How Do Unsecured Education Loans Facilitate Your Study Abroad Dreams?

With the expansion of globalisation, the aspiration to gain international education has risen quite sharply. Students from the third world countries now want to study in prestigious universities across the globe. To facilitate this journey, a student loan becomes a perfect opportunity to finance your global education endeavours. However, many students face the difficulty of deciding whether to opt for a formal channel of banking or look for an unsecured loan to fund their studies abroad. Let us first understand, what are secured and unsecured loans?.

Explore difference between secured vs unsecured education loan

Factors to Consider: Unsecured Education Loans

Unsecured loans are granted based on the borrower's creditworthiness and the lender's faith in the borrower's ability to repay the loan. On the other hand, secured loans are based on the security provided by the borrower against the loan they seek for. There are several factors which must be taken into consideration:

1. An unsecured loan or education loan without collateral is approved mostly depending upon the borrower's credit history and score. A higher credit score reduces the risk for the lender and increases the chances for a borrower to get a loan. It also helps a borrower to get a loan for a bigger amount up to 40-50 lakhs and at lower interest rates.
2. As these loans are not backed by any security, the interest rate is usually higher than secured loans which are available less interest rates ranging between 10.50% to 14%.
3. For unsecured loans the repayment terms can vary depending on the lender's policies, the borrower's creditworthiness, and other factors. 
4. In many cases, unsecured loans come with a moratorium period during which the borrower is not required to make regular repayments.

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What are the Types of Unsecured Loans Available in India?

Revolving Loan: Imagine a revolving loan like a reusable credit line. The bank sets a maximum amount you can borrow. You are free to use all or part of this amount. Once you pay back what you have borrowed, you can use it again. It's like having a pool of funds you can dip into, repay, and then dip into again, multiple times.

Term Loan: A term loan is when you borrow a big chunk of money all at once. It is usually at a set interest rate. You will pay it back in equal payments over a scheduled period. This is helpful for buying big-ticket items that need a lot of cash up front.

Consolidate Loan: If you are overwhelmed by multiple debts, a consolidate loan can be a lifesaver. It combines all your debts into one, often reducing your interest burden and making it easier to manage payments. It is a way to simplify your finances and get out of debt faster.

Which Bank is best for Unsecured Education Loan for Abroad?

Both private and public sector banks in India provide education loans without security for foreign education. A brief about the top lenders is as follows:

Study Overseas Help has on-boarded esteemed banking organisations such as AXIS Bank, IDFC FIRST Bank, YES BANK, Union Bank, ICICI Bank, Bank of Baroda, and Bank of Maharashtra, as partners.

In addition to these, several NBFCs (non-bank financial companies) have been constituted which mainly focus on lending education loans. Some of the top lenders include:

Study Overseas Help has partnered with distinguished NBFCs like Auxilo, HDFC Credila, Tata Capital, Avanse, InCred, Prodigy Finance, and MPOWER financing to offer innovative and competitive lending options.

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Eligibility Requirements for an Unsecured Education Loan

• For an unsecured education loan, since there's no security involved, your academic achievements play a crucial role in the loan approval process. The lender also evaluates your co-applicant's income and your future income potential. Your past academic performance is used to predict your future success.
• Your co-applicant needs to have a strong CIBIL score and fulfil the lender's specified criteria, including a minimum income requirement, which could range from 30,000 INR to 40,000 INR per month, depending on the lender, without any financial obligations.
• Lenders offering non-security education loans for studying abroad have compiled lists of approved institutions and programs. It's important to ensure that your chosen destination, program, and institution are included in these approved lists.
• Additionally, your scores from English proficiency and other standardized tests like IELTS, TOEFL, GRE, SAT, etc., should be above average or at least meet the minimum requirements set by your lender.

Documents You Need for an Unsecured Education Loan Application

The following is the list of documents required to avail an unsecured education loan:

• University offer letter mentioning tuition fees.
• Academic and employment documents.
• KYC documents of both applicant and co-applicant.
• Address proof along with electric bill.
• For salaried co-applicant, income proofs to be provided are as follows: ITR, Form 16, Salary slip, Salary account detail.
• For business owners, income proof to be provided are as follows: ITR, profit & loss account, balance sheet, business registration certificate, business current account.
• Applicant’s saving account details.

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How to Successfully Apply for an Unsecured Education Loan?

When you are about to apply for an unsecured education loan for foreign education, keep the following things in your mind:

• Pick the right unsecured education loan that fits your study abroad needs.
• Carefully go over the loan details like the break period before repayments start, how long you have to pay back the loan, interest rates, and any benefits the Indian government might offer for overseas education loans.
• Complete the online application form with accurate and full details as required.
• Prepare and upload the documents asked by the lender. It will include your school records, offer letter from the college, your financial details, and other required paperwork.
• After submission, await the lender's verdict on your request. The time it takes to process can vary by lender, but they will usually let you know their decision within a set timeframe.

Read Also

• Education Loan for Abroad Studies without Collateral 
• Secured vs Unsecured Education Loan for Abroad Studies 
• Education Loan Details: Eligibility Criteria and Basic Documents Requirement 
• Foreign Education Loan for Abroad Studies: A Complete Guide for Students 
• Types of Education Loans for Abroad Studies

What Happens if Unsecured Loan is Not Paid?

It is advisable to be financially prudent and make repayments for your loan on time. If you don't pay back an unsecured loan in India, here’s what could happen:

• The lender will add late fees to what you already owe to them. These charges differ among lenders and can significantly add to your debt.
• If you miss payments, it can greatly lower your credit score, making it hard to get loans in the future.
• If you often miss payments, your lender might increase your loan's interest rate, making it even harder to pay off.
• Lender may take legal action, which might lead to a court ordering you to pay the debt. In severe cases, your other assets might be sold off to settle the loan.
• If the lender can't get the money back from you, they might hire debt collectors. This can lead to stressful and uncomfortable situations.

If you’re struggling with loan repayment, try these strategies:

• Let your lender know about your financial struggles. They might offer solutions like changing your loan terms or pausing your payments for a while.
• Combining multiple debts into one loan with a lower interest rate can make your payments more manageable.
• Moving your loan to another lender with better terms might help, but watch out for extra fees.
• Look for ways to make more money or spend less to keep up with loan payments.
• A financial advisor or credit counsellor can help you make a plan to manage your debt.
• In extreme cases, selling off assets like investments or property can help pay off your loan.

Applying for an Unsecured Loan with Study Overseas Help Made Easy

Study Overseas Help in partnership with GyanDhan will be your trusted partner in securing unsecured education loans without the hassle of security. They have a streamlined process that allows you to focus on what truly matters - your education. Let us guide you through each step, from filling out the online application to submitting the required documents. Our 14 esteemed partners are dedicated to supporting your financial journey every step of the way. With our expertise, the path to securing your education financing is clear and straightforward. Apply now and take the first step towards your dream of studying abroad.