Foreign Education Loan for Abroad Studies: A Complete Guide for Students

Across the world, over 5 million students preferred a foreign country over their home nation to study further in 2016. In India, more than 3,00,000 students picked foreign studies, making it the biggest source of international students right after China.

Which Foreign Country Indian Students Picked the Most?

Why such an exodus of students for foreign studies? Because international education is a life-changing experience. It alters your entire career path for the better, which is why more and more Indian students aspire to it. 
But accessing a foreign degree hinges upon a student’s ability to afford it. Considering the astronomical cost of studying in the best international universities, it is not within the reach of all. A simple solution for such students is a foreign studies loan.

What are the Types of Education Loan for Foreign Studies?

A student who hopes to finance his/her studies with an education loan has two options – an education loan with collateral or an education loan without collateral.

1. Secured Foreign Student Loans

An education loan that asks for an asset as a guarantee is called a secured loan. The asset can be a property, FD, land, LIC Insurance, etc. The asset, called collateral, acts as a security for the lender if the student fails to repay the loan. Foreign education loans with collateral have:

• Lower Interest Rate
• Higher Sanction Amount
• Longer Repayment Time
• No Repayment During the Study Period

They are also much easier to get than education loans without collateral. These loans for foreign studies are offered by:

• Public Sector Banks 
• Private Banks 
• Non-banking Financial Companies (NBFC)

2. Unsecured Foreign Student Loans

An education loan that doesn’t require you to promise an asset as security is called an unsecured loan. Like secured loans, these are offered by private banks, NBFCs, and public banks. But the maximum amount for which an unsecured education loan is offered by nationalised banks is INR 7.5 Lakhs, which is never sufficient to bear the full cost of education from a foreign country. Education loans without collateral for foreign studies have:

• Higher Processing Fee
• Higher Rates of Interest
• Partial Payments during the Repayment Period

What are the Options for Secured Education Loans for Foreign Studies?

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• Period for Repayment - Secured foreign education loans from public banks have a 15-year repayment tenure. The same for NBCFs and private banks is 10 years and 20 years respectively.
• Time for Processing - A foreign study loan with collateral from a public bank takes 12-15 days to process but only 8-10 days from a private bank.  NBFCs have an even shorter processing time of 5-7 days.
• Coverage of Expenses - A public bank covers 90%-100% of the costs, but private banks cover only 86%. Most NBFCs sanction a loan for 100% of the expenses. 
• Reasons for Decline - Public banks will reject a foreign studies loan if the collateral documents are incomplete. Private banks will reject an education loan for incomplete documents and low CIBIL score. NBFCs mainly state CIBIL and low income as reasons for the decline. 

A simple way to increase your chances of loan approval by 50% is to take the help of GyanDhan. Our loan counselors assess your profile, pick the most suitable education loan option for you, and then contact that lender who is most likely to approve your application. 

Education Loan with Collateral in India for Foreign Studies: Documents

The documents required for a secured foreign studies loan are somewhat different from those required for an unsecured loan:

• Fee Structure
• Admission Proofs
• Property (collateral) Documents
• Relevant Mark Sheets of Applicant
• Bank Statements of the co-applicant
• KYC of the Applicant and co-applicant
• Income Tax Documents/Form 16 of the co-applicant
• Basic Academic Qualification records of the applicant
• Citizenship and Residence Proofs of the Applicant and Co-applicant

The loan application documents don’t just vary from bank to bank but also according to the collateral. Any student struggling with this step can consult GyanDhan. We give you a customised list of documents required by your lender. It ensures that your application is submitted in one go.

What are the Options for Foreign Studies Without Collateral Loans? 

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• Period for Repayment  - For unsecured education loan in India for foreign studies, 20 years is the maximum repayment period given by private banks. NBFCs offer just 10 years. You can get a customised foreign loan with the help of GyanDhan by requesting an extension of repayment tenure, which we take care of on your behalf.
• Time for Processing - Private banks take 5-7 days to process unsecured foreign education loans. If there is a delay on the part of the lender, GyanDhan contacts the lending institution and hastens the process to ensure timely sanction of the loan.
• Coverage of Expenses - A loan from an NBFC can cover 100% of your expenses, while a private bank covers about 85%.  If your selected country (like Germany) requires sufficient living expense funds to be put in a blocked account, GyanDhan ensures that the step is completed without any hassle to you.
• Income Requirement of Co-applicant - Education loans without collateral for foreign studies from both private and public banks require a co-applicant monthly income of over INR 35,000. However, the precise income requirement does alter according to the loan amount. Our experience says, 50% of the income is sufficient to bear the interest per month in the case of NBFCs. For banks, this number is 65%.
• Reasons for Decline - There are two common reasons a private bank or NBFC decline foreign studies education loan -   a) The co-applicants monthly income is not adequate to remit the interest during the period of studying b) Poor CIBIL Score of the applicant. If your CIBIL score is weak, it does not completely reduce your chances of getting an education loan. GyanDhan’s counsellor can come up with solutions for you to cross the hurdle and get your loan sanctioned.  
• a) The co-applicants monthly income is not adequate to remit the interest during the period of studying
• b) Poor CIBIL Score of the applicant. If your CIBIL score is weak, it does not completely reduce your chances of getting an education loan. GyanDhan’s counsellor can come up with solutions for you to cross the hurdle and get your loan sanctioned.  

