Guide to Student Loans

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Piyush
Piyush Kohli
Study Abroad Expert
Updated on Apr 8, 2020 13:29 IST

Going abroad to study is a great opportunity to further your career and goals, as the quality of education abroad is incomparable. But many Indian students shy away from considering this opportunity as the tuition fees and the living expenses in foreign countries are very high.

To rescue students out of this situation, all the banks (both private and public), offer student loans for foreign studies. Getting a student loan is an easy task, you only need to know the process of application. Here is all the information you need to know before applying for a student loan.

Note: This information is generic and the particulars may differ from bank to bank. Please check with the bank of your choice.  

When you apply for a loan, you will be treated as the borrower and your parents/guardians as co-borrowers. The loan amount or the terms of loan differs from bank to bank. Presently, Indian banks lend up to a maximum of Rs 20 lakhs for studying abroad. It covers:

  • Fee payable to college and hostel
  • Examination, library, laboratory fee
  • Purchase of books, equipment, instruments
  • Caution deposit, building fund, refundable deposit
  • Travel expenses
  • Purchase of laptop (if required for the course)

Apply for an education loan through Shiksha Study Abroad partners.

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Student Eligibility Criteria

The first thing is to be aware of whether you are eligible to apply for the loan or not. The general eligibility criteria that are followed by all the banks are –

  • You should be an Indian citizen
  • You must have a strong academic record
  • You must be seeking admission to a professional or technical course of studies. Banks maintain that the course of choice should be job oriented
  • You must have already secured admission at the foreign university
  • You must be above the age of 18 years or your parents will have to avail the loan

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Eligibility for Course

  • For Graduation: Job oriented professional or technical courses offered by reputed universities
  • For Post-graduation: MCA, MBA, MS or equivalent diplomas

Providing security means you are surrendering some form of investment to the bank. If you cannot pay back the loan, the bank has the right to sell these assets and recover the money you owe them.

Generally, if the loan amount is up to Rs 4 lakhs then you don’t need to provide any security. If the amount is between Rs 4 lakhs to Rs 7.5 lakhs then suitable third party guarantee is required.  For amount between Rs 7.5 lakhs to Rs 20 lakhs, you need to provide 100% collateral security in form of immovable property, bank fixed deposit, LIC policy or RBI Bonds.

Banks accept security in the form of:

  • Government securities/public sector bonds
  • Immovable property like land or building
  • Units of UTI, NSC, KVP, LIC policy, gold, shares/debentures
  • Bank deposit or fixed deposit in the name of the student, parent/guardian or any other third party with suitable margin.

Guarantor/Co-obligant

Should you default, the guarantor will have a legal obligation to pay up. The reason behind having a guarantor is that it puts a moral obligation on the student or his parents to repay the loan. The guarantor could be guarantee of parents as well. If the loan amount is between Rs 4 Lakhs to Rs 7.5 Lakhs, the bank may ask for a third party guarantee instead of security. Wherever loan is sanctioned in the name of parents, guarantee is obtained from the student.

The main document you will have to provide is the acceptance letter sent by the university stating that you have been selected for the course, along with mentioning the schedule of fees. You will also need to show the mark sheet of the last qualifying examination to show a strong academic record.

Note: All banks have different requirement for documentation, so you need to confirm with the bank first.

Repayment starts only after the end of course. If the student gets employed within one year after the completion of course, the repayment will start immediately after one to six months from the date of employment (time varies from bank to bank).

If you are unable to secure a job within a full year of completing the course then repayment starts, irrespective of your employment status.

Maximum Repayment Period of Loan

A student loan is supposed to be repaid within 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, then extension of time for completion of course may be permitted for a maximum of two years. Generally, you will get up to a maximum of 10 years to repay the total loan.

Step 1: Check whether your desired course or institute is recognised by the bank

Step 2: Determine how much loan you would need

You should make a rough estimation of your loan requirement and discuss with your family how much they can afford. Then figure out the amount you require to take as loan.

Step 3: Look for various loan options

Research online, call or visit all the banks of your choice and get all the details about the loan options. This is a great opportunity to clarify all your doubts and questions regarding the loan process of each bank.

Step 4: Figure out the best one by comparing the different options

Ensure that you are clear with all the terms and conditions stated by the bank before you opt for education loan. Make sure you are clear about these things:

  • Which bank offers the lowest interest rate?
  • For how long will I be paying the loan?
  • How long can I defer payments while studying?
  • Is there any option for deferring payments if I’m facing a financial problem?

Step 5: Apply for the loan after clarifying all your doubts

The following documents are required for Loan Application:

  1. Completed education loan application form
  2. All academic records and mark sheet of last qualifying examination
  3. Proof of admission, scholarship etc.
  4. Expense sheet of the specified course, provided by the university
  5. Passport size photographs
  6. Borrower's bank account statement for the last six months
  7. Income tax assessment order, of last 2 years
  8. Statement of assets and liabilities, of the Co-borrower
  9. Proof of Income (salary slips/Form 16)

Get in touch with India’s top-rated loan providers and apply for an education loan through Shiksha Study Abroad

About the Author
Piyush Kohli
Study Abroad Expert

With a plethora of knowledge of the education domain, Piyush Kohli has been involved with study abroad for over 5 years and counting. He comes with prior experience on the complexities of the study abroad applicatio... Read Full Bio

Comments

(18)

I want to 22 lakhs for my studies in Australia so how can I get my loan

Reply to Patel kaushik

P

Piyush KohliStudy Abroad Expert

27/12/19

Dear Patel, you can reach out to major banks with your academic details and acceptance letter and ask them how much amount you can get as a student loan.

I want 13 lakhs for my studies in germany so how can i get my loan

Reply to Bobby Dwivedi

Hi Bobby, to get an education loan you must have an acceptance letter from a university. Please read the article above and check with your bank for bank specific requirements.

I want study loan of 13lakh i have property but i don’t have parents or sibling so can i get loan?

Reply to Joshua Cecil

Is bank keep original documents of property with it?Im thinking to show my uncle's property for education loan. Because on my parent's name there is no property to show as security. Plz clarify my doubts

Reply to Hemavathi Naru

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