Benefits of Education loan for Indian Students
Financial Benefits: Students gain from education loans for studying abroad since they are eligible for them under Section 80E of the 1961 Income Tax Act. This indicates that by disclosing their student loan repayment information, loan applicants or their co-applicants can receive a specific percentage exemption on their monthly income tax payment. Both the hardship and the requirement to sell your investments would be lessened.
Access to Higher Education: Education loans give students the chance to enroll in higher education, something they might not have otherwise been able to do because of financial restrictions.
Pay after education: Benefits related to student loans include a moratorium period. The borrower is not required to make payments during the moratorium period, often known as a repayment holiday, while they are enrolled in college. Banks cannot compel students to make EMI payments throughout their study term; nevertheless, students who are willing to do payment may do so. As a result, students have the advantage of finishing their studies, finding employment, and making appropriate repayments because they do not have to worry about paying during their study period.
Lower interest rates: Compared to other unsecured loan types, such as home loans, personal loans, study loans for abroad have substantially lower interest rates. In India as well as the rest of the world, study loan interest rates can be quite cheap, especially from public sector banks. They may even be more affordable for people from economically backward class.
Loan Disbursement in Stages: Since student loans are disbursed in stages, they can be used as and when needed by students without subjecting them to interest charges on the entire loan amount.
No Hidden Charges: Students can make sure that the loan process is transparent because there are no hidden fees associated with education loans for abroad.
Things to consider before choosing Education Loans for Studying Abroad
For students seeking higher education in India and abroad, education loans are essential. They provide longer moratorium periods, affordable interest rates, and flexible payback schedules. Since the features and services offered by each bank differ, it’s important to take into account things like processing costs, interest rates, payback terms, moratoria, repayment duration, and tax advantages before selecting a loan provider. One should think about the following factors before choosing a specific loan provider.
Costs covered
The total sum disbursed varies depending on the reputation of the university, the applicant’s academic record, and co-applicants. Banks pay for a variety of educational expenses, such as lab fees, tuition, supplies, testing, books, and personal charges.
Tax benefits
Tax deductions for loan interest are allowed under Section 80E of the Income Tax Act of 1961 for education loans obtained from foreign financial institutions and Indian banks. Tax deductions are available for eight years in a row, starting with the year the loan was obtained and continuing for seven years, or until the loan’s interest is fully repaid, whichever comes first.
Eligibility
Banks use co-applicant information, creditworthiness, academic history, and family income to determine who is eligible for an education loan. The amount distributed depends on the type of course and the likelihood of employment. Previous educational credentials, address verification, co-applicant income verification, and passport-size photos are all required documents. While some colleges accept applications without a letter of admission confirmation, others do.
Moratorium extension
Banks give students a six-month moratorium before prepayment starts so they can find work and stabilize their finances. Extensions may occasionally be given because of unanticipated responsibilities or job inaccessibility.
Total cost over EMI
EMIs are used to repay school/ college loans, and they are dispersed evenly across the loan term. Some students select lengthier terms in order to reduce their monthly payments. Although it might be practical in the near run, the total cost of the loan will increase annually. Find a bank which makes your studies convenient and offers the greatest interest rate.
Rate of interest
When choosing any reputable bank for an education loan, the interest rate is a crucial factor to take into account because even a small variation might result in cost savings. Choose the option that is most cost-effective by understanding the difference between floating and fixed interest rates, comparing the rates that various institutions and banks offer.
Prepayment terms
You will save more on interest on the principal amount of the loan if you pay it off sooner. Find out if there are any penalties for early payment. As a result, a plan can be developed for finding employment to pay off the loan as quickly as possible.
Loan processing time
When applying to a university abroad, the deadline is crucial. When applying for a visa and admission, the loan sanction letter is a requirement to have as a financial resource. Inquire about the processing time required by the lender for loan disbursement.
Service charge
Fees for loan processing, prepayment, and extension of the moratorium are associated with applying for an education loan. To identify the loans that are the best fit for your needs, compare and contrast the perks and services offered by the various banks.
These are some of the steps in how you can get a student loan to study overseas.
Study Abroad Loan Eligibility For Indian Students
The first thing students should know is the student abroad loan eligibility.
