From tuition fees to travelling overseas and living at a new place during the course duration, higher education requires a considerable investment which can be sufficiently met with an Education Loan. We help you getting the fund for educational expenses of your child, whether in India or abroad. Utilise this loan amount to finance all big-ticket expenditures related to your child’s education.
Our experienced Education Loan Advisors will not only assist you in selecting the right financial institution but also guide you step by step as to how to get education loan for studying abroad.
Factors to look at
Banks and financial institutions usually sanction Overseas Education Loans for almost all programs of higher education such as
But all the banks do not sanction loans for diploma and certificate courses. So it’s essential to check which program are you opting for and whether the particular bank or financial institution sanctions the loan for your desired program or not
Overseas Education Loan interest rates vary from 9% to 14% depending on the kind of financial institution.
Overseas Education Loan interest rates vary among Nationalised banks, Private banks and Non-Banking Financial Corporations (NBFCs).
- Rate of interest at Nationalised Banks ranges from 9% to 10.5%.
- On the other hand, the rate of interest at private banks usually range from 10.5% to 13.5%,and sometimes can be 14% as well.
- At NBFCs, the Overseas Education Loan interest rates are usually around 11 % to 14%. Servicing of monthly interest during the study period and moratorium period is optional for students.
Few Nationalised Banks offer 1% concession on interest rate, if the student starts paying the simple interest during the study period and moratorium period.
Penal Interest @ 2% p.a. on overdue amount, if the loan amount exceeds Rs. 4 lakhs.
Concession on Rate of Interest (Based on the financial institution)
- Concession for students getting admission in top rated Premier Institutions
- Concession for Merit students
- Concession on GRE score card
- 5% concession for girl students
- Concession towards existing home loan customer
NBFCs provide 100% Overseas Education Loan. But Nationalised Banks and Private Banks expect 10% to 30% margin money from the applicant which is the student’s contribution to the education loan. So its essential to check how much loan can be sanctioned and what would be the margin money to be contributed by you. The margin may be brought in on year to year basis as and when disbursements are made.
Scholarship / Assistantship if any received by the student will be included in the margin.
Most of the financial institutions sanctioning educational loans for studies abroad cover expenses like
- Tuition and examination fees; library and laboratory charges
- Purchase of books, laptop, equipment, instruments, uniforms, etc…
- Any other expenses like study tours and project work
- On campus or off campus accommodation charges
- Travel expenses
- Insurance premium for student borrower
The interest paid on education loan is allowed as deduction under the Income-Tax Act, provided the loan is taken for higher education in India or abroad. The deduction is available for regular as well as vocational courses. Ensure that you obtain the interest certificate from the bank/ lending institution to claim the benefit. Kindly note that the Income Tax Benefit can be claimed only if the loan has been taken from a bank, approved financial institution or an approved charitable institution.
Education loan disbursement means actual release of funds. The disbursement is done after the loan has been sanctioned. Education loan sanctioned will be disbursed in single or multiple instalments depending on the demand raised by the college, university or the educational institute.
It takes approximately 3-4 working days for the disbursement to get processed . The loan applicant has to submit all the necessary documents at the respective bank so that the process can be done at the earliest.
At the time of loan disbursement, the bank may insist on an Insurance Policy for the student.
The tenure of overseas education loan generally ranges from 10 to 15 years for loan above Rs. 7.5 lacs, giving the student enough time to repay in smaller instalments. A longer tenure can reduce your EMls, making repayments comfortable; while opting for a shorter tenure increases your EMI but you’ll be paying the interest only for that span of time instead of the full tenure.
By and large, the repayment starts one year after the course completion or six months after the student is employed – whichever is earlier. But, the interest is charged even during the study period and the moratorium period. Most private banks and NBFCs demand payment of full or partial interest during the study period.
The interest charged during the study period and moratorium period is Simple Interest whereas the one charged after this is Compound Interest. As soon as your loan amount is disbursed, simple Interest has to be paid from the next month itself.
Students also have an option to prepay the loan for which the bank does not levy any prepayment charges. However, most of the students prefer not prepaying the loan as the interest paid on the loan helps earn Income Tax benefits under Section 80E.
Most of the Nationalized banks do not charge any processing fee for education loan but certain banks charge a specific amount. Private Banks charge an amount which is refundable at the time of disbursement. NBFCs charge 1% of loan amount sanctioned to you as their processing fee.
Having acquired a fair idea of the various factors to be considered for availing an Overseas Education Loan, you can choose a financial institution based on your preferences of loan amount, interest rates, margin money, processing fee and other relevant aspects at nationalized banks, private banks, and NBFCs.
