“Can you get an education loan without parental support?”
This question lingers in the mind of every student who dreams of studying abroad despite coming from a modest socioeconomic background.
For many such students across India, the aspiration for studying overseas dies prematurely when they learn about the expenses associated with getting a foreign education.
And facts such as these dampen their spirits further.
Although government-sanctioned education loans are there to offer financial support, most (if not all) of them require either hefty collateral or a parent’s income as security.
But what if your family does not have sufficient savings or assets to offer as collateral? Or, what if you just don’t want to burden them with this added responsibility?
All hope is not lost. We built FundRight precisely to make education loans more accessible and affordable for India’s aspiring students.
But all help from FundRight aside, you havee to be creative in the way you look for financial assistance to fulfill your goal of studying abroad.
And to get your loan without your parents’ support? That’s doable, but only when you act quickly, play smart, and know your rights.
Introduction to Getting an Education Loan without Parental Support
Conventionally in India, getting an education loan is a family affair, in which parents play a major role. In most cases, their income, life-time savings, and assets are taken into consideration when granting student loans. Having parental support makes getting a student loan for overseas education easy and hassle-free.
Unfortunately, not every aspiring student comes from an affluent background, and traditional lending institutions such as banks often reject student loan applications because of non-academic factors such as the low savings or income of parents, lack of assets to present as collateral, and the projected inability to repay the amount.
This is so common, in fact, that the Kerala High Court recently asked banks to go easy on students when examining loan applications. The apex court also stated that when banks deny student loan applications because of the low creditworthiness of parents, it defeats the very purpose of such facilities.
Secured Loans vs. Unsecured Loans
Unless you are a complete novice on this subject, you should already know that there are primarily two kinds of loans – secured and unsecured.
Simply put, secured student loans require you to put a valuable asset (such as a house or jewelry) as collateral or security. The idea is that if you fail to repay the loan, the lending institution will take possession of the asset.
Unsecured loans, on the other hand, do not require any collateral or security. These loans are approved based on the applicant’s creditworthiness and financial strength. Unsecured loans are approved in good faith that the applicant will repay the loan as promised.
However, unsecured loans bear a higher interest rate than secured loans, and they also typically require a co-signer or co-applicant.
But that’s not always the case. On FundRight, you could get your non-collateral loan for a lower rate of interest than a collateral loan. No kidding, check whether you qualify.
Ideal Choice for Getting an Education Loan without Parental Support
If you are aiming to get an education loan without parental support, you should consider applying for an unsecured loan. This way, you can protect your family’s assets, and it is a great option for those who don’t have any valuable assets.
The good news is that several banks offer student loans that do not require any security deposit or collateral and allow you to get an education loan without parental support.
According to RBI, the highest amount a student loan can provide for programs abroad is Rs. 20 lakh. The RBI regulations also state that collateral security may not be needed for loans up to a certain amount, but when the loan surpasses that predetermined sum, the bank might ask for a third-party guarantor or collateral.
Here’s a quick look at the banks that offer student loans for education abroad, and the collateral requirements:
| Name of Bank | Loan Amount and Collateral Requirements |
| HDFC Bank | Education loans in the amount of up to Rs.45 lakh for programs abroad. No collateral is required for loans up to Rs.7.5 lakh. |
| HSBC | Education loans in the amount of up to Rs. 5 lakh do not require collateral. |
| State Bank of India (SBI) | Education loans in the amount of up to Rs.1.5 crore for programs abroad. No collateral is required for loans up to Rs. 7.5 lakh. |
| Punjab and Sind Bank | Education loans in the amount of up to Rs. 20 lakh for programs abroad. No collateral is required for loans up to Rs. 4 lakh. |
| IDBI Bank | Education loans in the amount of up to Rs. 20 lakh for programs abroad. No collateral is required for loans up to Rs. 4 lakh. |
| ICICI Bank | Education loans in the amount of up to Rs. 1 crore for programs abroad. No collateral is required for loans up to Rs. 20 lakh for UG courses and Rs. 40 lakh for PG courses. |
| Bank of India | Education loans in the amount of up to Rs. 20 lakh for programs abroad. No collateral is required for loans up to Rs. 7.50 lakh. |
Getting an Education Loan without Parental Support – NBFCs are the Way to Go!
In the current market, the best way to get an education loan without parental support is to go for loans offered by NBFCs or non-banking financial companies. Many NBFCs are dedicated and specialized education loan platforms that have a unique approach to loan application assessment and approval.
Many of these NBFCs provide education loan without parental support by relying heavily on the merit of the student, quality of their academics, and the programs/universities they are opting for. The best part about NBFCs is that they give students access to hundreds and thousands of affordable education loan options with reasonable interest rates and easy eligibility criteria.
Wondering why you should choose NBFCs over traditional banks? Take a look at this quick comparison of both in various aspects:
| Comparing | Public and Private Sector Banks | Non-banking Financial Companies |
| Loan Amount | All public and private sector banks have an upper limit on loans. Education loan amounts typically range from Rs. 20 lakhs to Rs. 1 to 1.5 crores depending on university and program. | NBFCs do not impose any limitations on the loan amount, and the structure of the loan is generally based on the applicant’s specific needs. |
| Interest Rates | Public and private sector banks calculate interest rate as per the base rate, which may vary from one bank to another. Education loan interest rates typically range from 10% to 17%. | Most non-banking financial companies levy a floating interest rate on their loans. |
| Charges | When getting a student loan from traditional banks, borrowers need to pay documentation charges, processing charges, bounce charges, prepayment charges, swap charges, and late penalty charges to name a few. | The additional charges may vary from one NBFC to another based on the loan agreement. Many NBFCs provide loans without these charges. |
| Processing Time | All traditional loans have a lengthy processing period, but private sector banks tend to approve loan applications faster than public sector banks. Public sector banks may approve loan applications fast if the applicant has a good relationship with the bank. Banks may also approve loans faster for recognized courses or programs. | NBFCs tend to approve loans much faster than traditional banking institutions. A reputed NBFC might approve a loan within days of receiving the application. |
| Eligibility Criteria | Most traditional banks have strict eligibility criteria for their student loans. | NBFCs have simpler terms and eligibility requirements compared to banks. |
| Course Flexibility | Traditional banks tend to approve student loans only if the applicant has got admission into a prestigious university or program. Some nationalized banks may offer loans for vocational courses, but that varies from case to case. | NBFCs are comparatively a lot more relaxed and flexible on the matter. They may approve loans for offbeat courses, universities, and programs. |
| Customized Services | Some private sector banks provide customized loan packages based on the requirements of the borrower, and some offer doorstep services. Some lenders may facilitate pre-admission or pre-visa loan approvals. | NBFCs are known for offering special services like pre-admission or pre-visa loan approvals along with bridge loans, fast-track loans, loans based on GRE scores and many more. |
One such platform that provides education loan without parental support is FundRight, India’s first loan bidding platform. At FundRight, more than 14 lenders compete for your loan by offering you the best possible loan offers. Every loan offer is customized so that you can compare and select the one that suits your needs and goals the best!
Frequently Asked Questions
Since getting an education loan without parental support is rather unconventional, it is natural for you to have questions about it. Here are some of the most frequently asked questions about getting a student loan:
Question 1: Can you get an education loan without a co-applicant?
Answer: When it comes to getting an education loan without parental support, the most common question students have is whether they can apply for a loan without having one of their parents as co-applicant.
The truth is that even if you can apply for a loan without a financial co-applicant, you would need a primary co-applicant.
If you get an unsecured loan, a financial co-applicant will be responsible for paying off the interest rate since most unsecured loans come without an interest-free moratorium period.
If you go for a secured loan, the lender may not bother too much about the financial profile or the primary co-applicant.
Loan platforms such as FundRight have international lenders that offer excellent unsecured loans for students who are looking for financing.
Question 2: Will the interest rate be higher on an education loan without parental support?
Answer: If by “without parental support,” you mean your inability to provide an asset as collateral, then yes, most unsecured student loans come with a high interest rate. However, the exact interest rate may vary based on your lender.
Question 3: Are there any advantages of getting an education loan without parental support?
Answer: The main advantage of getting an education loan without parental support in the form of collateral is that you don’t have to worry about losing that asset. Unsecured loans also tend to have less paperwork and faster processing time than secured loans.
A Final Word on Getting an Education Loan without Parental Support
Getting education abroad is an expensive affair, but thanks to education loans offered by NBFCs and some traditional banks, this dream is now within reach for many.
However, due to the nature of the education loan sector, getting a loan completely without parental support may be difficult, if not impossible.
FundRight aims to make students as independent as possible by giving them access to a range of loan options, many of which do not require parental support.
