A Guide to Education Loan Without Collateral
A common question among students Students who want to study abroad without putting up any collateral is Can I get an education loan without collateral? The answer is, “Yes, You can”.
Loans for students who wish to study abroad are a great source of financial assistance. Millions of students would not have been able to attend their dream universities without education loans.
It is also important to note that not everyone is eligible to receive a loan for an abroad education without collateral, as too many loan applications are rejected by lenders.
Exactly what is a collateral-free education loan?
Education loans without collateral or no collateral education loans are taken without pledging any collateral or tangible assets like, as a guarantee to the lender. Thus, the applicant can take a loan without having to provide any type of security, such as a house, land, or anything else. Up to 50 lakhs can be borrowed by students for their education.
It will be discussed in this article all about non-collateral loans, such as eligibility criteria, the application process, and some other factors on why lenders may be rejecting the loan application, as well as the entire information needed before applying for an education loan for abroad studies without collateral.
Types Of Education Loans:-
- Collateral Education Loan: A collateralized education loan is a loan for which the applicant attaches security with the loan application. The security can be movable (FDs, LIC insurance, etc.) or immovable (buildings, non-agricultural land, etc.).
- Non-Collateral Education Loan: The term “unsecured loan” refers to a loan without collateral. Borrowers who lack collateral are evaluated for their creditworthiness in order to avail of a loan. Individuals who meet the eligibility criteria set by lenders are sanctioned with such loans.
Education loans: a brief overview
In order to qualify for an education loan for studying abroad without collateral, what are the eligibility criteria?
- In order to judge an applicant’s “Employability Potential”, the academic profile of the applicant must be reviewed. In the 10th, 12th, and degree levels, a minimum of 60% is required. An unsecured education loan may not be available to students with more than three backlogs.
- CIBIL score and income of co-applicant. A student’s financial co-applicant would pay on his or her behalf if the student cannot repay the unsecured education loan due to the fact that lenders do not take any collateral. This is the most important deciding factor for an unsecured education loan since lenders do not take any collateral.
- An applicant’s preferred course/degree. Lenders prefer students who are enrolled in UG, PG courses in STEM disciplines over those who are enrolled in Public policy or Aviation, but not in Ph.D., Mbbs, theology, tailoring, etc.
- It is also important to consider the country. When it comes to unsecured loans, the majority of lenders focus on major study abroad destinations such as the United States, United Kingdom, Canada, Australia, Ireland, and Germany. When it comes to less known countries like China, Ukraine, etc., they are less eager to provide loans.
- The university that you intend to attend. Universities that are approved for unsecured loans by private banks are listed with them.
For education loans, if you are not eligible for an unsecured loan, do not worry and get in touch with EduCred. As EduCred is affiliated with 15+ lenders, we will try to negotiate with lenders on your behalf for necessary deviations, as we have already done for multiple students who otherwise would have been refused education loans.
In order to qualify for an unsecured education loan, which documents are required?
The cost of flight fare, tuition fees, living expenses, study materials, etc., can be covered by an education loan without collateral for studying abroad. If you provide all the required documents listed below, the lenders will provide you with unsecured education loans quickly and without hassles:
- Documents for KYC
- Applicants and co-applicants must submit two passport-sized photographs
- Last six months’ bank statement
- Guarantor Form – Optional
- An official copy of the offer letter of the institute/university with the schedule of fees
- Certificates of completion of the S.S.C., H.S.C., Degree courses, and entrance examinations such as IETLS or TOEFL.
- A copy of the guarantor’s or co-applicants or borrower’s income proof (e.g., a pay slip or Form 16) is required.
It is necessary to consider the income of the co-applicant when applying for an unsecured education loan. Depending on whether a co-applicant is salaried or self-employed, lenders may ask for different documentation from the co-applicant.
Also Read: Countries which do not require IELTS
Are there any banks that offer education loans without collateral for abroad?
Generally, there are two types of lenders i.e government lenders & private lenders offering education loans without collateral. Private lenders are the ones who can provide education loans without collateral in larger amounts.
- SBI, BOB, and other public banks are only permitted to grant student education loans up to 7.5 lakhs without collateral regardless of the course or country. There are, however, some top-tier institutes in India that offer up to 40 lakhs of educational loans that are unsecured from SBI.
- Private banks can provide education loans for abroad studies up to 40 lakhs without collateral. The banks only approve unsecured loans for a select number of top universities, as described above. A private bank may lend up to 40 lakhs for a postgraduate program and up to 25 lakhs for an undergraduate program, with an interest rate of at least 10.5%.
- There are four non-banking financial companies in India that offer student loans without collateral, making them an alternative for Indian students. NBFCs assign the loan amount depending on the students’ choice of country, such as for the USA, 60 lakhs at 11-13% interest, for Canada, 35 lakhs at 12-13% interest, for the UK, 45 lakhs at 12-15% interest, and for Australia, 30 lakhs at 12-13.5% interest.
