Global Minds, Local Support: Education Loans for Studying Abroad
Ranbir Kapoor probably said it best in the Bollywood movie Yeh Jawaani Hai Deewani: Main udna chahta hoon, daudna chahta hoon, girna bhi chahta hoon … bus rukna nahi chahta (I want to fly, I want to run, I want to fall too… I just don’t want to stop).
But let’s be honest, in the real world; we have to think of the practicalities of our dream. The tuition fee is just one part of the journey. Accommodation, living expenses, books, lab equipment, insurance… and much more!
If you want to get a real shot at achieving your study abroad goals, we’re here to tell you you can do it. Thanks to the many options in education loans for abroad studies, you too can run headfast behind your dreams.
Why Should I Even Be Reading This Blog?
The education loan process can be overwhelming. After all, nothing says adulting, like dealing with banks and paperwork, right? And if you are thinking of the education loan as a debt, here’s some food for thought for you: Instead of a liability, think of this as an investment in your future and your potential. This loan can be the stepping stone between where you are today and where you’d like to be tomorrow!
Um, So What Is An Education Loan?
Alright, let’s start with the basics before bringing out the big guns. Like everything in life, obtaining a degree is not free. Big dreams cost big money, and to fund the costs of earning a degree from a university, one can apply for an education loan either from a bank (it could be a public sector bank or a private one) or from an NBFC (Non-banking financial company).
Do you start worrying about repaying the loan right away? Not really, phew! There really is truth to the adage ‘one step at a time’, which is why the education loan repayment period often begins after the degree has been completed. It can be extended for some years so that you can shell out monthly instalments from your post-degree earnings.
Okay, But what are the student loan requirements?
We wish we could give you a straightforward answer, but there isn’t one. Because all of this depends on who you go to while requesting a loan, it would vary from bank to bank and NBFC to NBFC.
But some basic criteria for student loans come into play everywhere. Such as:
- You must be an Indian national to apply for an education loan for studies abroad in India.
- If you are a minor (below 18 years), the parent can make the loan application.
- The student must have received good grades in the previous education thus far and be admitted to a well-known institute or university for their higher education.
- Usually, institutes prefer it when students apply for courses with higher employability guarantees. So the course for which the education loan for abroad studies is being availed does matter a little.
If you’re looking for specific requirements for student loans in India, each bank has its own set of rules and regulations. Let’s break down the specific requirements for student loans at the top 5 popular banks in India: (Note: Keep in mind that these requirements may change, so it’s always a good idea to check with the respective banks for the most accurate and up-to-date information.)
- Bank of India: Besides the general requirements mentioned earlier, the Bank of India may also request income proof of the co-applicant, such as salary slips or income tax returns. They may also require you to provide a copy of the fee structure from the educational institution.
- State Bank of India: SBI may require the student to maintain a certain academic performance throughout the course duration. They might also ask for additional documents like photographs and a statement of purpose explaining the course and career plans.
- ICICI Bank: ICICI Bank may require a co-applicant as a guarantor for the loan, along with their income proof. They might also request a copy of the mark sheets of the last qualifying examination.
- HDFC Bank: Apart from the basic requirements, HDFC Bank may ask for collateral security for loans above a certain amount. They may also require you to provide a detailed expense budget for the course.
- Punjab National Bank: PNB may require a margin amount to be paid by the student or the co-applicant. They might also ask for additional documents like photographs, identity proof of the co-applicant, and property documents if the collateral is involved.
Mirror, mirror on the wall, which student loan is the best of them all?
More options, more confusion! So if you’re staring at multiple tabs on your computer screen and ruffling through 10 different loan brochures, we hear you.
Deciding which loan to apply for and learning how to apply for a student loan can be daunting. But if you pay attention to some factors, you may find some light at the end of this tunnel and an answer to which loan is best for you.
- Collateral involved: Ever heard the term ‘collateral damage’? Some lenders usually require the applicant to pledge collateral in property or other assets. This is what the applicant loses if the loan is defaulted upon. Rule of thumb? If the collateral is involved, the interest rate can be lesser. If it is not involved, the rate could be higher. Collateral is usually involved with loans from public sector banks. The private sectors and NBFCs offer both collateral and non-collateral options. Find out about this before you start the education loan process with an institution like Kotak Mahindra Bank or IDFC Bank.
- How much cover you get: Not all loans are direct and straightforward. So another important factor in applying for an education loan for abroad studies is how much of all your total expenses the loan will cover. Some loans only cover a part of the costs. Some include more provisions like travel fees, lab equipment, laptop, accommodation, etc.
- Tax benefits: No pain, no gain. Here is some good news: There could be some benefits to taking a loan! In some cases, the interest paid on education loans is exempted from tax under section 80E of the Income Tax Act of India. This exemption is also not valid throughout the education loan repayment period but only for a maximum number of years (around 8). Speak to your loan provider about this before you begin the procedure of education loan application. Don’t be too hasty, though.
- Interest rate: The ultimate catch of all loans. Our pro tip? Speak to alumni from your institute and ask them what options they considered to understand the student loan options. Follow their wise footsteps! Because when taking out an education loan for abroad studies, every 0.5% difference in interest can also make a huge difference in repaying the loan. For example, Hdfc bank has interest rates starting from 9.5%p. a, which is much more than the Bank of India’s 9.35% p.a.
- Processing fees: Have you ever heard your parent ask you, ‘Does money grow on trees?’ They were right. It doesn’t. And as counterintuitive as it sounds, you have to pay the institute some money to get more money. When applying for an education loan for abroad studies, institutions charge the applicant a fee for processing their loan amount too. This also plays a big role in determining the ease of the education loan procedure. Some institutions charge a flat processing fee. Some charge a percentage of the loan amount. Like relationships, here, too, transparency is key. Clarity about all the costs involved will help you make an informed decision.
- Repayment terms: Are you already worrying about how to pay back the loan? Step one, take a deep breath! Lending banks and financial institutions typically provide a grace period of six months to one year. This is known as the moratorium and starts after the completion of the course before the repayment of the loan begins. What does this mean for you? It means you don’t have to get into hustle mode minutes after dawning your graduation gown and hat. Hold your horses! During this period, students are not required to make any loan payments. You can instead focus on post-graduation activities such as job hunting and settling into your career.
PS: Some banks may also ask for the interest to be paid during the moratorium. Check with your bank.
What else am I missing when it comes to education loans for abroad studies?
If you’ve read this far, you’re mostly covered! But here’s another pro tip: You can also check with your university or educational institution about the options available to Indian students for scholarships/funding the degree. Also, put those social media stalking skills to good use! Connect with past-year students on LinkedIn or through your university and discuss how they financed their education.
If you’d like a smooth loan application process, we highly recommend you start the procedure well in advance since gathering the documents could be time-consuming. And sometimes a bit harrowing. So establish a working relationship with your lending institute and get clarity on all the student loan requirements before you begin.
Lastly, remember to check out Niyo Global for more financial tips, packing hacks, and more before you embark on this exciting journey!