A common aspiration among Indian students is to finish their higher education abroad, mainly from the US. And if you are one of those ambitious souls looking to study abroad, there are all kinds of questions that you might be looking for the answers to!
Well, in this article let us clear up all those doubts regarding loans for studying abroad so you have a clear roadmap for your future.
Eligibility Requirements for Study Abroad Loans
Too much information only convolutes the solution you're looking for and so all the eligibility requirements for study abroad loans boil down to three simple check marks for you:
- Essential Requirements
- Student Profile Requirements
- Documentation Requirements
Now, these three are the basic requirements that allow you to be eligible for a study abroad loan, however, saying that your thoughts should end at these three factors only is alas, not true.
Say, you'd have to fuss over the basic preparation for a perfect serving of crispy gobhi manchurian but that doesn't mean you'll be free from doing the dishes later!
In that way, there are other similarly important factors that you need to be mindful about:
- Visa Availability
- Loan Security
- Upfront Payments
- Loan Disbursements and Repayments Models
- Applicable Courses
- Co-Applicant Eligibility
Now, don't get overwhelmed by all that! That's why we are here, to simplify your study abroad loan roadmap.
Let's tackle all these requirements one by one:
1. Essential Requirements
Perhaps the biggest eligibility for you to take on an educational loan to study abroad is that you must have been already accepted to a recognized University, College, or Institution in a foreign country.
But, just so we are in the clear, here are the rest of the essential requirements that you must cross off your list:
- You must be an Indian citizen who is residing in India or an NRI.
- As stated earlier, you must already have secured admission to a recognized academic institution.
- An exceptional academic record is always helpful in securing such loans.
- You must opt for a full-time or part-time UG/PG program.
2. Student Profile Requirements
Your profile as a student opting for such loans plays a huge part in the banks and private lenders deciding whether to sanction the loan or not as per their underwritten norms.
Let's see some of those factors:
- You must have completed high school and any other academic requirements for the course you're applying to.
- Since you, as a student, most probably have no independent source of income or you might be underage thus you may require a co-applicant who can be a family member with an income source.
A very big notion for approval resides in the course type that you are going for, banks prefer job-oriented courses so your chosen course must be technical or professional in nature.
FYI: Underwriting Norms
An underwriting norm is a set of parameters set by banks and lending agencies that help these institutions decide whether to allocate loans to an individual or not and if so, then what should be the loan amount, interest rate, repayment model, etc.
These rules are for in-house only but you get the idea that the more you seem excellent at repaying the loan either via your family's present income source or by your future career prospectus,, the more you are in favor of getting a study abroad loan.
3. Documentation Requirements
Proper documentation is probably the most articulate process that requires your full attention, miss any one of them or fill in even a tiny wrong detail and you could set yourself back by days or even weeks.
So be really attentive to these documents:
- Proper KYC papers that confirm your identity and address.
- The admission letter from the college/Uni abroad.
- The proofs of your academic qualifications such as mark sheets and certificates that are up to the qualifying exam level AND don't forget the English language proficiency tests i.e. TOEFL, IELTS, and PTE.
- A payment structure prepared by you that outlines all your academics and miscellaneous expenses.
- In case you have a scholarship letter, add that to the list as well.
Documentation Requirements for the Co-Applicant
- Salary slips for the last three months
- A copy of IT returns for the last 2-3 financial years or a copy of form 16, both acknowledged by the Income Tax Dept.
- Salary account statement for the last 6 months.
For Self-employed co-applicant
- Address proof of your business, if applicable
- TDS certificate (Form 16A, if applicable)
- ITR for the last three years
- A Certificate of qualification (for C.A./ Doctor and other professionals)
- Your bank account statement for the last 6 months
Technical Documents for Collateral
- An approved layout plan and permissions (if applicable)
- NOC and allotment letter
- Copy of prior sale deeds
- Possession certificate (if applicable)
- Urban clearance certificate
- Conversion certificate where the property has changed from agricultural to non-agricultural use
Legal Documents for Collateral
- Latest property tax receipt
- Khata certificate and extract
- Encumbrance Certificate (EC)
- Sale/gift/partition deed
Additional Requirements for A Study Abroad Loan
Visa
Hopefully, you already would have sorted out your Visa approval before applying for a loan to study abroad but just in case, there are two types of Visas you could get for your education purposes abroad:
I. F1 Visa for academic courses
II. M1 Visa for vocational courses
Here are the basic requirements for these two Visa types:
- Must be enrolled in an academic/vocational program
- Your school needs to be approved by the Students and Exchange Visitors Program, Immigration and Customs Enforcement
- You must be enrolled there as a full-time student
- You must be proficient in English or be enrolled in courses that improve your English
- You must have sufficient funds to support yourself during the academic stay
- You must have a residence abroad which you don't want to give up in any way
For more on the fabled F1 visas for students studying abroad come over to Zolve for a comprehensive understanding!
