How to Get an Education Loan Without Collateral for Studying Abroad?
Education loans serve as great financial aid to students planning to pursue higher education abroad. Without education loans, millions of students would never have made it to their dream universities. However, not all students can pledge collateral as security to get a study abroad education loan. This is why an education loan without collateral is a great way for students to finance their education without having to provide any security against the loan amount.
In this article, we will explore non-collateral student loans, including the banks offering unsecured education loans, the eligibility criteria, and the documents required to get one. We have also covered the process of how to apply for a foreign education loan without collateral.
What is an Education Loan without Collateral?
An education loan without collateral, or an unsecured education loan,ย is a type of loan offered by financial institutions in India to help students cover their educational expenses. Unlike secured loans, an education loan without collateral doesnโt require the applicants to provide any collateral as security for the loan amount.
However, these loans are offered by banks and NBFCs based on the income and the CIBIL score of the applicant and their financial co-applicant. A financial co-applicant is essential to obtain an education loan without collateral. They sign the loan agreement alongside the student and are responsible for repaying the loan if the student, for any reason, doesnโt repay the loan. Without a co-signer, it is typically not possible to get an unsecured student loan.
Applying for a study abroad education loan without collateral can be quite confusing, with various lenders offering diverse loan options. Contact WeMakeScholars for a fast and simple unsecured study abroad loan process. Their team of experienced financial officers can help you get the best education loans. And since WeMakeScholars is funded and supported by the Ministry of IT, Government of India, they offer their services completely free of cost to students.
Benefits of an Education Loan without Collateral
- No need for Collateral: One of the major benefits of an education without collateral is that the applicants do not need to pledge their properties, such as a house, land, fixed deposits, etc, to secure the loan amount.
- Broad Coverage: These loans cater to the needs of students from all backgrounds, and are available for both studies in India as well as abroad. The funds from an unsecured student loan can be used to cover various expenses associated with education, including tuition fees, living expenses, purchase of books, and a laptop, etc.
- High Loan Amounts: Many lenders offer higher loan amounts of up to โน1 crore for abroad education loans without collateral.
- Quick process: As there is no collateral in the loan, unsecured education loans are processed faster than secured loans.
- Online process: The loan process for an education loan without collateral from all private lenders can be done online. You can simply apply and submit all your documents online and visit the branch only once to finalize the deal.
- No Loan Margin: There will be no loan margin for unsecured education loans. This means that banks will sanction the entire loan amount without needing any margin money from the students.
- Tax Benefits: Under Section 80E of the Income Tax Act, applicants can claim tax on the interest paid on their unsecured education loans for up to 8 years.
Banks offering Abroad Education Loans without Collateral
The following are the prominent lenders that offer unsecured education loans to students in India:
Public Banks
Most public banks in India can offer an unsecured education loan of up to โน7.5 lakhs under the CGSEL Scheme. Apart from this scheme, you can also obtain an education loan of up to โน50 lakhs without collateral from the State Bank of India (SBI), depending on your university. The SBI education loan Interest rate without collateral for abroad studies starts from 9.65%.
Private Lenders in India
Private banks and Non-Banking Financial Companies(NBFCs) in India can offer an education loan without collateral of up to โน1 crore for study abroad. They offer higher loan amounts and have strict eligibility criteria for education loans without collateral. The interest rate for an unsecured education loan from private lenders in India starts from 10.5%. These lenders have a list of recognized universities, according to which they approve unsecured study abroad loans.
International Lenders
Apart from lenders in India, you can also get an unsecured study abroad loan from foreign lenders. They offer student loans in foreign currency. This means that students can avoid currency conversion charges on student loans from these lenders. You can get an unsecured education loan from foreign lenders even without a co-applicant, as they provide loans based on the future earning potential of the students.
Eligibility Criteria for an Abroad Education Loan without Collateral
The eligibility criteria for an education loan without collateral vary from lender to lender. However, the following are the basic eligibility criteria for unsecured education loans for abroad studies from financial institutions in India:
- Citizenship: Both the applicant and the co-applicants should be Indian citizens.
- Admission Status: The student should have secured admission at a well-recognized university.
- Academic History: Students are expected to have a good academic history with at least a 50% score in their previous academic records.
- Co-applicant profile: The co-applicant should meet the income and CIBIL score requirements of the lender. Since there is no collateral involved in the loan, lenders thoroughly assess the income and creditworthiness of the financial co-applicant.
- Recognized University: The university that the student is going to should come under the recognized list of universities of the lender.
- Course/Degree: Lenders also consider the field of study you are going to pursue. UG and PG courses in STEM disciplines are preferred over courses like Public Policy or Aviation.
- Age: Students aged between 16 to 35 are generally eligible for an unsecured education loan. However, private lenders typically donโt accept co-applicants aged more than 60 years or nearing their retirement age.
As we have mentioned before, the above criteria can vary from bank to bank.
Documents Required for an Education Loan without Collateral
Lenders thoroughly asses the documents required for non-collateral student loans, as there is no collateral involved. The following documents of the student and their co-applicant are required for an education loan without collateral.
- KYC Documents:
These are the documents proving the identity and address of the student and their co-applicant. They can include:
- A photo ID proof(Aadhaar card, Voter Id, Driving license, etc.),
- PAN card, and
- An Admission Letter:
Students should submit an admission letter from the university proving their acceptance into the university.
- Previous Academic Records:
Students should provide their previous academic records as specified by the lender. These can include documents, such as the 10th,12th, and undergraduate marksheets.
- Financial Documents of the Co-applicant:
Documents that prove the financial condition and creditworthiness of the financial co-applicant are required to process an unsecured education loan. These documents can vary depending on whether the co-applicant is salaried or self-employed.
- Additional documents:
Lenders can also require other documents such as:
- Passport-size photos of the applicant and the co-applicant
- Applicable test score results, such as CAT, IELTS, TOEFL, and GRE.
These are the basic documents required to process an education loan without collateral for abroad studies. These documents can vary by lender.
How to Get an Abroad Education Loan Without Collateral?
The following is a step-by-step process on how to get an unsecured education loan for abroad studies:
- Choose a Bank: The first step to get an education loan without collateral for abroad studies is choosing the lender. You should compare the offers of all the lenders and pick the bank that fulfills your needs and requirements.
- Apply for the Loan: Go to the website of the bank and fill out their application form for an unsecured education loan.
- Submit the Documents: Prepare and submit the necessary documents for the loan application, such as proof of admission, KYC documents, and the co-applicantโs income proof documents.
- Pay the Processing Fee: You must pay the processing fee to get your unsecured education loan sanctioned on time. Post the payment of processing fees, the sanction letter will be granted to you.
- Loan Sanction: After successful verification, the bank will approve the loan and issue a sanction letter with loan details such as the Loan amount, Interest rate, Repayment terms, and Moratorium period.
- Loan Agreement: Carefully check all the terms and conditions mentioned in the loan agreement and sign it.
- Disbursement of Loan Funds: After the loan agreement is signed, funds are disbursed to the university or the student’s account, accordingly.
Conclusion
Unsecured education loans make higher education accessible to students who couldnโt pledge collateral as security for the loan amount. This article explores the key insights on unsecured education loans for abroad studies, including their benefits, eligibility criteria, and documents required. We have also covered the process of how to get an education loan without collateral for abroad studies.
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