• Education Loans

Education loan with Collateral to Study Abroad

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  • read time3 min Read
  • By:CANAM Group
  • Updated On:May 01,2024 05:37 PM IST

• Collateral-based loans are important for any Indian student who aims to study abroad. 

• Collateral education loans are preferred as they offer a high amount for a longer time at low interest rates. 

• Read this blog to learn about collateral education loans, such as their eligibility, required documents, advantages, features, best loan providers and more. 

Collateral-based education loan to study abroad.webp
Studying abroad requires a lot of money, which is not easy for any middle-class person; therefore, an aspiring Indian student often takes the help of a collateral education loan to study abroad. Talking about 2024, the price of everything is rising, and foreign education is no different. Therefore, taking an education loan is necessary and a compulsion in many cases. 

Read this blog to know what an education loan with collateral is, the importance of a collateral education loan, different types of collateral, features of an education loan with collateral, eligibility criteria and documents required for an education loan, advantages of a collateral education loan, expenses covered under collateral loan, best loan providers in India and more. 

What is an Education Loan with Collateral?

Collateral refers to the asset that a borrower needs to pledge to a lender to guarantee an education loan. It allows the lender to give the education loan to the borrower easily. If the borrower defaults, the lender can sell the collateral and get the money back. A collateral can be a tangible asset like a flat or an intangible asset like a government bond.

The most common types of collateral used for study-abroad loans are Fixed deposits, life insurance policies, government securities, gold, investment accounts, bank saving deposits, etc. The interest rates for education loans with collateral are less compared to unsecured loans as the collateral reduces the loan provider’s risk. 

Importance of Education Loan with Collateral to Study Abroad

A foreign education loan to study abroad is very important for students to cover expenses such as tuition fee, living expenses, books, travelling expenses, etc. A study loan allows students to study stress-free without worrying about different costs.

Inflation is rising worldwide and so is the cost of studying, making it difficult for a middle-class student to bear all expenses on their own. This pushes the students to look for financial aid options such as bursaries and scholarships. One such option is an education loan, which provides a good amount to cover the expenses and further allows enough time to the student to repay the loan. 

Types of Collateral Required to Study Abroad

There are different types of collateral lenders can ask for. The following are the three types of collateral that lenders accept. 

Types of collateral for education loans.webp

Features of an Education Loan with Collateral

Now, let's see the features of an education loan with collateral.

• A tangible or intangible asset is required to get an education loan with collateral.
• An education loan with collateral comes with a longer repayment duration.
• The interest rate of collateral education loans for abroad study is generally lower than loans without collateral. 
• For collateral loans, proof of parental income is not required.
• Students can avail themselves of tax benefits under Section 80E for secured loans from banks. 
• Collateral loans can offer an amount of up to INR 1.5 Cr at lower interest rates.

Eligibility Criteria for Collateral-based Education Loan to Study Abroad

To apply for any education loan, students must fulfil some eligibility criteria, which will vary from lender to lender. Following is the list of standard eligibility criteria students need to fulfil to apply for an education loan to study abroad

• The applicant must be an Indian citizen.
• The applicant must be over 18 years old. 
• The candidate must have a solid academic record.
• The candidate must have been accepted by a foreign university, college, etc. 
• The course chosen by the candidate must be technical or professional. 
• The applicant must have the collateral papers.

Documents Required for Education Loan with Collateral

Other than eligibility criteria, students must submit the following documents to get collateral education loans for study abroad.

• Complete Application Form
• Passport-size photographs of the applicant
• Photo ID such as driving license, Voter ID card or Aadhar Card
• Residence proof of the applicant
• Academic documents such as mark sheets
• Admission Proof
• Last Six Months Bank Statements
• Income Proof

Advantages of Education Loan with Collateral

A collateral education loan for abroad study comes with a lot of benefits. The following are the advantages of collateral education loans.