Loan Security
In most cases, students such as you aren't employed anywhere so you will need a co-applicant who's going to be liable for the repayments.
To reduce their risks even more, banks and private lenders also ask for collateral.
Here's an interesting bit of trivia, in case you are selected for a prestigious college, banks may not even require any collateral from you!
If it's apparent that you'll end up having the bigger end of the bargain stick in life via this loan they give you, you'll have an easier time applying for and receiving funds from any bank or lender!
Upfront Payments
There are no down payments for up to a loan of INR 400,000. After that amount, you'll be liable for a margin upfront deposit. These may vary depending on the individual banks and private lenders you select.
Loan Disbursements and Repayments Structure
Typically, your lending institution shall pay directly to the college or university for your fees and any other academic charges. But if you have already paid the fees then the banks may pay you directly provided they have a show of proof, receipts, and all.
Moratorium. It's a new and hopeful word of the day. A moratorium is the 'holiday period' every lender has to provide you, once the moratorium ends, the count begins on your repayment era. Moratoriums last throughout your academic years plus 6 to 12 months more depending on your bank/lender.
The loan repayment terms generally range from 7 to 15 years and depend on the lender's policy, so make sure you know the finer details about the repayment process.
Before You Apply For A Study Loan Abroad
Here are a few helpful hints that will make your academic pursuit and future afterward easier:
- Pick the repayment option that you know aligns with your budget.
- Don't forget to check the length of a suitable Moratorium period.
- Always opt for a shorter loan tenure since they provide you with significant interest savings.
- But don't select unaffordable EMIs instead opt for the shortest tenure you can manage.
- Use any automatic educational loan EMI calculator to always have a clear view of your payments.
- Set up automatic debits from your savings account, trust us, you'll accrue fewer liabilities this way.
- Start paying off your interest within the moratorium period, on a related note, consider getting a part-time job.
- While issuing a cheque to pay for your outstanding amount, pay just a little extra amount so there's a surety that there are no outstanding amounts left for the payments made.
Study Abroad Loan Parameters for Public Sector Banks (PSBs)
And now, here are a few helpful data tables that show you the loan parameters for public and private banks as well as NBFCs. Happy Shopping!
Basis Of Difference | UBI | SBI |
Loan amount (unsecured) | Up to INR 40 Lakh | Up to INR 7.5 Lakh |
Interest rate | Starting at 9.8%* | Starting at 11.15%* |
Moratorium period | Course + 12 months | Course + 6 months |
Processing fees | No processing fee | 10,000 INR + GST |
Processing time | Up to 7 days | Up to 14 days |
Unsecured loan eligibility | Only for master program | N/A |
Premiere institute list | Have a list that can lead to fluctuation in interest rate | N/A |
Loan Approval Basis GRE / GMAT? | No | No |
Study Abroad Loan Parameters for Private Banks
Basis Of Difference | IDFC First Bank | ICICI Bank | Axis Bank |
Maximum loan amount | Secured loans - INR 1 cr, Unsecured loans - INR 75 Lakh | Secured loans - INR I cr, Unsecured loans - INR 40 Lakh | Up to INR 40 - 75 Lakh |
Interest Rate | 11.50 - 12.25% | 9.85 - 15.5% | 11 - 11.5% |
Margin Money | Nil | 0 - 15% | 0 - 5% |
Processing fees | 1 - 1.25% | 0.5 - 2% | 0.75% of the loan amount + GST |
Moratorium period | Course period + 12 months | Course period + 6 months | Course period + 1 year |
Repayment during the course duration | Simple or Partial Interest | Simple Interest (SI) | Simple Interest (SI) |
Loan tenure | 12 years | 8-12 years | 15 years |
Co-applicant minimum income | INR 35,000 / per month | INR 60,000 / per month | INR 35,000 / month |