Education Loan Without Collateral in India for Foreign Studies: Documents

When you fill out an application for an unsecured loan for foreign studies, the lender asks you to submit distinct documents. The precise list varies from bank to bank and student to student, but typically the papers required are:

• Fee Structure
• Admission Proof 
• Bank Statements of the co-applicant 
• Income Tax Return of the co-applicant 
• KYC of the Applicant and co-applicant
• Basic Academic Qualification Records of the applicant
• Citizenship and Residence Proofs of the Applicant and co-applicant

Gathering the documents is one of the most complicated steps of an education loan application process. If you’re floundering in an ocean of paperwork and unsure of which documents to submit, GyanDhan can provide the customized list of documents for your favoured lender and expedite the process. 

What are the Foreign Loan Options for US, Canada, Australia & More?

If you’re looking for a particular foreign studies loan options, use the links in the table below. Each post covers in detail both secured and unsecured education loans available for the given country and course and their key features. 

If your desired combination of college and course is not in the above list, don’t worry! Contact us, and we will let you know the extent of financing provided for the combination. 

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How to Get an Education Loan for Foreign Studies?

• First, Check Your Loan Eligibility.
• Next, an education loan counsellor calls you to discuss all your foreign studies loan options. Depending upon the lender you select, the counsellor walks you through the next steps.
• Then, you are required to submit all the supporting documents. Since the acceptance of a foreign studies loan hinges on the right documents, we emphasise taking GyanDhan’s support for this step. Besides, we make it easier for you to submit the documents. If you live in a metro city and choose a nationalised bank, we pick them up from your doorstep. For other cities, we set up a meeting with the right bank manager and coordinate the process. If you select a private bank, then our banking partner picks up the documents from your doorstep, or you can get it couriered to the sales manager appointed by GyanDhan. For NBFCs, you don’t need to submit a hard copy. You can upload the soft copies through our website!
• Now, the lender checks the application. They may ask for additional information from you or your co-applicant. If all the requirements are met, the loan is approved. However, if GyanDhan finds that the additional demands are unreasonable, they will raise the matter with the lender. 
• To accept a foreign studies loan from a private or public bank, you and your co-applicant sign a sanction letter. For an NBFC loan, you pay the processing fee.
• Once you have the sanction letter in hand, you sign a loan agreement (within 2 to 6 months) and finally apply for loan disbursement.

What are the Things to Watch Out for in a Student Loan for Foreign Studies?

From education loan interest rates for foreign studies to the tenure, there are several points to keep a careful eye on while shopping for a loan. Here is a list of factors you need to consider while opting for a loan:

• Interest Rate
• Loan Duration 
• Processing Fee & Time
• Expenses Covered 
• Margin Money
• Moratorium Period
• Tax Benefits 

Apart from these, the pre-disbursement rule is a critical aspect which you need to consider. 
A lot of international countries and colleges demand the remittance of the first-semester tuition fee before approving the student visa. This is called Pre-visa disbursement of loans for foreign studies. However, most banks and NBFCs require reliable proof, i.e., a visa before they sanction a loan. This question of ‘loan first or visa first’ creates the biggest hurdle to loan sanction, since most lenders are unaware of this requirement. Essentially, the student is dependent on the benevolence of the presiding bank officers for loan approval.
GyanDhan helps by making sure that the bank is aware of these pre-disbursement policies.

What’s the Ideal Education Loan Option for Foreign Studies?

• A secured foreign education loan from a public sector bank should be your first preference. 
• If you lack solid collateral, then go for an education loan without collateral from a private bank. These loans have less interest and are tax-deductible. 
• Your last preference should be an NBFC. Pick these if your CIBIL history or academic performance is weak, or if a private bank does not cover your choice of college.

How can GyanDhan Help You with a Foreign Loan?

Finding the right student education loan for foreign studies takes energy and time - a lot of it. And if by an iota of chance, it is rejected, all that effort is flushed down the drain. GyanDhan helps you on two fronts. One, we make sure that the effort on your part is minimal. Two, we increase the odds of loan approval.

You can use our customizable EMI calculator to find loans that fit your pocket or better yet get in touch with our loan counsellors to make the foreign studies loan process a piece of cake!