Higher Loan AmountGetting the loan with collateral allows the borrower to get a higher loan amount. This is because the lenders get a sense of security that if the borrower defaults, then they can simply sell the asset and get their money back.
Lower Interest RatesStudents who pledge an asset to a lender can get a lower interest rate on the loan as it reduces the risk of the lender recovering the amount. Students can save a lot on interest by having a lower interest rate.
Higher Chances of Loan ApprovalSecuring a loan with collateral increases the chances of the borrower getting the loan to study abroad. This is because the collateral assures lenders that they can recover the money.
Longer Repayment TenureThe loans with collateral provide more time for the borrower to return the money. This allows students to pay the money easily once they have enough funds. This also reduces the burden of paying money while studying, and students can study stress-free.
Flexibility in collateral optionsAnother benefit of collateral education loans for study abroad is that students can have flexibility in choosing collateral options depending upon the lender. Students can pledge assets such as investments, property or other valuable possessions. The collateral must align with the student’s financial situation and preferences.

Expenses Covered Under Collateral-based Education Loan

Before applying for any collateral education loan for study abroad, students must check the expenses it covers. Following are the various expenses that an overseas education loan covers.
 
• Flight ticket cost
• Examination fees
• Tuition Fees
• Books
• Health Insurance
• Library Charges
• Study material required during the program

Best Collateral-based Education Loan Providers in India

The following are the various foreign education loans provided in India. Students can compare all of them and then choose the best suitable. Students must remember that loan amount and repayment tenure can vary based on the candidate’s profile, financial history, CIBIL score, etc.

Name of the BankLoan AmountRepayment Tenure (maximum)
HDFC CredilaOver 1 Crore 12 years
AvanseMinimum 1 lakh (no cap)15 years
ICICI2 Crore Maximum14 Years 
Yes Bank40 Lakh Maximum15 years

How to Apply for an Education Loan with Collateral in 2024

Applying for a student loan for abroad studies is simple if the student follows the instructions properly. It is to be noted that the applicant must start around 4-6 months before their enrolment date, as the process of getting an education loan may take time. Applicants can follow the steps below to apply for a collateral education loan: 

Step 1: First, check the eligibility for an education loan.
Step 2: Contact an expert for details about the application process and guidance regarding the lenders. 
Step 3: After choosing the lender, check the document requirements and collect the documents. 
Step 4: Now submit all the documents as per the instructions and wait for verification. The verification process usually takes 1-15 days. 
Step 5: Once the application gets approved, the applicant can sign the agreement letter and wait for the disbursement of the loan amount. 
Step 6: The disbursement will be directly deposited into the student’s account or to the university according to the agreement.

Students do not need to handle all these procedures alone; they can contact experts for guidance. For example, students can contact experts at Canam who can guide them in selecting the best lenders. 

Conclusion

 
A collateral education loan for abroad study in 2024 is something every Indian student aspiring to study abroad searches for. This is because collateral-based loans provide longer repayment tenure and high loan amounts at lower interest rates. However, before choosing the lender, students must remember that there is a difference between private banks, public banks and NBFC, which will reflect in the loan amount, interest rate repayment tenure, etc. Students can get guidance from study abroad consultants regarding foreign education loans, but Canam doesn't provide assistance with education loans. 

FAQ

No, it is not compulsory for every education loan; however, many loan providers ask for collateral. 
Immovable assets such as real estate, plots of agricultural land, gram panchayat properties, non-agricultural lands without build-up boundaries and cantonment area property are not accepted as collateral for foreign education loans. 
There is no exact answer for this as it varies from lender to lender. Students can connect to their preferred lender to discuss the same.
Every bank has its pros and cons regarding foreign education loans. However, students can prefer banks such as HDFC Credila, ICICI, Yes Bank and Avanse.
Students can connect with Canam experts for guidance related to collateral education loans for study abroad.
Students can use various assets for collateral like a house, FD, life insurance, stocks, government bonds etc.
Although it depends from bank to bank, the duration of an education loan is generally 15 years. 
The processing time for study abroad loans varies from lender to lender. 
Yes, you can prepay your education loan, as many banks have the option of foreclosure. Depending on the bank, you may be levied pre-payment charges. 
The documents required for a collateral education loan are an admission letter, academic transcripts, entrance exam results, residence proof, last 6 months' bank statement, two passport-size photos, etc. 

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