If you find yourself fulfilling the following criteria, then you are eligible to apply for a student loan to study in a foreign country
1. The Student Must Be a Citizen of India
A citizen is a person who is regarded as an integral part of a country. The citizenship of a person in India is governed by the rules laid down in the Citizenship Act 1955. According to the Act, citizenship of India can be acquired in the following ways:
- Citizenship at the commencement of the Constitution
- Citizenship by birth
- Citizenship by descent
- Citizenship by registration
- Citizenship by naturalization
- By incorporation of territory (by the Government of India)
- People who were domiciled in India as of 26th November 1949 automatically became citizens of India by virtue of citizenship at the commencement of the Constitution.
- Persons who were born in India on or after 26th January 1950 but before 1st July 1987 are Indian citizens.
- A person born after 1st July 1987 is an Indian citizen if either of the parents was a citizen of India at the time of birth.
- Persons born after 3rd December 2004 are Indian citizens if both parents are Indian citizens or if one parent is an Indian citizen and the other is not an illegal migrant at the time of birth.
- Citizenship by birth is not applicable for children of foreign diplomatic personnel and those of enemy aliens.
- Another student loan eligibility criteria is that students must be 18 years or above (in case the student is below 18, the loan shall be in the parents or guardian’s name).
The legal age for students to apply for educational loans is 18. However, minors can also apply for loans through their parents or major guardians.
2. Academically Inclined
Although all students can apply for loans, the ones who are more likely to succeed in procuring loans are the ones that can show their academic proficiency.
The lender is more likely to give a loan to a student who has more academic achievements than one who does not.
3. Students Must Show Admission Into a Foreign University
To secure a loan, students must show the acceptance letter of the college they intend to join. The bank will act accordingly.
Documents required for Indian students who aspire to study abroad:
One of the methods of how to get a loan for abroad studies is to have all your documents ready well in advance. Here is a checklist that will help you prepare for your educational stint abroad.
- Address proof
- Birth certificate
- Duly filled application forms
- Passport size photographs
- Passport
- Academic certifications and marks sheets
- Test scores of entrance compulsory examinations like TOEFL, GRE, SAT, IELTS, etc
- Bank statements of co-applicant
- Income proof of co-applicant
- In case of collateral, proof of title deeds.
Details to Keep in Mind While Applying for A Loan for Studies Abroad
Banks give loans to students with an average interest of 10 to 15%. Generally, all banks issue educational loans to students only with the addition of a co appellant signature.
Banks have different rules regarding the payback of loans. Some banks stipulate those students can return loan amounts at the time they start their employment.
How to Get Loan for Abroad Studies
Now that you are eligible to apply for a loan and have prepared your documents, you must now study the procedure for how to get a loan for abroad studies.
1. Select Recognised Courses
Once you have selected the course you wish to pursue in a foreign university, you must find out if the bank recognises the course for loan eligibility.
2. Compute the Loan Amount
The next step is to figure out the entire course amount and then calculate how much loan can you get for studying abroad.
Many times students may have saved some money for their future academics. In such cases, your loan amount from the bank will be reduced to a considerable extent.
Different banks give different loan amounts to students at varied interest rates. Usually, the higher the loan amount, the higher the rate of interest.
3. Do a Comparative Study
It is advisable to do a comparative study of the different loan amounts with interest offered by different banks. Also, find out from the banks about the payback rules.
4. Loan Application
Once you have made the comparative study, the next step in how to get a loan for abroad studies is to fill out the loan application forms given by the bank.
Once the bank approves of your educational loan the bank will issue a bank loan statement that contains all the details of the loan. Read the details carefully and sign the loan document.
On signing the document, the bank shall grant the loan and release amounts of the loan as and when required during the course.
Some Components of Loans Granted by Banks:
1. Collateral
When the loan exceeds a certain amount, some banks require collateral. Collateral is defined as movable or immovable property belonging to the loan applicant and is in the custody of the bank until the entire loan amount along with interest is repaid to the bank.
In certain circumstances, the student is unable to pay the bank loan amount. In such cases, the bank will recover the amount from the collateral.
2. Interest Amount
Interest is defined as an amount the borrower shall pay the bank for the cost of the loan amount. Accordingly, different banks have different interest rates.
These interest rates are based on many factors like loan amount, period of the loan amount, etc.
3. Currency
Loan amounts from banks in India are in Indian rupees and therefore, must be repaid in Indian rupees only.
4. Money Recipient
Loans from banks are paid directly to the recipient college. The banks release the loan amount to the college as and when demanded by the college or university abroad.
