Things to know before applying for foreign education loan

Going abroad to study is a great opportunity to further your career and goals, as the quality of education in North America and Europe 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 very general and the particulars may differ from bank to bank. Please check with the bank of your choice.

Read More: Education Loan Interest Rates 

Student Eligibility criteria

The first thing is to be aware of is 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 National.
• You must have a strong academic record.
• You must be seeking admission to a Professional, Technical or Other course of studies. Most banks maintain that the selected course should be job oriented.
• You must have secured admission to foreign University Institutions.
• You must be above the age of 18 years or else your parents can avail the loan.

Eligibility of course

• For Graduation: Job oriented Professional or Technical courses offered by reputed universities
• For Post Graduation: MCA, MBA, MS or even diplomas
• These courses could be from foreign universities or institutes approved by the state and central government.

Total amount

Whenever you take an education loan, the bank will not fund the entire amount. You will be expected to pay a part of it through your own funds and the rest will be covered by the loan.

If your total fee is Rs 10 lakh, the bank may offer to give a loan of 80% of the amount and you will have to put in the balance 20%. This is called the margin amount.

Maximum loan amount

Student loans always have a maximum amount that can be given.

The maximum loan amount for studies abroad is generally around Rs 20 lakh by the bank. If your tuition fees amount is Rs 30 lakh, you’ll have to manage the rest of the funds by yourself.

Processing fees

Some banks charge a processing fee, while others don’t. it may be a fixed amount or a percentage of the total loan amount. So if the bank charges you a 1% as processing fee, that will be an additional cost you’ll have to cover.

Expenses considered for Loan

• Fee payable to College and Hostel
• Examination, Library, Laboratory fee
• Purchase of Books, Equipments, Instruments
• Caution Deposit, Building Fund, Refundable deposit
• Travel expenses
• Purchase of laptop required for the course

Security

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 upto Rs. 4 Lakhs then you don’t need to provide no security. If the amount is between Rs 4 Lakhs to Rs 7.5 Lakhs then suitable third party guarantee is required. And for amount between Rs 7.5 Lakhs to Rs 20 Lakhs, you need to provide 100% collateral security in any of the form of Immovable property, bank fixed deposit, LIC policy or RBI Bonds.

Guarantor/Co-obligant

The reason behind having a guarantor is that it puts a moral obligation on the student or his parents to repay the loan. Should you default, the guarantor will have a legal obligation to pay up. The guarantor could be –

• Guarantee of Parents
• 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 to Parents, guarantee is to be obtained from the student on attaining his majority

Documentation required

• You will have to provide the acceptance letter sent by the University reflecting that you have been selected for the course and the schedule of fees. You will also need to show the mark sheet of the last qualifying examination to show your academic record.
• All banks have different requirement for documentation, so you need to confirm with the bank first.

Repayment

Repayment starts only after the course period. If the student got employed within one year after completion of the course, the repayment should start immediately after the expiry of one month from the date of employment.

If you do not secure a job within a year of completing the course, then repayment starts irrespective of whether or not you are employed.

Applicants who find it difficult to arrange for financial resources to support education abroad, can apply for a loan through Shiksha.

Maximum Repayment period of Loan

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

Related articles on Student Loans:

Steps to Filling an Education Loan Form