Beginner’s Guide for Study Abroad Loan: Check Application Process, Requirements, Interest Rates, and More 

What is an education loan? Do you have plans to study abroad? How much loan do you think is sufficient to study at the top universities in the world? How can an education loan help students achieve their life goals? The internet is flooded these days with such questions on education and study abroad loans. Why has it become easier to get a study abroad loan? The answer is simple: the increased demand for international education, competitive loan market, supportive government policies, and collaborations between banks and educational institutions have collectively made the education loan process smoother. Today, public and private banks and financial institutions are lined up to offer education loans for domestic and abroad studies.  

This is our ultimate guide for study abroad loans. Every study abroad aspirant must read this article to understand what a study loan is and how it works. At the end of this page, we have highlighted some facts that will help students calculate the education loan interest rates. Let’s get started! 

What is an Education Loan? 

Education loans are a type of financial assistance offered by financial institutions to individuals looking for funds to support their higher education. Each country has its own laws, tax, and interest rates concerning education loans. These loans cover not just the tuition fees, but other expenses too, like the house rent, living expenses, etc. 

Types of Education Loan 

Education loans are categorized into different types based on location, course, and collateral. Before thinking of taking any education loan, it is essential to know the types of education loans available and their purpose. 

Based on Location 

Based on location, education loans are further categorized into domestic and study abroad loans. 

Domestic Education Loan 

Domestic education loan is for students who want to pursue their higher education within their country of residence. Each bank has its own criteria for offering a domestic education loan. Students can only apply for this loan once the admission is confirmed. The domestic education loan amount can offer up to INR 1 Cr in India. 

Study Abroad Education Loan 

Study abroad education loan is for students looking for financial assistance to pursue their dream education abroad. The loan amount under this category is generally higher as the cost of studying abroad is expensive. The overseas education loan can offer up to INR 3 Cr. 

Based on Course 

Education loans are also offered based on the education level of the course, as some courses have higher tuition fees and longer duration. 

Undergraduate Loans 

Students looking for financial aid to pursue their undergraduate degrees can apply for an undergraduate education loan. The duration of an undergraduate degree is 3 to 4 years under different specializations. An undergraduate degree is essential to kick-start a profession in any field. 

Postgraduate Loans 

Postgraduate education loans are a class above than undergraduate. The duration of this academic level is 1 to 2 years, depending on the course, university, and country. The amount offered under this loan differs from the one offered in an undergraduate loan. 

Career Development Loans 

This type of education loan is for working professionals who want to take a break from work and want to take up professional courses and training to enhance their employment prospects.  

Based on Collateral 

Loan Against Property, Deposits, and Securities 

Financial institutions accept immovable assets like agricultural, residential, and commercial lands, houses, and others, gold deposits, fixed deposit certificates, debentures, and equity shares as collateral against education loans. 

Third-Part Guarantee 

Students can also get study abroad loan against a guarantee letter from a bank employee or one from a home bank. 

Apply for Education Loan Online 

Securing a study abroad loan is a time-taking process. There are multiple players involved, tons of documents required, then their verification, and other formalities too. Regardless of all these complications, the number of applications for education loans has only gone up. The reason? Easy online application form. Yes. Students and individuals can now apply for education loan online. Here are steps that must be followed to successfully apply for education loan online. 

• Before starting your online loan application process, make sure you understand the right type of education loan required to support your education. 

• Find out the right bank, financial institution, or NBFC in your area which has the lowest interest rate and has a hassle-free loan application process. 

• Then figure out the total loan you require to study abroad. Make sure this includes your entire tuition fee, cost of books and stationaries, accommodation rent, living expenses, and other essentials. 

• Visit the bank’s official website.  

• Under the dashboard, look for the ‘Loan’ option and click on ‘Education Loan’. 

• The page might highlight important details, like the amount, collateral, etc. 

• Click on the ‘Apply Now’ options and fill out the application form. 

• The loan application process will be divided into four parts; Account Verification, Add Applicants, Essential Details, and Uploading Documents. 

• Once all the stages are completed, your documents will be verified by bank personnel and your loan status will be notified within a month. 

Who is Eligible for an Overseas Education Loan? 