- Loans obtained from foreign lenders – Companies such as Leap Finance, Prodigy Finance, etc can provide 80% of your total expenses for studies abroad . Its rate of interest is around 9.25-16%, but because it is calculated based on the London Interbank Offered Rate (LIBOR) rather than the Marginal Cost of Funds based Lending Rate(MCLR), when converted to INR it reaches around 14-15%, making it the most expensive unsecured education loan.
The lenders mentioned above can all provide you with a non-collateral education loan for your overseas studies. There are many pros and cons of opting unsecured education loan that you should be aware of before applying for one.
You should be aware of the additional costs
A moratorium period consists of six to twelve months plus the duration of the student’s course. During the moratorium period, students have the option of skipping the payments of interest incurred on the disbursed amounts with the public banks. There is, however, no such moratorium period for students offered by private lenders. While the EMIs begin following the moratorium period, students are required to pay interest during their moratorium period.
The processing fee on an unsecured education loan is not charged by public banks; however, private banks charge 1% of the loan amount plus GST, and for some, the fee is 15k plus GST. The processing fee can be 1% to 1.5% plus GST on the loan amount for the NBFCs and a minimum of 2% plus GST on the loan amount for the foreign lenders.
Private lenders are required to have loan insurance, but public banks are not. It is 1% to 1.5% of the loan amount for private banks and 2% or above for the NBFCs.
When students approach private lenders on their own, they end up paying more because the processing fees and loan insurance are negotiable.
EduCred along with associates is funded and supported by the Ministry of Information Technology Government of India, partners with these lenders to offer students an instant 0.5% reduction in processing fees and to negotiate interest rate reductions on their behalf as well for education loans. If you are interested in obtaining a loan, you should start your search with us since we will do our best to secure you the best deal without charging you any fees.
What is the reason for the rejection of unsecured education loan applications?
Some lenders reject students’ loan applications based on unwritte
n rules other than failing the eligibility criteria set by the lenders.
Undergraduate program- A private lender does fund a UG program abroad if the university falls under the list, however, the odds are that they will deny it at first since they prefer funding a postgraduate program since the course duration is shorter than in a UG program. NBFCs, on the other hand, seldom fund UG programs abroad; they consider funding only if the co-applicant has exceptional income. UG programs are not entirely funded by foreign lenders.
Applicant and co-applicant age criteria – Age of the applicant and co-applicant – NBFCs take into account the age of applicants. There is no loan program available to students over the age of 27 offered by NBFCs. As long as the other profile parameters are good, they can consider up to 30 years of age. If your co-applicant is retired (pensioner or not) or about to retire within three years, NBFCs will not accept your application.
FOIR- Private banks are the only ones who follow a fixed obligation to income ratio, or FOIR norm. When the co-applicant does not meet the FOIR norm, a private bank will reject the loan as the co-applicant’s obligations, i.e. EMIs, are too high.
As a result, when students approach these lenders without being aware of these circumstances, their loan application is rejected. Students may have been able to obtain approval for their loan if they had learned about the co-applicant earlier. The fact that EduCred has dealt with and is dealing with such a high volume of loan applications means that we have the solution to almost any problem that a student might encounter with an education loan. You will be informed in advance if such a possibility arises when you apply with us for an education loan. EduCred offers many benefits such as these.
Using EduCred, how do I apply for an education loan without collateral?
Please visit our website and click on the “Request a Callback“ button.
Click on “Proceed” after selecting the region
The form should be filled out with the necessary basic information, the course information, etc.
We will contact you within 1-2 working days after you submit your request.
As soon as you provide the financial officer with some additional information regarding your education loan requirements, he or she will be able to assist you in choosing the best lender for your needs.
A secured link will be sent to you by your assigned financial officer, where you must upload all the documents listed by the banks.
Upon uploading all necessary documents, your financial advisor will connect you with a variety of lenders and help you find the best bank deal.
There is a possibility that lenders may ask you to mail or WhatsApp your documents separately, but it is advised not to do so as this compromises the confidentiality of your documents. Instead, ask the lender to access your documents through the EduCred portal only. Our secured link maintains the confidentiality of all documents uploaded by students to EduCred.
How do I apply for an education loan without collateral?
It is quite simple and quick to obtain an education loan without collateral. Obtaining an education loan without collateral involves the following steps:
- Fill out the online application form.
- Collect the latest document checklist from EduCred.
- The documents will be verified by EduCred and the bank officials before being sent to the processing center.
- The loan application is verified and sanctioned by the processing officer.
- Documents will need to be signed once the loan has been sanctioned
- The loan amount is disbursed following the signing of the disbursement agreement.
If you need an education loan without collateral, which banks can you approach?
It is possible to obtain an education loan without collateral from both public and private banks. It is the loan amount that makes the difference. The maximum amount of loan available by public banks is 7.5 lakhs, while the maximum amount available by private banks is 40 lakhs. Additionally, NBFCs can be used as a substitute for private banks. Unsecured loans can be obtained from banks such as SBI, BOB, Axis, ICICI, Avanse, and Incred.
In the event that you do not have collateral or security, what should you do?
No collateral is required for collateral-free education loans, so you do not have to worry as there are a number of options available on the market. EduCred can assist you in finding the most appropriate lender or best bank for your profile if you contact our team at EduCred.