- Date : 31/10/2020
- Read: 5 mins
What overseas education loans can you apply for, and what are some of the most popular choices available?
The impact of overseas education on a person’s career and personal growth can be immense. A stint in a new country broadens your world view and make you more adaptable towards different cultures. You get exposure to educational courses that you may not otherwise get and maybe even better career opportunities than in India.
However, studying abroad is often expensive. Most quality education institutions are in first-world nations that have a high cost of living. Your expenses wouldn’t be limited just to the course fee; there would be various other expenses like administrative costs, accommodation costs, travel costs, credit card, living expenses, insurance, etc.
Arranging for all these costs would require you to have significant funds at your disposal. Study loan for abroad ensures that talented students are not deprived of quality education because of the shortage of funds. Broadly speaking, there are two types of loan. Let’s see what they are.
- Secured loans - As the name suggests, these loans are disbursed against collateral. It could be in the form of tangible or intangible securities such as fixed deposits, land/building, insurance policy, etc. Being secured, these loans are offered at a lower rate of interest. The repayment terms can be quite flexible, and repayment is not required during the curriculum tenure. The education loan procedure involves the verification of security-related documents. Unlike with unsecured student loans, the income of the parents is not a major deciding factor here.
- Unsecured loans - Unsecured student loans are disbursed without any collateral security. The lender takes a higher risk by providing this loan. In case of default, there will be no assets to liquidate and recover the loan. So, the interest rate for an unsecured student loan may be higher than that of a secured loan. Besides, in the absence of collateral, it is comparatively difficult to get approval for these. Being unsecured, these loans have a shorter repayment tenure and are often already underway while you study abroad.
Related: Types Of Loans
Student loan options and features
The features of various types of overseas student loans can vary depending on the products available in the market. Let us look at some student loans offered by leading banks to find out more about criteria such as collateral, co-guarantor, tenure, interest rates, etc.
1. State Bank of India - SBI Global Ed-vantage is an education loan for studies abroad in selected foreign countries. It is offered against tangible collateral security. The security can be offered by someone other than the parents as well. Loan amount under this scheme can range from Rs 7.5 lakh to Rs 1.5 crore. The maximum repayment period is 15 years, and repayment can be made in easy EMIs. Presently a rate of 9.3% is charged as interest, with a 0.5% concession for girl students. During the course and moratorium period, simple interest is charged.
2. Punjab National Bank - PNB Udaan loan is offered to students for pursuing specific courses overseas. PNB has a list of foreign colleges, universities, and institutes where this loan is offered. For loans up to Rs 7.5 lakh, no tangible security or third-party guarantee is required. Above Rs 7.5 lakh, tangible security acceptable to the bank must be provided as collateral. There is a repayment moratorium of the course period plus one year. The rate of interest for this loan product is 2% above the Repo-Linked Lending Rate, which currently comes to a total of 8.8%. The repayment period is 15 years.
3. HDFC Bank - Offered under its education loan division, Credila, student loans for studying abroad start from Rs 1 lakh. There is no specific upper limit, but Credila underwriting and credit norms apply to loans above Rs 25 lakh. Collateral can include a residential house or flat, non-agricultural land, or a fixed deposit with HDFC Credila. Parents or specified relatives have to be a co-applicant to the loan. The floating interest rates are based on Credila's Benchmark Lending Rate (presently 12.3%) plus the spread.
4. Bank of Baroda - The Baroda Scholar loan is provided for overseas technical and professional studies. There is a moratorium period of the course period plus one year. Maximum loan is Rs 80 lakh for the bank’s listed institutions, and Rs 60 lakh for other institutions. The repayment period can be between 10 and 15 years. Tangible security is required above Rs 7.5 lakh. The loan interest rate presently ranges between 8.5% and 9.15%, based on the Baroda Repo Linked Lending Rate.
5. Canara Bank - It offers overseas education loan at a rate of 1.5% above MCLR, for loans exceeding Rs 7.5 lakh. Tangible security equating to 100% of the loan value is required, and repayment has to be made within a maximum of 15 years. Repayment starts one year after the end of the course. Future income of the student has to be assigned, and a parent or guardian has to be a co-applicant while applying for the loan.
The information related to the loans and respective interest rates were compiled on the basis of relevant data available during the first week of October 2020 and are subject to change from time to time.
By availing of a student loan, you become eligible for tax benefits in India. Besides, you are able to protect your savings if you choose not to use it for higher studies. There is a convenient moratorium period before the start of the repayment period. For these reasons, a student loan is an ideal way of fulfilling your academic aspirations.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.