Overseas Education Loan

The reason for taking an education loan is apparent. It could cost anything between INR 10 lakh – INR 1 Crore, and in a few cases, even more for graduation / post-graduation program in a foreign college/university. Many are unable to raise the entire corpus, hence, the need for education loans.

The loan amount to apply can depend on student to student and family to family. It is ideal to account for every expense for the entire duration of a student’s stay and add 15% – 20% to it as a contingency expense. Now minus that amount with your savings. That is the final amount of student loans to apply for.

Expense: INR 30,00,000

Add – Contingency @15%: INR 4,50,000

Minus – Savings INR 10,00,000

Net loan amount: INR 24,50,000

(The calculation mentioned above is a hypothetical one to give an idea of calculating the loan amount to apply for)

How does it work? What are the steps?

An education loan works more or less like any other loan; the loan amount, paperwork, collateral, etc. Understanding the application process is essential to have a good chance for your loan application to be approved.

Step 1: College admission letter

• The first and foremost document a student would need is the final admission/offer letter from the college/university. This vital document would tell the bank almost everything about your overseas education aspirations and expenses, and they would be able to correlate it with the loan amount you intend to apply.
• Needless to say, it would be irrelevant to apply for an education loan without a college admission letter. However, before receiving the college admission letter, you can shortlist the banks / NBFCs to apply for an education loan.

Step 2: Eligibility

• This is the second most important factor, probably the deciding one, on whether or not an education loan application is approved.
• The principal applicant – student – must be an Indian citizen, ideally should have a bank account and submit the bank statement. Although it is not compulsory for a student to have a bank account or financial history, it can certainly help his / her cause in obtaining the loan.
  The student must have a co-applicant while submitting an education loan application. A co-applicant could be parent/s, close relative, sibling, etc.
• The co-applicant must submit his / her financial statements so that lending bank can understand the financial background.
• The lending bank may ask for collateral as security against education loan. The collateral could be in the form of gold, fixed deposit, residential/commercial property, non-agricultural land, etc.
• After checking paperwork and credibility, bank would disburse the education loan in favor of the applying student.

Step 3: Know the terms & conditions

• A loan is money that ought to be returned to the lender. Know each and everything about education loan even before you apply for one.
• Education loan is given under the ‘Study Abroad’ title. This money can be used only for its intended purpose. It could be illegal to utilize this money for other purposes.
• Know the interest rate at which the bank is offering an education loan. Compare it with other banks. Your co-applicant could help you out in this area.
• Know the repayment terms of education loan. Know the exact EMI and duration. Some banks offer a grace period for repayment after the program/degree is complete.
• Banks could credit the tuition fee of the loan component directly to the college/university, either in installments or in full, depending on the college’s terms and conditions. This feature of education loans varies from bank to bank.