Pursuing a degree or professional course in another country presents certain challenges, prominent among them being your economic potential. This includes several overheads such as admission and course fees, books, accommodation, food and travel to list a few. Further, studying overseas calls for airfare, insurance, visa and similar additional costs.
Most individuals favour taking up education loans, also referred to as study loans or student loans, with the objective to address all the primary and allied financial commitments pertaining to their children’s education. It enables them to support this obligation without draining their life savings. Read on to know more about availing an education loan for studies abroad and how to apply for one.
Categories of Education Loan
Lenders in India offer different credit plans that are designed keeping in mind the requirements for higher studies in India and abroad. They fall under two basic categories –
Secured Loan
These loans are backed by collateral such as property, land, gold, bonds, shares, fixed deposits, insurance policies, debentures or other securities of high monetary value. A loan against property is one prime example and it can fulfil your child’s dreams of studying at reputed foreign universities or institutes.
Due to the real estate collateral involved, lenders consider it a low-risk facility. You can enjoy lower interest rates and longer terms with bigger loan amounts, which allows you to manage every academic, miscellaneous and personal expenditure. The principal you receive will mainly depend on the property’s market price. What’s more, a loan against property holds no limitation on fund usage, so it serves diverse financial obligations.
Unsecured Loan
Unsecured loans require no collateral and, therefore, offer comparatively smaller loan amounts at higher interest rates and shorter tenors. In general, education loans up to Rs. 4 lakh do not require security. Lenders may ask for a third-party guarantee in case of loans up to Rs. 7.5 lakh where parents or guardians sign as joint borrowers. For higher sums, you may need to pledge an asset.
Basic Eligibility Criteria to Qualify for an Education Loan on Property
Lending institutions are known to extend hefty loan amounts ranging from a few lakhs to crores. Eligible borrowers, be they salaried or self-employed, can qualify for a student loan against property if they meet these standard specifications:
- Nationality – Applicants should be resident Indian nationals.
- Age – Salaried individuals must be aged between 23 to 62 years; while self-employed applicants should be between 25 to 70 years old.
- Property location – The property to be mortgaged must be located in any of the cities where the lender operates.
- Employment status – Salaried applicants should be working in a public, private or multinational firm; self-employed individuals must have a steady income from their business enterprise.
Documents Required to Apply for Property Loan for Education
A property loan for education entails much paperwork, which is likely to vary among lenders. They will need the following documents during loan processing:
- ID and age proof
- Residence proof
- PAN card/ Form 60
- Latest salary slips for salaried applicants
- Bank account statements for the last three months (for salaried individuals)
- Bank account statements for the previous six months (for self-employed persons)
- Income tax returns
- Title documents
- Property papers for the mortgage
How to Apply for a Property Loan for Studying Abroad?
Interested applicants may apply for a student loan against property online with the steps given below:
- Go to the official website of your selected lender
- Navigate to the loan against property application form
- Click on the form and fill in the required details
- Enter your personal information such as name, age, occupation, income and so on
- Next, you will be asked to provide property details
- Submit the filled application online
- Expect a call from the lender’s office as they help you with further processing
- Once the verification is complete, you will be informed whether or not you qualify for the loan
- Lenders will require all the documents at this point
- After you accept the loan sanction letter and sign the agreement, the principal will be disbursed into your account
Education Loan Schemes for Study Abroad
There are multiple education schemes introduced by the Central and State governments of India offering financial assistance or interest subsidies to Indian students who want to pursue higher education in another country. Some of these are specifically aimed at students based on merit, gender, community or physical challenges.
The Indian government grants education loans up to Rs. 20 lakh to meritorious students from economically weaker sections under the Model Education Loan through nationalised banks. These are cheaper than private student loans and require zero collateral having a margin up to Rs. 7.5 lakh.
Some notable government-aided study abroad loans include:
1. Gujarat Government Education Loan
Through this scheme, the state government of Gujarat extends 100% subsidy to students from underprivileged sections based on merit. Students gain attractive interest rates of 4% per annum and loans up to Rs. 15 lakh for professional, graduation or post-graduation level courses. The moratorium period includes the course duration and another additional year.
2. Vidya Lakshmi Education Loan
Vidya Lakshmi loan scheme is available for study abroad programmes at the graduation, post-graduation and doctoral levels. The government approves loans up to a maximum of Rs. 30 lakh with a moratorium period of one year upon course completion or six months after getting a job.
3. NBCFDC Education Loan
The National Backward Classes Finance and Development Corporation (NBCFDC) grants loans to students living below the poverty line for pursuing general, professional, technical, graduation or higher courses. Eligible students can expect loan amounts up to Rs. 20 lakh and a moratorium period of five years.
4. Padho Pardesh Yojana
The Padho Pardesh Scheme equips students from minority sections who have good academic records to enrol for a post-graduate degree overseas with 100% subsidy. The moratorium period comprises the course duration plus one year post completion or six months after receiving employment, whichever comes first.
5. Dr. Ambedkar Central Sector Scheme
This central government scheme encourages overseas education offering full subsidy to deserving candidates from minority communities. It is applicable for higher studies like Masters, MPhil and PhD programmes and may be availed just once. For example, if you obtain it for the post-graduation degree, you cannot avail it again for the doctorate course.
All deserving eligible candidates may apply for these government education schemes online. Check and verify the college and course details of your preference to do a cost analysis for viability and the loan amount required. As there are various funding options for overseas studies, both government and private, borrowers must ensure they choose the one that fits the bill.
A collateral-free education loan may give you lesser loan amounts and higher interest rates compared to a loan against property for education abroad. Hence, understand their eligibility, documentation and repayment parameters for optimum loan benefits without jeopardising your finances or your child’s foreign study plans.
