Education Loan for Studying Abroad: Interest, Eligibility, Documents

Who wouldn’t want to study abroad? It is often seen as a life changing opportunity that offers exposure to global cultures and world class education. Cost of studying abroad is expensive, and you need a good amount to cover the expenses. That’s where the idea of borrowing an education loan for abroad studies comes into the picture. 

Banks and NBFCs offer education loan at different ROI. Loan amount and interest rate totally depend on the profile of student and their co applicant. Many students make mistakes while borrowing a study loan from banks or other loan providers due to a lack of knowledge.

In this article, we will cover everything you need to know about student loans in India. It includes eligibility, application process, ROI and more. By the end of this article, you'll have enough information to choose the best education loan in India for studying abroad or in India.

Steps to Get an Education Loan

Many students opt for education loans to study internationally recognised degrees such as an Education Loan for MBA, engineering, or medicine. Probably, most of you are going to borrow a loan for the first time and have less information about the process of borrowing an education loan for abroad studies. To help you, we have mentioned a road map for getting student loans from banks.

• Know Your Needs: Understand your needs first. Calculate the student loan amount required after analysing personal savings and scholarships (if any).
• Check Options: Compare study loan schemes offered by different banks and select 2 or three schemes for you.
• Check Eligibility: To apply for an education loan, you need to ensure that you are eligible.
• Collect Documents Required: Arrange the documents you must submit with the education loan application.
• Apply for Student Loans: Fill out the application form and start the application process.
• Profile Verification Process: The bank will verify your documents, and after completing the verification, the bank will disburse your amount.

Benefits of Education Loan to Study Abroad

When a student is not financially strong, they need an education loan to fund their studies. Banks and NBFCs offer different types of student loan schemes. Apart from financing education, here are some other benefits of a study loan that you should know:

1. No Need to Touch the Savings: After borrowing an education loan, your family can pay your study expenses without even touching their hard-earned savings. This benefit reduces the financial burden on the family and students.
2. No Need to Sell Anything: We often see that parents in India sell their assets to fund the education of their children. Borrowing an education loan can eliminate the need to sell any assets. You can also explore how to get low interest rate education loan.
3. Income Tax Benefits: The least known benefit of student loans is that you can claim income tax exemption if you repay your loan. This will significantly reduce your taxable liability.
4. Flexible Repayment Terms: Banks offer flexible repayment options, including a moratorium period for student loans. Typically, they provide a 6 to 12 months moratorium during which no interest is charged. This allows you time to find a job before starting repayment. It's a valuable benefit that many people are not aware of.
5. Built an Impressive Credit Report: This benefit will help you in the future when you knock on the door of a bank to borrow other loans like a home loan, a car loan and a personal loan.

Loans are frequently seen as bad debt. This expression implies that you are borrowing money for something whose value will diminish over time. An education loan is unique from other forms of loans since it is an investment in the borrower. Through this, you will eventually make far more money than you borrowed.

Eligibility Criteria for Education Loan in India

The first and foremost thing is to check whether you are eligible to apply for an education loan or not. Provided below are the education loan eligibility in India and the general conditions that are usually followed by any bank in the process of granting an education loan. Kindly note that individual banks could have their eligibility guidelines, which would have to be adhered to when applying to that particular bank.

• Citizenship: The candidate must be an Indian national.
• Age Limit: If the applicant is under 18 years old, then his or her parents will have to take out a study loan for abroad studies.
• Impressive Educational Qualification: The candidate must have a strong academic record.
• Accepted at Top Universities: The candidate must have been accepted to a reputable overseas university, institution, or college.
• Demanding Courses: Since banks favour courses that are job-oriented, the applicant's chosen course must be technical or professional in nature.

Underwriting norms are the standards set out by loan providers to guarantee that only safe and secure loans are made available. They are also important as they are used to determine whether or not to provide a person with a study loan for overseas study, as well as how much money the firm is prepared to loan and at what interest rate.

Documents Required for Student Loan to Study Abroad

Below, we have mentioned the list of required documents for applicants and co applicants to apply for an education loan:

NOTE: These requirements can vary as per the banks’ regulations.

Education Loan Interest Rates 2025 (Updated)

Education loan interest rates are not same for every bank. ROI changes if your academic performance, loan amount, and CIBIL score. ROI for student loans starts from 9.15% to 14.00%. Government banks offer education loans at lower ROI compared to private banks.

It is important to compare interest rates from various banks and NBFCs. Also, consider total cost of the loan before making a decision. Interest rates of different banks in India for education loans are given below:

Source: Official Website of Banks

Disclaimer: Banks may update the ROI, so check the official website of banks to get the actual Education loan interest rate.

How to Apply for an Education Loan?

From loan application to approval and disbursement, entire loan process is time consuming. It is always advisable to apply for a loan a little early. Follow these steps to apply for a student loan:

• Check whether course is recognised by banks or not.
• Figure out how much loan amount you require. Also have an idea about amount you can arrange without loan.
• Compare student loans provided by different banks for studying abroad and go for one that caters best to your needs.
• After finalising bank and loan amount, fill out loan application form and approach your bank.
• As soon as your loan is approved, bank will issue a loan document that includes various elements of loan.
• After signing loan document bank will disburse amount. You will get money in installments or as requested by university.

Tips to Select Best Education Loan for Abroad Studies

• Compare Interest Rates: Always compare interest rate of education loan offered by banks. Also, ask them about fixed and floating rates. You may find a good deal if your CIBIL score is decent.
• Understand Loan Repayment Terms: Always ask every detail about loan repayment. Make sure you are paying less or no foreclosure charges.
• Analyze Maximum Loan Amount & Coverage: Ask questions about things covered under the education loan for abroad studies. Make sure your maximum cost of living and studying are covered.
• Assess Processing Fees and Charges: Check the documents of student loan before signing it. If any hidden cost or any other charges then negotiate for it. You may get a discount.
• Check for Loan Subsidies: Governments offer interest subsidies on education loan for higher studies. Ask banks about these schemes and apply for it.

Top Education Loans Providers in India

Here are the top education loan providers in India for study abroad, where students can apply for study loans.

Vidya Laxmi Education Loan Portal

Vidya Lakshmi Education Loan Portal was started by the Department of Financial Services (Ministry of Finance), the Indian Banks Association (IBA), and the Department of Higher Education (Ministry of Education). The objective of developing this portal is to simplify and streamline the education loan simplify and streamline. Students can access information about various education loan schemes and apply to multiple banks.

Things to Remember While Taking an Education Loan for Abroad Studies

• Moratorium period: This is the time during which the borrower does not make any repayment to the bank. This period varies from bank to bank and could last up to some time after completion of the course.
• Loan Margin: Usually, banks do not provide the complete amount, i.e. 100 per cent of the money needed to fund the education. The majority of the public sector banks issue 90% of the total amount, the remaining 10% has to be arranged by the aspirant himself.  
• Effect of Exchange Rate: Always calculate the amount which you will be receiving at the time of disbursement, as any change in the exchange rate can affect the amount you will be receiving.

Collateral Rules for Student Loan for Abroad Studies

Banks offer study loans for abroad studies, but they need to pledge some collateral against the loan. Collateral submitted by students acts as a security measure for lenders. These rules typically involve pledging assets like property (land, house), fixed deposits, or life insurance policies with a surrender value.

Any type of liquid assets like bonds, FD, shares or any immovable property like a house, any commercial property, or just land can be classified as collateral for education loan. Here is detailed information, what is acceptable as collateral: