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Sneak a peek at the buzz we're creating in the study abroad ecosystem
8 mins Read
Explore our guide on securing an education loan for studying abroad. We explain what a study abroad loans, interest rates, process, benefits, and more.
Over a million Indian students are now abroad. Most are in North America. The US and Canada are top choices, but destinations like the UK, France, and Germany are also popular.
A postgraduate degree from abroad is invaluable. But the price tag for studying abroad can be steep.
Take the US, for example.
A study loan for abroad is a special type of loan from a bank or financial institution to help students pay for their education in another country.
Since studying abroad can be expensive, this loan covers things like :
Tuition fees: The money the university charges you to attend classes.
Living expenses: Costs like housing, food, and transportation in the foreign country.
Basically, it's a way to borrow money for your education abroad, and then pay it back with interest later, once you've finished your studies and hopefully landed a good job.
Most public and private sector banks in India offer education loans for abroad studies. Moreover, there are many NBFCs and international lenders that offer lucrative education loan products to Indian students for study abroad.
For study loans for abroad education, banks set interest rates based on the repo rate. This is the rate at which the Reserve Bank of India (RBI) lends money to banks.
Banks add a few percent to the repo rate. The margin is for their operating costs, profit, and potential loan defaults.
This explains why education loan rates typically range between 8.5% and 15%, even with the current repo rate at 6.5%.
You can choose between fixed and floating interest rates on the education loan in India for study abroad.
Fixed Rate
Fixed rates remain constant throughout your loan term. It offers predictability but potentially locks you into a higher rate if interest rates decrease.
Floating Rate
Floating rates adjust periodically based on the repo rate. If the repo rate goes from 6.5% to 7%, all loan interest rates will rise. The converse is also true.
Education abroad requires a significant investment of several lakhs. This may seem daunting. For this reason, study loans for abroad are invaluable aids for students.
Here are the key benefits of utilizing an education loan to finance your studies abroad.
1.Bridge the Financial Gap
Education loans can cover your tuition fees and a large portion of your living expenses.
They can even be used for additional costs like travel and study materials. This makes international education a possibility for everyone.
2.Moratorium Period
Education loans for abroad studies offer a grace period, known as a moratorium. You can delay repayments until you find a job.
This breathing room lets you concentrate on your studies. You can upskill without the immediate stress of managing debt.
3.Tax Benefits
Education loans usually have lower interest rates compared to other loan options.
In addition, the Indian Income Tax Act (Section 80E) provides tax deductions on interest payments on education loans in India for study abroad.
This makes it a cost-effective investment in your future.
4.Covers Sundry Expenses
Education loans in India for study abroad go beyond simply covering tuition fees. They can finance various education-related expenses. These include travel costs and study materials. Education loans can even pay for study abroad trips.
How does a student qualify for an education loan for abroad studies?
These are the usual eligibility criteria. Remember that some banks may have slightly modified rules. But most of it is the same for all banks.
Indian Resident
You must be a citizen of India. Those who are Indian citizens but have been abroad for a large number of years (Resident but Not Ordinarily Resident in Income Tax parlance) are also considered. Banks may or may not grant an NRI Indian an education loan in India for study abroad.
Age Limit
Most banks require applicants to be more than 18. Some banks like ICICI have an upper threshold of 35 years old. Individuals over the age of 35 who want to pursue a doctoral degree abroad can apply for special consideration.
Educational Qualification
Loans are offered for pursuing courses at recognized undergraduate, postgraduate, or diploma programs in India or abroad.
Academic Performance
Banks may set minimum marks requirements in previous exams (e.g., 10th, 12th, graduation).
Admission Confirmation
Proof of admission to your chosen institution is mandatory for loan disbursement. Banks mostly send the loan amount directly to the institution.
Co-applicant/Guarantor
An eligible co-applicant (parent, sibling) or guarantor with a strong financial standing may be a requirement.
When applying for an education loan for abroad studies, you’ll need to provide specific documents to the bank. Here’s a comprehensive list of the necessary paperwork:
Documents of Applicant
Documents of Co-signer
Documents related to collateral
Different banks and financial institutions have different fee structures and charges. You need to understand these costs upfront.
Let’s explore some of the common fees and charges associated with education loans:
Interest Rates
This is the core expense of an education loan for study abroad. It varies based on your creditworthiness and the reputation of the degree.
Processing Fees
Banks charge a one-time fee. It is usually a percentage of the loan amount. The processing fee covers loan application processing costs. It is capped at about ₹10,000 in most banks.
Prepayment Charges
Do you want to pay off your education loan for abroad studies early? Be mindful of potential prepayment charges depending on the bank and your loan terms. Some banks don’t levy a prepayment penalty.
Late Payment Charges
Missing an EMI installment can incur late payment charges. You must pay on time to avoid late fees. Late fines also impact your credit score.
Miscellaneous Charges
Depending on the bank, there might be additional fees. These are for document retrieval or loan statement requests.
Nearly every bank in India offers education loans for abroad studies. This is a concise list:
Here's a breakdown of the steps involved in applying for a education loan for abroad studies:
Step 1: Research and Eligibility Check
Explore different banks and NBFCs offering education loans for abroad studies. Compare their interest rates, loan amounts, processing fees, and repayment terms.
Ensure you meet the eligibility criteria set by your preferred bank.
Step 2: Application Process
Collect the required documents. these usually include:
Application form
Photographs
Mark sheets of previous exams (10th, 12th, graduation)
Proof of admission
Income proof of co-applicant/guarantor (if required)
KYC documents (PAN card, Aadhaar card)
You can apply online through the lender's website or visit a branch in person.
Step 3: Loan Processing and Approval
The bank will verify your documents and assess your loan application. Upon successful verification and creditworthiness assessment, the bank will sanction your loan. You'll receive a loan agreement outlining the terms and conditions.
Step 4: Loan Disbursement
Carefully review and sign the loan agreement. Ensure you understand all the terms and conditions.
Once the agreement is signed, the bank will disburse the loan amount.
This is a lengthy process. It is preceded by you visiting numerous branches and waiting hours.
Between the stress of admission and the time factor involved this is a hassle you can do without.
Want to do it the smart way? Head right over to FundRight
Our AI-enabled lending platform does all the heavy lifting. Upload your documents and you will see your loan approved at warp speed.
What do you have to do?
Register on the FundRight platform.
Upload your documents.
You will find over 15 banks and NBFCs that grant loans.
Take advice from our experts.
Your loan will get approved in just a few days.
Find your best study abroad loan offers in just 2 days.
The maximum amount of loan you can get for a foreign education depends on various factors. Some of these include:
Generally, banks offer education loans of ₹20 lakhs to ₹1.5 crores for studying abroad.
Typically, banks offer a repayment duration of up to 15 years on loans to study abroad. This also includes the moratorium period (course duration + up to 1 year after graduation). You do not have to start repaying the loan during the moratorium period. After this grace period, you can begin repaying your loan for studying abroad in EMIs.
There is no single best bank for an education loan to study abroad. The best bank for you to get a foreign education loan from depends on many factors. Some of these include:
Using FundRight, you can get a study abroad loan at the best terms. This is because with FundRight, lenders bid on your profiles. They offer their best education loan terms and you can pick a lender that best meets your needs.
Many banks and financial institutions offer international education loans without collateral. This is called an unsecured international education loan.
Generally, you can get unsecured study abroad loans of up to ₹7.5 lakhs.
Specialized lenders may offer unsecured loans up to ₹1 crore. The amount depends on the course, institution, and country you are planning to study in. Your academic performance and future earning potential also have an impact.
Important:
It can take anywhere between 2-4 months to get your loan for studying abroad approved. The exact timeline depends on:
Below we have mentioned a tentative timeline for international education loan approval:
Task | Description | Tentative Timeline |
Research & Preparation | Before applying, spend some time researching various loan options. Also, make sure you have all necessary documents. This may include admission letters, fee structures, identification proofs, etc. | 1-2 months |
Application Submission | If you have all the documents, submitting your application is usually quick. | 1 week |
Bank Processing & Approval | After submitting your application, the bank will review it. This involves verifying documents, assessing creditworthiness, and evaluating the course and institution. | 2-4 Weeks |
Disbursal of Funds | Once approved, the loan disbursement can take another one to two weeks. The exact time depends on the bank’s internal processes | 1-2 Weeks |
Note: These timelines are approximate and can vary based on individual circumstances. Make sure you apply for an education loan to study abroad well in advance of your prorgam start date.
You generally don’t have to pay EMIs on your education loan while you’re studying. This is because most banks offer a moratorium period. This period lasts during your course and extends up to 6 to 12 months after course completion or till you get a job. (Whichever is earlier).
However, some banks may require/allow paying the interest on the loan during this period. If you can manage this financially, it is a good option. It reduces your overall loan burden by reducing your EMIs later.
Different study-abroad education loans cover different expenses associated with international education.
The primary expense is the tuition fee, which is often the largest component.
Beyond tuition, education loans also cover other essential costs, like:
This ensures that you have the financial support needed throughout your course.
Yes, you can prepay your education loan for studying abroad. This is called loan foreclosure.
Prepaying your loan reduces the total interest payable over the loan tenure. This potentially helps you save a significant amount of money.
However, the terms for prepayment can vary between banks. Some banks may impose prepayment charges, ranging from 1% to 4% of the outstanding loan amount.
Yes, you can apply for an education loan without a co-applicant with income. This is especially possible if you are pursuing postgraduate courses or higher studies.
Other situations when you can get a study abroad loan without a co-applicant with income are:
Yes, you can. Many Indian banks and NBFCs now offer funding for up to 100% of the expenses of studying abroad. However, it’s likely that you will need a strong application with sufficient collateral to avail this option. Most loan products work in a way where you have to pay a certain percentage of the total expenses yourself, and the bank funds the remaining amount.
Yes, a lot of Indian banks and NBFCs offer education loans for amounts well in excess of Rs 40 lakhs.
Getting an education loan is much easier than it used to be 10 years ago. Most of the banks and NBFCs now have an online process. However, researching across a wide range of lenders for the right loan products is still challenging as it takes a lot of time and coordination, for which students are often ill-prepared. However, students can simply use FundRight to compare 15 loan offers with a single profile and make sure they get the best offer.
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