Exploring Education Loans to Study Abroad: Eligibility, Loan Types, Document Checklist, and Indian Banks

 
Education is the most powerful weapon which can help change the world. Quality education requires a huge amount that some people cannot afford. For candidates who have the potential but lack funds, a study loan for abroad is the best option. Education loans play a pivotal role for students who aim to study at a premier institute but don’t have enough finances. With the help of education loans, students get the chance to pay for further studies. Education loans to study abroad can cover expenses like tuition fees, charges of hostel, and other costs related to the course.

Choosing Education Loan for Studying Abroad

• Tax Benefits:  Study loans for abroad taken from Indian banks are eligible for tax deductions on loan interest under Section 80E of the Income Tax Act, 1961. It can be available for eight consecutive years.
  
• Interest Rate: The rate of interest is important when selecting any bank for an education loan. Understanding the difference between fixed rates and floating rates, comparing the rates that the banks offer, and opting for the most pocket-friendly option is crucial.
  
• Eligibility: The process of evaluating study loan eligibility includes creditworthiness, academic background review, family income, co-applicant details, etc. The education loan amount also depends on the nature of the course and employment probability.
  
• Documents: Students are recommended to collect the list of documents and stay prepared before applying for an education loan. Some of the common documents asked for by most of the Indian banks are a copy of mark sheets of previous education qualifications, address proof, co-applicants' income proof, passport-size pictures, etc. Some banks also ask candidates to provide their offer letter from the college they applied for.
  
• Terms for prepayment: One can consider repaying the loan amount earlier to save on interest on the principal amount. It is important to confirm if there are any prepayment penalties.
  
• Total cost over EMI: An education loan is paid in EMIs, distributed evenly throughout the loan tenure. Some people prefer longer tenure, while some prefer it shorter. 
  
• Loan processing time: A loan sanction letter serves as a vital financial resource when applying for a visa and admission. One must confirm the processing time that the lender needs for loan disbursement.

Eligibility Criteria for Education Loan to study abroad:

The first and foremost thing is to check whether the candidate is eligible to apply for an education loan or not. Provided below are the general terms and conditions that are usually followed by any bank in the process of granting an education loan.

• Citizenship: The applicant must be an Indian national.
  
• Age: If the applicant is below 18 years old, the loan will need to be taken out by their parents or legal guardians.
  
• Academic Record: A strong academic track record is typically required.
  
• Admission to a Reputable Institution: The applicant must have received an acceptance letter from a recognized overseas university, institution, or college.
  
• Course Selection: Banks often prefer job-oriented courses, so the chosen course should be technical or professional in nature.
  
• Underwriting Norms: Loan providers have specific standards, known as underwriting norms, to ensure the provision of safe and secure loans. These norms determine the loan amount, interest rate, and whether the loan will be granted for overseas study.

Necessary Documents for Student loan to study abroad

Applying for an education loan abroad can be a stressful process however the availability of all necessary documents from the applicant’s side can make the process hassle-free. The following documents are verified for the loan:

• A valid passport: The most important document to apply for a loan is a valid passport.
  
• KYC: KYC documents include the candidate’s valid identity proofs, i.e. PAN card and Aadhaar Card.
  
• Education proof: The 10th, 12th, and other relevant degree certificates should be presented. If there’s any gap between your studies, a certificate stating the gap should be included. If a candidate has any work experience, an offer letter can be provided.
  
• Address proof: There should be proof of the applicant’s permanent residential address and the present residential address along with the application.
  
• There should be an offer letter that a university has to apply for the loan. It is also necessary to show the scorecard, fee structure, and the results of admission tests such as IELTS/TOEFL, GMAT/GRE, or any other test for which one might have applied.
  
• Co-applicant documents also need to be submitted, including address proof, photo identity proof, bank statements, salary proof, business proof, and income tax return certificates.
  
• In the case of collateral (immovable property), it can be flat, home, or non-agriculture land the following documents are required:
  Property title deed
  Building approved plan
  NOC for a mortgage from a builder or society

What Are The Expenses Covered By Education Loan For Studying Abroad?

The student loan to study abroad can be used for various education-related purposes.

• The loan can be used to cover the admission application fee, tuition fee for the duration of the course, and examination fee.
  
• The student loan can be utilized to purchase necessary study materials such as computers/laptops, books, etc.
  
• The loan amount can also cover the airfare or travel expenses to join the course.
  
• Hostel or Boarding costs: A candidate opting to reside in a hostel provided by the institution can use the loan amount to cover accommodation costs.
  
• The loan may further cover additional expenses such as study tours, research costs, field trips, or any other academic-related expenses.

However, it is important to note that the rules might vary from bank to bank.

Types of Education Loans for Education Loan for Studying Abroad

The two types of education loans are secured loans and unsecured loans. A candidate can get both loans from public sector banks, private sector banks, and NBFC with varying rates of interest on different amounts.

1.Secured Loans: These loans require applicants to provide some kind of security in the form of collateral while applying. The lender will be, therefore, protected against the loss of money if the borrower fails to pay the loan. Secured loans have a lower rate of interest as compared to unsecured loans.

• A borrower can offer any collateral, such as FD, immovable property, insurance policy, etc., against which the loan can be offered
• The approval rate is higher
• When a student is studying, no prepayment is required
• The repayment period is longer
• Parental income is not necessary to get approval

2.Unsecured Loans: Unsecured Loans do not require applicants to provide collaterals however the rate of interest is high compared to secured loans.
• It is not necessary to offer any collateral to the lender for loan approval
•The repayment period is shorter when compared to collateral loans
•It can be a risky affair to get this loan. Therefore, obtaining an unsecured loan from the bank is not so simple
•A certain amount of repayment needs to be done during the study period
•Parental income should be the proof for loan approval

Here are a few well-known Indian Banks that offer Education Loans for Studying Abroad
1.    HDFC Bank
2.    ICICI Bank
3.    Axis Bank

Conclusion:
The number of Indian students studying abroad is increasing rapidly. To pursue studies abroad, a student must have a strong awareness of the money required to fund the studies. Indian banks provide helpful assistance to students studying who aim to study abroad. Candidates can select the loan that best suits them and check their eligibility before applying. By availing an education loan for studying abroad, students can turn their dreams into reality and embark on a successful global educational journey.