Education Loan for Abroad Studies

According to a recent survey conducted by QS World University, India has been ranked as the second biggest market in sending its students to study abroad. This is in spite of the fact that India has some of the top-notch educational institutions in the world. Globalization, ease of payment and availability of high-quality educational institutes can be attributed to this migration of students from India. Let us delve deeper to understand about abroad studies and how education loans helps students and parents in financing studies in a foreign country.

Why Indian Students Choose to Study Abroad?

Some of the common reasons why Indian students are interested in studying in a foreign country include:

1. Ease in admission

Admission to prestigious universities such as IIMs, IITs, AIIMS, etc. involves extreme pressure and cut-throat competition. To compound the problem further, the number of seats available in such institutions is dismally lesser than the student population aiming for admission.

2. More options

The education system in India still primarily follows the conventional focus on popular subjects such as Science, Tech, Medical, Engineering or Management. The youth of today wants to study and learn about non-conventional subjects or niche domains. Such programs (especially with research focus) are offered by many reputed international universities.

3. Quality of education

Indian universities rely a lot on theoretical knowledge and rote learning. The lack of practical application of skills has caused the problem of educated unemployment in our country. On the other hand, educational institutions abroad invest considerable time and effort in aspects such as class participation, imparting life skills, dialogue exchange, case studies, and practical experiences. This makes the whole process of learning more relatable, fun and meaningful. In addition, flexibility to tailor the courses as per students’ interest, take additional credit courses and freedom to work on part-time basis while pursuing education adds to the overall charm of studying abroad.

In spite of all these positives, usually one of the biggest negative about pursuing education abroad is that it is an extremely costly affair. While many universities offer scholarships and other such financial aid options, only a handful of students are able to benefit from the same. This problem can be easily tackled by an easy route offered by many financial institutions in our country- education loans. These days many reputed banks and other such institutions offer education loan for abroad studies.

The loan offered by these institutions, in addition to the regular tuition fees, usually cover all related expenses such as hostel fees, cost of books, laptop and equipments, travel expenses to the location of the school or university, study tours, project work, etc.

Things to Keep in Mind when Taking Education Loan for Abroad Studies

Here are a few things to keep in mind to make a successful application for education loan for abroad studies:

1. Eligibility Criteria

The first step while considering going down the loan path is to check if the course or program that you want to pursue is included in the list of eligible programs by the concerned bank. All the banks which offer education loan for abroad studies have a list of programs (technical and professional) that are covered under the scope of loan. Mostly, long term programs by well-known universities are included in the eligibility list.

2. Rate of Interest

Though a no-brainer, it is very important to carefully read through the terms and conditions of the loan to fully understand the overall rate of interest charged by the NBFC or Bank. Usually, the rate of interest offered by the public sector banks is lower as compared to the private ones. On the other hand, the private sector banks are known to offer higher loan values and have a quicker and less cumbersome application process. One needs to weigh in all these factors before choosing the loan provider.

3. Margin Requirements

None of the financial institutions that offer educational loan for foreign studies finance the entire amount. It only pays a particular portion of the total expenses and the rest is to be funded by the student. This balance amount is known as the margin amount.

4. Collateral Requirement

Most of the financial institutions require collateral to be provided especially if the loan amount crosses a particular limit. It is important to be cognizant of this clause in order to decide the most optimum source of education loan.

5. Co-signer or guarantor

While all the banks or other institutions which offer student loans have varying limits, generally when the loan value crosses 5 Lakhs, one is required to bring a co-signer on board.

6. Repayment Period

The moratorium period or the period in which the borrower is not required to start the loan repayment is usually six months’ post course completion. The repayment time period for the education loan for abroad studies varies from one financial institution to another. One must carefully understand this clause and analyze other financial commitments in the pipeline before opting for the loan from a particular institution.

7. Other charges

It is imperative to understand if there are any processing charges involved. As the loan value tends to be on the higher side for foreign education, even a small fraction of such charges makes a big dent. Also, check if there are any penalty or such charges for pre-payment or pre-closure of the loan.

8. Documentation

One needs to have their documentation on point before approaching any Bank/NBFC for educational loan. While all the financial institutes have different requirements, the below basic documents remain common:

• Photo Identity proof and address proof
• Acceptance letter from the foreign university
• Education records so far (last qualifying examination mark sheets)
• Expense schedule and estimation
• Scholarship details, if available
• Bank statement for the last six months (primary loan applicant and the co-signer)
• Form 16 and other income tax related documents
• Collateral such as Fixed Deposits, house, land or other such immovable property

Some of the well-known public sector banks that offer education loan for abroad studies are SBI, Bank of Baroda, Allahabad Bank, Canara Bank, Syndicate Bank and Punjab National Bank. In the private sector, players like Axis Bank, ICICI Bank and HDFC Bank have attractive education loan schemes.

Non-Banking Financial Companies such as Avanse, Credila and Prodigy Finance also provide education loan to students venturing to foreign schools and universities.

So, are you a deserving candidate and wish to pursue your further education in a foreign land? Then don’t worry about the financial aspect of the process. There are many financial institutes that offer loan at attractive rates. Just choose the right financial partner and turn your dreams into a reality.