Factors to be Checked before Applying for Study Abroad Loan

Studying abroad can significantly advance your career and help you achieve your goals. More than 1.3 Million Indian students are currently studying abroad and it is expected that this number will increase in the upcoming year. The easy education loan process in India is one of the key factors behind this trend.

Due to the easy process of Student loans in India, the idea of studying abroad is not limited to tier-1 cities and wealthy families. Now, students of tier-2 and even tier-3 cities are exploring options for overseas higher education. Getting a student loan is an easy task, you only need to know the process of application process. Here is all the information you need to know before applying for a student loan. Also, we have mentioned some important things that you should keep in mind while selecting education loans. 

Note: This information is very general, and the particulars may differ from bank to bank. Please check with the bank of your choice.

Read More: Education Loan Interest Rates 

Student Loan Eligibility Criteria

The first and foremost thing is to check whether you are eligible to apply for an education loan or not. The general eligibility criteria that are followed by all the banks are:

• Nationality: You should be an Indian National.
• Impressive Academic Performance: You must have a strong academic record.
• Choose a Demanding Course: You must be seeking admission to a Professional, Technical or Other course of study. Most banks maintain that the selected course should be job-oriented.
• Admission Letter: You must have secured admission to a foreign University institution.
• Age Limit: You must be above the age of 18 years, or else your parents can avail of the loan.

Eligibility of the Course

• For Graduation: Job-oriented Professional or Technical courses offered by reputed universities
• For Post Graduation: MCA, MBA, MS or even diplomas

These courses could be from foreign universities or institutes approved by the state and central government.

Education Loan Amount

Whenever you take an education loan, the bank will not fund the entire amount. You will be expected to pay a part of it through your own funds, and the rest will be covered by the loan.

If your total fee is Rs 10 lakh, the bank may offer to give a loan of 80% of the amount, and you will have to put in the balance 20%. This is called the margin amount.

Maximum Loan Amount

Student loans always have a maximum amount that can be given. The maximum loan amount for studies abroad is generally around INR 50 lakh by the bank. If your tuition fee amount is more than this, you’ll have to manage the rest of the funds by yourself.

Education Loan Processing Fee

Some banks charge a processing fee, while others don’t. it may be a fixed amount or a percentage of the total loan amount. So if the bank charges you a 1% as processing fee, that will be an additional cost you’ll have to cover.

Expenses Considered for Student Loan

• Fee payable to College and Hostel
• Examination, Library, and Laboratory fee
• Purchase of Books, Equipment, Instruments
• Caution Deposit, Building Fund, Refundable Deposit
• Travel expenses
• Purchase of a laptop is required for the course

Student Loan Collateral

Banks may require collateral for education loans. This means you pledge an asset (like property or investments) to the bank as security. If you can't repay the loan, the bank can sell this asset to recover the funds you owe. 

Generally, if the loan amount is up to Rs. 4 Lakhs, then you don’t need to provide any security. If the amount is between Rs 4 Lakhs to Rs 7.5 Lakhs, then a suitable third-party guarantee is required. And for an amount between Rs 7.5 Lakhs to Rs 20 Lakhs, you need to provide 100% collateral security in any of the forms of Immovable property, bank fixed deposit, LIC policy or RBI Bonds.

Guarantor/Co-Obligant

The reason behind having a guarantor is that it puts a moral obligation on the student or their parents to repay the loan. Should you default, the guarantor will have a legal obligation to pay up. The guarantor could be –

• Guarantee of Parents
• If the loan amount is between Rs 4 Lakhs to Rs. 7.5 Lakhs, the bank may ask for a third-party guarantee instead of a security
• Wherever a loan is sanctioned to Parents, the guarantee is to be obtained from the student on attaining their majority

Documentation Required 

Here is the list of documents required for education loan:

• Residence Proof or ID Proof Documents (Adhar Card, Driving License or etc)
• Academic Documents (Academi transcripts, admission letter and etc)
• Income Documents (ITR, Form 16, Salary Slip and more)
• Collateral Documents (Property papers, FD and other financial documents).

Education Loan Repayment

Repayment starts only after the course period. If the student gets employed within one year after completion of the course, the repayment should start immediately after the expiry of one month from the date of employment.

If you do not secure a job within a year of completing the course, then repayment starts irrespective of whether or not you are employed.

Related Read: 

• How to Repay Student Loans Faster?

Maximum Repayment period of Loan

The loan is generally to be repaid in 5-7 years after the commencement of repayment. If the student is not able to complete the course within the scheduled time extension of time for completion of the course may be permitted for a maximum period of two years. Generally, you will get up to a maximum of 10 years to repay the loan.

That's all about the topic. We hope that you have got the information you are looking for. Students who wish to study abroad can get in touch with India’s top-rated loan providers and apply for an education loan through Shiksha Study Abroad.