Embarking on higher education abroad is a transformative experience, but it often involves significant financial hurdles. To bridge the gap between your aspirations and financial resources, opting for education loans emerges as a pragmatic solution. Choosing collateral as a form of security becomes a strategic choice, especially when seeking sizable loan amounts or favorable terms.
Options in academic funding
Before we move forward, let’s quickly understand the different kinds of education loans. There are two main classifications:
1. Secured education loans: These require borrowers to provide collateral as a security measure for the loan.
2. Unsecured education loans: In contrast, these loans don’t require collateral from the borrower. However, they do necessitate a co-applicant for approval.
Unsecured education loan features
For an education loan that requires collateral, it is imperative to provide either tangible or intangible security. Secured education loans offer higher loan amounts, reaching up to INR 1.5 crore, with lower interest rates starting at 8.85%. The interest rates for loans backed by collateral are generally more favorable compared to those without collateral. You can use GyanDhan’s Education Loan Interest and EMI calculator to estimate monthly installments and overall interest. While proof of parental income is not mandatory, a strong income can be advantageous. Extended repayment durations are available for education loans with collateral. Some banks, such as SBI or BoB, may offer deferred repayment during the study period with accumulating interest. Tax benefits under Section 80E may apply to secured loans. GyanDhan provides document pick-up services and connects applicants with bank branch managers or relationship officers.
SBI study abroad loan
The essential details about the SBI study abroad loan cover various aspects, including loan amounts, interest rates, fees, and other terms. The loan amount ranges from INR 7.5 Lakh to INR 1.5 Crore. The interest rate, fixed at 11.15%, is variable, and female applicants receive a 0.5% concession. A non-refundable processing fee of INR 10,000 + GST applies. Margin money requirements vary, with 15% for amounts between INR 7.5 Lakh and INR 20 Lakh, and 10% for amounts exceeding INR 20 Lakh. Property evaluation charges, approximately INR 7,500, are subject to change based on location and property details. The moratorium period extends throughout the course duration plus an additional 6 months. The repayment tenure allows for an extension of up to 15 years. To know more about SBI education loans click here.
UBI study abroad loan
Loan options offered by the Union Bank of India (UBI) include a secured choice, expandable up to INR 1.5 crore based on the student’s profile, and an unsecured option capped at INR 40 lakh. Interest rates for UBI Education Loans on secured options range between 10-10.5%, while unsecured loans carry a fixed rate of 9.8%. A refundable processing fee of INR 5000 is applicable, contingent on disbursement within 3 months of sanction. Margin money requirements differ: 10% for secured loans in listed universities, 15% for those in non-listed universities, and 15% for unsecured loans. The moratorium period spans the course duration plus an additional 12 months, and the repayment tenure extends up to 15 years.
Eligibility criteria for education loan with collateral
The applicant must possess all documentation related to the security intended for attachment. Eligibility requires that the applicant, who must be an Indian national, can also be an NRI with an Indian passport, thus extending access to education loans. However, OCI students are eligible for loans only for studies within India, given their non-Indian citizen status. It is crucial for the applicant to secure admission to a recognized institute, and lenders typically request a copy of the acceptance letter along with the loan application. Additionally, a commendable academic history, evidenced by relevant mark sheets, is a prerequisite. Most lenders also consider a favorable CIBIL score when approving education loans.
Advantages of education loan with collateral
Opting for a secured education loan for overseas studies, where collateral is pledged, brings forth numerous advantages compared to an unsecured loan. These benefits encompass:
1. Increased Loan Amount: Providing collateral as security allows access to a larger loan amount. Lenders are more inclined to offer substantial loans when backed by an asset, ensuring ample funding for your international education.
2. Reduced Interest Rates: Secured loans generally come with lower interest rates compared to unsecured alternatives. Collateral serves to mitigate the lender’s risk, leading to lower interest rates and significant cost savings over the loan term.
3. Extended Repayment Terms: Secured education loans often come with extended repayment periods, offering flexibility and alleviating financial stress during your study and early career phase.
4. Enhanced Loan Approval Odds: Collateral-backed loans simplify the approval process, particularly for individuals with limited credit history or lower credit scores. The presence of collateral provides assurance to the lender, increasing the likelihood of loan approval.
5. Collateral Flexibility: Depending on the lender, you may have the flexibility to choose collateral, such as property, investments, or valuable possessions. This allows alignment with your financial situation and preferences.
6. Credit Building Potential: Responsible management of a secured loan, including timely repayments, contributes to building a positive credit history. This can be advantageous for future financial endeavors, including applying for other loans or credit cards.
In summary, secured education loans tailored for international studies, as demonstrated by the offerings from SBI and UBI, play a pivotal role in surmounting financial obstacles. Backed by collateral, applicants enjoy advantages such as access to substantial loan amounts, favorable interest rates, extended repayment terms, and heightened approval probabilities, especially beneficial for individuals with limited credit history. The flexibility in choosing collateral, along with the potential for building credit, introduces a strategic element. These loans serve as essential financial instruments, bridging the divide between educational aspirations and financial constraints, and fostering academic pursuits with significant funding and advantageous terms.