The most important stage of the entire education loan process is to thoroughly understand the eligibility criteria. What’s required and what’s must not be at a student’s fingertips to successfully complete the loan application process. Here are all the eligibility requirements for overseas education loans in India: 

• Must be an Indian national. 

• Must be 18 or above. Students under 18 are not eligible for an education loan. Instead, their parents will have to take the loan on their behalf. 

• Applicant must have a strong academic record. 

• Applicant must have received an offer letter from a university abroad. 

• Banks usually offer loans to students who have applied for a professional or business-oriented course. 

Documents Required for Education Loan 

Education loan application requires all your academic and personal documents. Here’s a list of all the documents required for an overseas education loan. 

• Bank application form with all the details and applicant’s signature. 

• Applicant and co-applicant’s passport-size photographs. 

• Valid photo identity card of the applicant and the co-applicant. (Aadhar Card/ Pan card/ Passport/ Voter ID Card) 

• Academic certificates (Matriculation, Class 12, College Degree) 

• Standardized Test Scorecard (GRE/ GMAT/ SAT) 

• English Proficiency Test Scorecard (IELTS/ PTE/ DUOLINGO/ TOEFL) 

• Offer Letter received from the university/ college. 

• Last six months bank statement. 

• Applicant and co-applicant’s income proof. 

• For collateral, banks accept immovable property, like land, homes, commercial shops, etc. This will further require a property title deed and approved building plan. 

Things to Remember Before Applying for an Overseas Education Loan 

Overseas education loan requires thorough understanding about the entire loan process. There are many complications involved and to avoid getting caught in any of them, it is crucial to remember certain things. Here are all the things to remember before applying for an overseas education loan: 

• Check all expenses covered by the education loan. 

• Compare interest rates of different banks and NBFCs. The average interest rate on overseas education loan in India is 9.3% to 13.1%. 

• The moratorium period, the time during which you need not repay any amount to the bank. In the case of overseas education loan, the moratorium period can range between 6 to 12 months. 

• You won’t receive the entire loan amount at once. Public banks usually issue around 90% of the loan amount. Out of this, your tuition fee will go directly to the university, and the remaining amount will be added into your bank account. 

• Banks charge a compound interest rate on the principal loan amount. The rate is charged annually, and in the following years, the interest is also added to the principal loan. 

Best Education Loan Providers to Study Abroad 

Now that you know what study abroad loans are and how to get one, it’s time to check out the best banks and financial institutions in the market. Here are some of the best education loan providers in India. 

ICICI Bank 

ICICI Bank is known for its user-friendly banking services. One such service is a study abroad loan. Students can get up to INR 2 Cr as an overseas education loan. It even offers collateral-free (non-secured) education loans of up to INR 1 Cr. Students can apply for a study abroad loan both offline and offline.  

*Note – The interest paid under overseas education loan can be claimed as deduction under Section 80E of the Income Tax Act of India, 1961. 

GyanDhan 

Another major player in the loan market is GyanDhan. Its India’s leading financial aid provider for higher studies. It is best known for its unmatched interest rates and highest loan amount to cover the entire cost of living abroad. Here are features of education loan offered by GhanDyan. 

HDFC CREDILA 

HDFC CREDILA is a globally recognized education loan provider. HDFC CREDILA is a subsidiary of HDFC Bank, India’s leading bank in all major financial schemes. This loan provider has successfully delivered education loans to over 1,80,000 students in over 65 countries and in 3,300+ courses. What’s more, the loan repayment tenure is up to 15 years. 

GradRight 

GradRight is a popular digital platform for international higher education. It offers smarter solutions to study abroad aspirants and is best known for its services like easy education loan, education counseling, and other related resources. 

Collateral Rules for Study Abroad Loan 

Banks accept two types of collateral as security against education loans. These include: 

• Immovable properties, like houses, flats, commercial or non-agricultural land. 

• Liquid securities, such as fixed Deposits (FDs), term life insurance policies (LICs), and government bonds. 

• Collateral or secured education loans are offered against these securities. As per the study abroad loan policy, the bank holds the right to seize the collateral till the repayment of loan.  

• If the applicant defaults on the loan repayment, the interest amount will increase, and the bank can also take legal action.  

• A secured education loan offers comparatively lower interest rates than non-secured loans. 

• Banks often offer collateral-free education loans to students admitted to top universities due to their high earning potential.