If education loan interest rates and processing fee concern you, then you should choose a public sector bank since they offer loans on low-interest rates. Overseas Education Loans offered by Nationalized Banks like State Bank of India, Bank of Baroda etc., are usually the most sought after. So, make sure you’re availing a loan at a competitive rate of interest. It makes sense to compare interest rates before applying to any bank.
In case you don’t have any immovable property but you have secured admission in a premier institution, then you can approach Private Banks or NBFCs .
Types of Overseas Education Loans
Secured Loans are provided by Nationalised Banks, Private banks and NBFCs. The quantum of finance up to which the bank can sanction the loan amount is up to 1.50 Crores for Overseas Education.
A loan on secured credit promises
- lower interest rates
- flexible repayment terms and
- a choice of different interest plans
A Secured Overseas Education Loan can be taken on the basis of assets like immovable property, LIC Policies, government bonds, shares etc.
However, secured education loans take longer than unsecured loans and only 75% of the amount will be sanctioned against the valuation of the property.
Unsecured Loan is a viable option for the students who are not willing to pledge any collateral security against the loan amount. This type of loan can be availed from nationalized banks, private banks, NBFCs and international lenders.
NBFCs and few private banks offer up to Rs 45 lakhs as a loan amount whereas nationalized banks provide unsecured loan up to Rs 7.5 lakhs. An unsecured loan is much quicker and convenient as it does not involve the procedure of legal verification and property valuation.
Overseas Education Loan Requirements
Credit / CIBIL Score is a three-digit numeric summary of your credit history found in the CIBIL Report. CIBIL score will be in the range of 0 to 900. Banks check your CIBIL score before approving your loan.
CIBIL Score between 0 or -1: If your score is 0 then it just means that you have no credit history created via a credit card or loans.
CIBIL Score between 300 – 600: This is a real poor credit score. It means you have been defaulting on payments and the chances of getting new loans/credit cards are minimal. As such you should not miss your EMIs and should focus on payment of credit card dues well on time!
CIBIL Score between 600 – 750: You are on the right path. You will not face any problem while getting the loans or credit cards issued. Banks will be ready to offer you a line of credit for sure!
CIBIL Score between 750 – 900: This range indicates that you are regular with loan EMIs and credit payments with a really good payment history. Banks consider these people with high priority. You may get too many loan offers and at attractive rates of interest along with several Credit Card offerings!
- Offer Letter/Admission Acceptance Letter from the University / College
- Prospectus of the University or copy of online course details
- Details of University World Ranking
- Recognition of the University/College by competent authority WHED
- Letter of Consent, in case of pre-disbursement of loan
- Statement of cost of study/ Schedule of expenses for the entire duration of the course
- Receipt of Tuition fees paid to the University (if any).
- Academic Documents
- 10th & 12th Marksheets with Diploma Certificate (If any)
- Marksheets of Graduation along with Provisional / Degree Certificate
- Standardized Test Scores as applicable (GRE/ GMAT/ ACT/ SAT/ IELTS/ TOEFL/ PTE, etc.)
- Work Experience Certificate (If any)
- Photocopy of the first and the last page of the Passport
- Photocopy of PAN Card and Aadhar Card of the Student
- Photocopy of Student Visa & Air Ticket (At the time of Disbursement)
- In case of Salaried Persons
- Income Tax Returns and Form No. 16 of last 2 years
- Salary slips of last 3 months
- Appointment / Promotion Letter along with copy of Employee Identity Card
- Bank Account Statement of last 6 months (Salary / Personal Account)
- In case of Business Persons
- Income Tax Returns, Balance Sheet, Profit & Loss Account, Computation of Income of last 2 years
- Bank Account Statement of last 6 months (Personal and Business Account)
- Business Proof – Registration Certificate / GST Registration Certificate
- In case of Agricultural Income
- Income Certificate for the last 2 years issued by Tahsildar / Mandal Revenue Officer / A Revenue Department Officer having State Level Gazetted rank
- PAN Card and Aadhar Card
Photocopies as well as originals of
- Sale Deed (Registered)
- Mutation in the name of the present property owner
- House Tax Receipt (Latest) in the name of the present property owner
- Electricity Bill (Latest)
- Sanctioned Map of the property
- Deed of Declaration / Apartment (in case of Flat)
- Power of Attorney (if any in case of Flat)
- Building Permission Letter (in case of Flat)
- Lease Renewal Deed and NOC (No objection certificate)
- Society Registration Certificate and Occupancy Certificate (OC) (If applicable)
- Non-Agriculture (NA) Certificate & RL Order
- Demarking (Boundary wall / Fencing) (in case of open plot)
- Photocopy of the WILL in case of grandparents’ property
- Agricultural land is not considered by banks for Education loan
- Gram Panchayat property is also not considered by the banks unless supported by Town Planning approvals.