Loan programmes provided by Indian banks for study abroad
HDFC Bank Education Loan for studying abroad: Students from India who desire to attend college abroad can apply for an HDFC Bank Education Loan for Foreign Studies. Under this plan, loans can be available for a maximum of INR 20 lakhs at a low interest rate. It also offers the students tax benefits, and it can even be granted before admission.
SBI Student Loan Scheme: The SBI Student Loan Scheme is available to Indian students who have been accepted to any university in India or abroad. The maximum loan amount at a low interest rate is INR 20 lakhs, and the loan must be paid back within 15 years. Additionally, if the loan amount exceeds INR 7.5 Lacs, students must provide collateral as security. After the course has been completed for a year, the repayment process begins.
SBI Global ED-VANTAGE Scheme: This study loan for abroad is available to Indian students who wish to pursue full-time study overseas. The maximum loan amount for students is INR 1.5 crore, with a 15-year repayment period.The loan must be secured by collateral, and the students must begin payments six months after the course is over.
What Do Loans Usually Cover?
Only educational-related expenditures will be covered by the student loan for foreign studies. The expenses listed below are, however, typically covered by study abroad loans.
- Fees and expenses of admission, tuition, and examination
- Airfare to travel abroad for education
- Books, stationery, and electronics (computers, etc.)
- Cost of boarding or lodging
- Other expenses, such as study tours and research expenses.
Conclusion
Applying for a bank loan can be a strenuous process. Therefore, you should contact your trusted study abroad consultant.
A study abroad consultant has the expertise and knowledge about the various available and best loans that suit your requirements.
Contact your study abroad consultant to make a better decision when it comes to applying for study abroad bank loans.
If you are looking for the best study abroad education consultancy, go no further, CollegeMarker Study Abroad is dedicated to offering students who want to pursue their academic career abroad complete guidance and support.
We offer a wide range of services, including assistance with choosing universities, drafting applications, securing visas, and arranging stays. Our team of knowledgeable professionals is committed to ensuring that each of our clients receive personalized attention and unique solutions that meet their unique needs and preferences.
We encourage you to get in touch with us to learn more about our consultation and how we can help you with your study abroad experience.
FAQ’s
1. Why are education loans for higher education preferable to other types of loans?
Education loans are specifically designed for higher education and offer lower interest rates, flexible repayment options, and longer terms. They also offer tax advantages and no security or guarantors. Students can focus on studies and choose a career before making payments, unlike other loans.
2. Who is eligible to apply for an education loan for studying abroad?
Indian students who have been accepted for a higher education programme at a reputable overseas university or institution are eligible to apply for an education loan.
3. What is the maximum loan amount that can be obtained?
The maximum loan amount available depends on a number of variables, including the course, the institution, and the student’s ability to repay the loan. However, the majority of banks provide educational loans for foreign studies up to INR 20 lakhs to 30 lakhs.
4. What is the abroad education loan interest rate?
The interest rate on student loans varies from bank to bank and is based on a number of variables, including the loan amount, the length of the repayment period, and the student’s creditworthiness. The interest rate typically ranges from 8% to 15%.
5. What is the repayment period for education loans?
The repayment time that students must return their education loans varies from bank to bank and is based on a number of variables, including the loan amount, the length of the course, and the student’s ability to make payments. The typical repayment time is between five and fifteen years.
6. Is collateral required for education loans?
For student loans up to INR 7.5 lakhs, collateral is not necessary. Banks may, however, request collateral security in the form of real estate, fixed deposits, or other assets for loans over INR 7.5 lakhs.
7. What documents are required to apply for an education loan abroad?
The documents required to apply for an education loan include admission letter from the foreign university, mark sheets of the previous academic qualifications, income proof of the co-borrower or parent, and other relevant documents as per the bank’s requirements.
8. Can education loans for foreign studies be availed for part-time courses or distance learning programs?
No, only full-time courses offered by reputable international colleges or institutes are eligible for education loans.
9. Can pre-admission expenses like application fees, visa charges, and travel costs be covered by student loans for foreign studies?
Yes, loans for college can be used to cover pre-admission costs like application fees, visa expenses, and travel costs.
10. Can education loans be availed for courses in any country?
No, only courses offered by reputable international universities or other institutions in countries that the bank has approved are eligible for foreign education loan.
