With the ever-rising cost of tuition all over the world, an education loan is that magic wand that makes a student’s dream of pursuing higher education a reality. Today, getting an education loan in India to study abroad is quite possible, thanks to the many banks and NBFCs that give education loans for studying abroad.
Education loans are broadly classified into two types – secured and unsecured education loans. This blog will discuss education loans for abroad studies without security in India in detail. So, let us start without any further ado.
What are Education Loans Without Collateral?
An unsecured education loan also called an education loan without collateral, is a loan in which the applicant, generally the student, does not need to pledge any collateral or security with the loan application.
Now, the obvious question in the reader’s mind would be – what is collateral?
Well, collateral is any tangible or intangible asset that the applicant pledges as security with the bank that provides the education loan. This security can be immovable property, FDs, etc. Collateral helps a bank recover its dues in case the borrower fails to repay his/her educational loans.
What are the Features of Education Loan Without Collateral?
Some features of an education loan without collateral for US, Canada, Australia, UK and other foreign countries are as follows:
- The borrower does not need to offer any security while applying for this loan.
- In most cases, the interest rate for an unsecured education loan is higher as the risk is higher for the lenders
- Such loans are generally based on the income of the co-applicant who can be the immediate family member. For a few top colleges, lenders might ignore the income of the co-applicant.
- Though the banks and NBFCs have set an upper limit for an unsecured loan, they may make exceptions depending on the profile of the student. However, the amount never exceeds INR 50 Lakhs even if the profile is good.
Which Lenders Provide Education Loans Without Collateral?
Now that the readers know about the salient features of a student loan without security, let’s take a look at the various lenders who provide education loans without collateral. The IBA has set guidelines for CGFSEL educational loan scheme, and most banks follow them. However, the internal rules vary, and therefore, the maximum loan amount for an unsecured loan varies from lender to lender. Here is a list of some popular banks as well as NBFCs that give education loans without collateral to Indian students to study abroad along with their maximum loan amount.
Financial Institutions Providing Loans Without Collateral
|Name of Lender||Maximum Education Loan Amount Without collateral|
|SBI education loan without security||Up to INR 7.5 lakhs|
|Bank of Baroda||For Institutions under List AA, up to INR 40 lakhs (Only Indian institutes)
For Institutions under List A, the maximum unsecured loan amount is INR 20 lakhs (Only Indian institutes)
For institutions listed under B & C, the maximum loan amount is INR 7.5 lakhs (Included Abroad colleges)
|Axis bank education loan without collateral||Up to INR 40 lakhs (For 100+ colleges)|
|ICICI bank||Up to INR 40 lakhs (For 50+ Colleges)|
|HDFC||Up to INR 4 lakhs|
|Avanse education loan without collateral||The maximum loan amount varies and is based on the student’s profile|
|Incred||Up to INR 40 lakhs|
If you are confused as to whether your profile is suitable for a bank’s loan scheme, you can get in touch with our education loan counselor who can pre-assess your profile and suggest you the best option accordingly.
Who is Eligible for Education Loans Without Collateral?
Education loan without collateral eligibility requirements varies from lender to lender and from scheme to scheme. However, some common eligibility conditions for applying for an unsecured loan are as follows:
- The applicant (the student) must be an Indian national.
- The applicant must have got an acceptance letter from an institute that is duly recognized by a competent authority.
- The applicant also has to provide documents such as KYC (Know Your Customer) documents, ITR or salary slips of the co-applicant for the loan, etc.
- The applicant must have relevant mark sheets.
- The co-applicant must have a good CIBIL score. If your CIBIL score is low, you should let GyanDhan’s education loan counselors know right away, so that they can suggest the next steps accordingly.
Why go for Education Loan Without Collateral Over Education Loan With Collateral?
GyanDhan always recommends students to take a loan with the property because of lower interest rates on secured education loans. However, in case your family doesn’t own a property or if the documents are incomplete or your family is hesitant to pledge the house as collateral, you should check the eligibility requirements for unsecured education loan rather than dropping the plans for higher education. For all the aforementioned cases, an unsecured education loan is the silver lining for students which makes their higher education dreams a reality. Please note the processing time of an unsecured loan is much less than that of a secured loan as the verification of collateral is not required.
But What are the Drawbacks of Education Loan Without Collateral?
Just like every coin has two sides, an unsecured education loan has its own set of drawbacks when compared to secured education loans. Let us take a look at some of them:
- Since the chances of an unsecured education loan becoming an NPA (non performing asset) are quite high for banks, getting such a loan is comparatively more difficult, especially for students with a family income on the lower side.
- The rate of interest for unsecured education loan is higher than that for secured education loan. Readers can visit GyanDhan’s Education Loan EMI Calculator to find out how a higher rate of interest will affect their monthly EMI.
- Applicants have to repay loans without collateral in a shorter tenure.
- Parental or co-applicant income is mandatory to apply for an unsecured education loan.
- The students have to make some repayments during the study period too.
- Not all colleges & courses are eligible for unsecured loans.
- How can we Help Students?
Getting an education loan without collateral is a tedious and long process. Many times, lenders reject an application for an unsecured education loan for the lack of proper documents. Or in the absence of proper information, a number of students either tend to take unsecured education loans at high-interest rates or make mistakes which are in fact completely avoidable. In all such cases, GyanDhan can come to their rescue and help them get the best-unsecured education loan for their case. Let us take a look at some ways in which GyanDhan can help students in getting their unsecured education loan.
- GyanDhan’s 3-step loan process helps in hassle-free and quick loan approvals.
- They study the student’s profile and then match it with the lender’s criteria and then suggest the best possible loan options for them.
- Once the student has finalized the lender, we give them a customized list of documents that would be needed with the loan application. They even help the applicants submit the documents to the lender. In the case of an unsecured loan from a private bank, GyanDhan’s banking partner will collect the documents from your doorstep, or you could courier the documents to the appointed sales manager too. And in the case of NBFCs, you could submit the documents just by uploading them on the website.
- They then follow up with the lender and keep a tab on the student’s loan application process. We help resolve any roadblocks that arise. They even negotiate the rate of interest on behalf of the student if the student has decided to take the education loan from a private lender.
An unsecured education loan is certainly a boon for all those students who wish to pursue higher education but do not have a tangible asset to pledge for a secured loan. Now no need to think of “how much collateral is needed for education loan”!