Education Loan Without Collateral: How to Apply

So, you’ve set your sights on studying abroad. 

The adventure, the growth, the opportunities – it’s all within your grasp. 

But then comes the reality check: the costs. It’s like standing at the edge of a cliff, wondering if you can make the jump without risking it all.

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The truth is you don’t need to put your family’s assets on the line. 

The solution is this – education loans without collateral. 

Many banks in India offer education loans without collateral. For example, HDFC Bank offers up to ₹45 lakh, and SBI can go up to ₹1.5 crore for certain top-tier institutes.

Other financial institutions like IDBI Bank, Bank of India, and ICICI Bank also offer loans without collateral. And that’s just the tip of the iceberg—there are many more options, which we’ll explore later in the article.

But first, let’s understand what abroad education loans without collateral are, how they can relieve financial burdens, and how to get one.

What Is a collateral-free education loan?

An education loan without collateral is simply a loan that doesn’t require you to put up any of your assets as security. 

If you don’t have significant assets to pledge or if you’d rather not risk your assets, it’s a great option. It’ll cover your tuition fees, living expenses, travel expenses, and other study-related costs. 

Benefits of education loans without collateral

Financial hurdles can sometimes be the biggest demotivator of quality education. 

More students are applying for and getting education loans to study abroad since the pandemic. 

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However, many more still miss out because they don’t want (or don’t have access to) collateral to pledge as security with the lender. But that doesn’t have to be the case anymore. 

You may not have significant assets to go for secured loans, but you can surely explore ones that don’t need any assets in the first place – education loans without collateral India can be a lot of help in such cases 

Here’s how they can make a difference:

No asset risk

With non collateral education loans, you don’t risk losing any personal or family assets if you face repayment challenges, as there’s no collateral involved.

Unsecured overdraft facility

Some lenders provide an unsecured overdraft facility, allowing you to withdraw funds as needed up to a certain limit. It can be particularly useful for unexpected expenses.

Co-applicant flexibility

Unlike secured loans, which often require co-applicants to be immediate family members, non collateral education loans may offer more flexibility in choosing a co-applicant, such as distant relatives or friends.

Post-study grace period

Many education loans without collateral offer a grace period after completion of your studies. This gives you the time to find a job before you start repaying the loan.

Coverage for various expenses

Non collateral education loans are just as good as one with collateral. That’s because they typically cover a wide range of expenses, including tuition fees, accommodation, books, travel, and even insurance. So you have all the financial support you need for your studies.

Customizable repayment plans

Lenders often provide various repayment options, including step-up repayment plans where you can start with lower EMIs and increase them over time as your income grows. But you need to confirm this with your lender, all lenders don’t provide this flexibility. 

Also Read: Education Loan to Study Abroad (GradRight’s Guide)

Differences in education loans: with collateral vs. without collateral

As we discussed above, there are essentially two types of education loans for studying abroad that you can opt for: 

1. Education loans with collateral
2. Education loans without collateral

Here’s how they differ:

Collateral requirement

Like we explained, for loans with collateral, you need to pledge an asset (like property or fixed deposits) as security. However, you don’t need any such security for education loans without collateral.

Loan amount

Generally, you can borrow larger amounts with secured loans, up to ₹1.5 crore. Non collateral education loans can cap at ₹50 lakh for some banks. 

But as of today, many financial institutions offer loans amounting to as high as ₹1.5 crore for unsecured loans, too. 

Interest rates

Because loans with collateral are secure, they obviously have lower interest rates. 

But that’s not always the case. Many finance companies and NBFCs offer competitive rates for both types of loans.

Processing time

Secured loans might take longer to process, up to 20 days, due to the additional documentation and asset verification involved. 

Education loans without collateral have quicker processing times, often just a few hours or days.

Moratorium period

Collateral loans often offer a moratorium period, where you don’t have to pay the principal or interest for a certain time after your course. 

For education loans without collateral and co-applicant, you generally start paying interest soon after receiving the loan, but the principal payment can be deferred until after your course.

Education loan interest rates for foreign education in India

To study abroad, the current loan interest rates range from 9% to 15% per annum. It depends on the lender and other factors like the loan amount, your academic profile, and the university you choose. 

To understand how these rates affect the total amount you pay back, here’s some important info:

Factors affecting interest rates

• Your academic record and university reputation
• Co-applicant’s creditworthiness and income
• Collateral security provided (if any)
• Relationship with the lending institution

Types of interest rates

• Fixed Rate: The interest rate remains constant throughout the loan tenure
• Floating Rate: The rate is linked to a benchmark rate (like the MCLR for Indian banks) and can fluctuate based on market conditions

Moratorium period

Most education loans without collateral in India have a moratorium period (course duration plus six months to a year) during which you don’t have to repay the principal amount. 

However, interest accrues during this period.

