Based on the latest information provided by the Education Ministry of India, the number of Indian students pursuing education abroad reached a six-year high in 2022, with over 770,000 students opting for overseas studies. Consequently, there has been a significant increase in the demand for education loans. In fact, after five years of negative growth, education loans experienced a remarkable 17% rise in the previous financial year, ending in March 2023. This indicates that taking an education loan for studying abroad can be a prudent decision, enabling you to pursue your studies without undue stress. Furthermore, once you secure a good job after graduation, you can begin repaying the loan. If you find the complex financial jargon intimidating and feel unsure about how to obtain an education loan, there’s no need to worry. We are here to help you enhance your understanding of education loans for studying abroad and guide you on how to effectively secure one.
How much does it cost to study abroad?
Studying at an abroad destination can come up with a heavy price and thus before looking at the different lending options for abroad studies, it is important to know how much it costs to study abroad. The average tuition fees and cost of living for a few top study-abroad destinations are shown in the table below –
|Country||Average tuition fees per annum||Average tuition fees per annum|
|USA||USD 50,000||USD 12,000|
|UK||USD 44,000||USD 13,000|
|Canada||USD 35,000||USD 13,000|
|Australia||USD 40,000||USD 10,000|
As you can see, studying in a foreign country can be quite expensive, and thus taking an abroad education loan is the most viable solution. Let’s look at some of the lenders that can provide you with education loans for abroad studies.
Lenders and types of education loans to study abroad
There are two types of education loans available for studying abroad: secured and unsecured loans. The primary distinction between the two lies in the requirement of collateral. In the case of a secured education loan, you need to pledge an asset as security. Typically, this type of loan offers a higher loan amount and a lower interest rate. On the other hand, an unsecured education loan does not necessitate collateral; instead, a co-applicant is required to act as a guarantor. The loan amount may be slightly lower compared to a secured loan, and the interest rate could be slightly higher. These two types of loans are provided by many lenders. The different category of lender that can be chosen by you includes –
- Public sector banks: these are the banks that are operated by the government of the country. State Bank of India (SBI) and Union Bank of India (UBI) are the two renowned names out of all the public sector banks that are being operated here in India. This lender is most suitable in cases where the applicant has collateral like a property or other asset that can be pledged to the bank as security. This can be done to obtain secured education loans as the loan quantum for these banks in case of secured education loans is up to 1.5 Cr with an interest rate of around 11%. They do provide education loans without collateral as well but in this case, the loan quantum is very less which is up to 7.5 Lakhs INR only.
- Private sector banks: Private banks are financial institutions that are owned and operated by private individuals, corporations, or partnerships, rather than being publicly traded companies. They offer a wide range of banking services. Private banks can be a feasible option especially when you do not have collateral to pledge but have a strong co-applicant like your parents to support you with an education loan to study abroad. The documentation process is easier and so does meeting eligibility. The loan quantum for private banks can range between 30 – 50 Lakhs INR and you can get it with a reasonable interest rate (starting at 11% approx). In the case of a co-applicant, you will need to ensure one important criterion that is the co-applicant must meet the minimum income criteria (without obligation) set by the lenders. Axis Bank, ICICI Bank, and IDFC First Bank are some of the well-known names in this category.
- NBFCs: this category of lender includes names like HDFC Credila, Avanse, Auxilo, and InCred. The interest rate of NBFCs is slightly higher than public and private banks starting at around 12%. There is a benefit to going with NBFCs that is they provide a higher loan amount than that of private banks even without collateral. Their loan amount can range between 30 – 65 Lakhs INR. The eligibility and documentation are also comparatively easier.
- International lenders: they can provide you with an education loan without collateral and even without a co-applicant. This is the USP of going with international lenders. They provide you with education loans up to USD 100,000 and in this same currency domination only. They can disburse the loan amount directly to the university, saving you some money. The interest rate for them starts at around 13%. They have an approved list of universities/colleges and your targeted school should be one of them so that you can start your loan application with them. MPOWER Financing and Prodigy Finance are the most common names that you might hear in case you explore more about international lenders.
Required documents and eligibility to get an education loan for abroad studies
Eligibility criteria may differ depending on the lender that you choose but to help you give a general idea here are the common eligibility criteria –
- The applicant must be a minimum of 18 years.
- Must be enrolled in a reputed foreign university/college.
- Must have appeared for tests like IELTS, TOEFL, GMAT, and GRE.
- Must have a co-applicant that meets the minimum income criteria.
The documents that will be required during the education loan process will include –
- KYC documents
- Past academic transcripts
- Score sheets of different tests like IELTS, GMAT, and more.
- Admit proof
- Fee structure of the university
- Financial Proofs
Choosing the best lender for an abroad education loan can be tough especially when you have these many options available in the financial marketplace. An education loan for abroad studies is a long-term commitment that needs to be made carefully. You can check your eligibility with GyanDhan, in order to find the best lender that can guarantee you the best education loan offer. In case you want to choose a lender on your own you can compare them based on different variables like interest rate, repayment period, moratorium, processing fees, and more. To conclude, choosing the right lender totally depends on your desired needs for an abroad education loan.