Co-applicant age | 32 years | 35 years | |
Pre-approved college lists | Colleges and universities are divided into three categories i.e. Platinum, Titanium, and Gold | Colleges and universities are divided into four categories i.e A1, A1, A3 & A4 | |
Loan approval basis GRE / GMAT? | Yes | No | Yes |
*Interest rate as of August 2023
Study Abroad Loan Parameters for Non-bank Financial Companies (NBFCs)
Features | HDFC Credila | Avanse | Auxilo | InCred |
Maximum loan amount | INR 20 - 75 Lakh | INR 20 - 75 Lakh | INR 20 - 75 Lakh | INR 20 - 80 Lakh |
Interest rate* | 11.25 - 13% | 12.25 - 14% | 12 - 13.25% | 11.65 - 13.5% |
Moratorium period | Course period + 1 year | Course period + 1 year | Course period + 1 year | Course period + 1 year |
Repayment during the moratorium period | Simple Interest (SI) or partial Simple Interest (PSI) | Simple Interest (SI) or partial Simple Interest (PSI) | Simple Interest (SI) or partial Simple Interest (PSI) | Simple Interest (SI) or partial Simple Interest (PSI) |
Processing fee | 0.5 - 1.5% of the loan amount + GST | 1 - 2% of the loan amount + GST | 0.5 - 1.5% of the loan amount + GST | 0.5 - 1% of the loan amount + GST |
Loan tenure | 12 - 15 years | 12 - 15 years | 12 - 15 years | 12 - 15 years |
Maximum Loan Amount | INR 20- 75 Lakh | INR 20- 75 Lakh | INR 20- 75 Lakh | INR 20- 80 Lakh |
Margin Money | Nil | Nil | Nil | Nil |
Minimum co-applicant income (negotiable for secured education loans) | INR 30,000 - 60,000 | INR 30,000 - 60,000 | INR 20,000 - 40,000 | INR 20,000 - 40,000 |
*Interest rate as of August 2023
Interest Rates of Different Banks for Education Loan
Bank | Interest Rate |
HDFC Credila Education Loan | 13.80% (approx) |
ICICI | 9.40% to 14.00% |
SBI | 11.15% |
Axis Bank | 13.70% to 15.20% |
Punjab National Bank | 9.40% to 12.10% |
Bank of Baroda (Baroda Scholar) | 9.70% to 12.20% |
Indian Bank | 8.80% to 11.40% |
Union Bank of India | 10.90% p.a. to 12.55% p.a |
Conclusion
Eventually, it all comes down to understanding your needs and options. It is highly advisable to be vigilant of your financial conditions and your academic prospects before signing up for a study abroad loan.
But in case, you do not want to worry yourself with the hassle of the application process and the anxious vibe that follows why not allow Zolve to take care of all your study abroad loan sanctions?
It's fast, easy, and completely transparent all the way. Have a smooth experience getting a study abroad loan with Zolve.
FAQs
1. Does the study abroad loan cover every expense?
A. Private banks and NBFCs do cover the full cost of studying abroad. Public banks, however, may ask the students to cover 10-15% of the cost through self-financing, the rest is on them.
Hey, btw you can save more by being smart (which you already are) with Zolve.
2. What is the interest rate for study abroad loans?
A. The typical interest rates range from 9% to 11% per annum, but it depends on your credit profile and your bank's policy. Public banks have way lower interest rates than private ones though.
3. Can a low-income student get a study abroad loan?
A. In one word, No! Your financial background must be strong to get the loan approved and disbursed hassle-free. There are a few government schemes that such students can look for, we at Zolve also offer scholarship programs worth $25,000, you can check that out! But the cold truth is that no low-income applicant can get a study abroad loan.
4. What is the minimum salary for parents for a study abroad loan?
A. Any applicant who is earning at least INR 30,000 per month is considered eligible to qualify for a study abroad loan. You can still get considered at even less than that but INR 30,000 is the recommended minimum monthly salary.
5. Is it risky to take a loan and study abroad?
A. It's risky for both, lenders and borrowers since unlike other loans, student loan repayment is more unclear as it remains unsure if everything will go as planned with the student's studies and results or not.
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