Repayment flexibility

Some lenders offer flexible repayment options for foreign education loans without collateral, allowing you to start repaying the interest or partial interest during the study period, reducing the overall interest burden.

Tax benefits

Under Section 80E of the Income Tax Act, you can claim a deduction for the interest paid on an education loan without collateral and co applicant for the loan repayment period.

To estimate your loan payments, you can use an education loan EMI calculator. 

The tool helps you figure out how much you’ll need to pay each month based on your loan amount, interest rate, and repayment period.

Eligibility criteria for education loan without collateral in India

To apply for an education loan without collateral in India, you must meet the following criteria:

• You must be a resident of India.
• You should be 18 to 35 years old when applying for the loan.
• You must have a confirmed admission letter from a recognized university affiliated with UGC/AICTE/Government, etc.
• The loan is available for undergraduate, postgraduate, or PG Diploma courses.
• If you’re pursuing a full-time course, you’ll need a co-applicant, such as a parent, guardian, spouse, parent-in-law, siblings, or first cousins.

Documents required for education loan without collateral in India

When applying for an abroad education loan without collateral, you’ll need to provide the following documents:

• A completed and signed application form with attached photographs.
• Copies of your 10th/12th mark sheets or latest education certificates.
• A statement of your course expenses/cost of study.
• Two passport-size photographs.
• Aadhaar Card and PAN card of the student and parent/guardian.
• Identity proof includes a copy of your Aadhaar Card, Voter ID, Passport, or Driving License.
• Age proof, like a copy of your Voter ID, Aadhaar Card, Driving License, or Passport.
• Proof of residence includes a rental agreement, bank statement, ration card, gas book, electricity bill, or telephone bill.
• For income proof, you’ll need recent salary slips or Form 16 of the parent/guardian/co-borrower, a 6-month bank statement, and an updated ITR (Income Tax Return with income computation) of the last 2 years.

Basic property-related documents, if applicable, like the property title deed, sale agreement, allotment letter, link documents, property tax bill, electricity bill, and municipality-approved building plan.

So, if you’re wondering, “Can I get an education loan without collateral?” The answer is yes.

Also Read: Study Abroad for Indian Students (Comprehensive Guide)

How to apply for an education loan without collateral in India?

Obviously, you must be an Indian citizen and over 18 years old to apply for an education loan without collateral in India. But here’s what’s more:

Step 1: Check your eligibility

Firstly, check if you’re eligible. You must have an offer letter from a foreign university. You might also need a family member to apply with you as a co-applicant.

Step 2: Choose the right lender bank

Next, choose the right lender. 

You have several options, including government banks, private banks, and Non-Banking Financial Companies (NBFCs). Compare their interest rates, fees, and repayment terms to find the best fit for you.

If you’re wondering, “Which bank gives education loan without collateral for abroad?” it’s essential to research and compare different lenders.

Step 3: Gather necessary documents

Prepare the required documents, which typically include passport-size photos, proof of admission, academic records, proof of age and residency, statement of cost of study, and income proof and tax returns of the co-applicant ​​.

Step 4: Decide on loan type

Decide between a secured loan, which requires collateral, or an unsecured loan, which doesn’t. Secured loans usually offer more money at a lower interest rate.

Step 5: Apply for the loan

Now, apply for the loan. You can do this online or by visiting a bank branch. 

Make sure you fill out the application form accurately and provide all the required documents.

Step 6: Loan approval and disbursement

Wait for approval. 

After you apply, the lender will review your application and may conduct an interview. Once approved, the funds are usually disbursed directly to the university.

Or, you can let FundRight handle getting an education loan for abroad studies without collateral.

How does FundRight work?

FundRight changes how education loans without collateral are acquired for studying abroad. 

Here’s how it works:

Education loan bidding platform

FundRight is the world’s first platform where banks bid to finance your education loan. 

You create a profile, and lenders compete to offer you the best loan terms based on your profile.

Savings

Because banks compete for your business, you can save significantly on your loan. FundRight can save up to 23 lakhs on your education loan for abroad studies without collateral.

Convenience

With FundRight, you don’t have to chase banks; instead, they come to you. 

You can receive loan offers from 15+ lenders from India and abroad within just 2 days.

You can opt for loans without needing collaterals or co-signers, giving you more flexibility and potentially reducing the burden on your family.

Expert guidance

FundRight provides financial advisors to help you compare loan offers and negotiate with banks for better loan terms. So you get the best deal possible.

How do you benefit from FundRight as a student?

• Since banks are competing, you’re more likely to get a lower interest rate for your education loan without collateral.
• You can opt for loans without collaterals or co-signers, which can be a significant advantage for students looking for an abroad education loan without collateral.
• With expert guidance and the ability to compare offers, you can make more informed decisions about your loan.

If you’re interested in exploring your options with FundRight, you can start the process right away: Find My Best Loan with FundRight. 

FAQs – education loans without collateral in India