Numerous Indian students dream of pursuing international studies but may lack the ability to provide collateral for an education loan. However, it’s essential to stay dedicated to your aspirations and explore lenders offering education loans without the need for collateral. Numerous financial entities, such as private banks and non-banking financial companies (NBFCs), offer education loans without collateral. This article aims to furnish a thorough understanding of this alternative.
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Types of education loans without collateral
There are majorly 2 types of lenders that can provide you with an education loan without collateral. They are –
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Option 1: Lenders that need cosigner which includes private banks and NBFCs
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Option 2: Lenders that provide no cosigner student loan
Let’s understand about each of them one by one.
Lenders that provide loans with cosigner
Private banks in India, such as ICICI Bank, Axis Bank, and IDFC FIRST Bank, provide unsecured education loans but will require a cosigner. The sanctioned loan amount depends on factors like the chosen country, course, applicant’s profile, and the financial standing of the co-signer. Although private-sector banks typically have higher interest rates than government banks, they remain more competitive than Non-Banking Financial Companies (NBFCs) and international lenders, starting at an annual Rate of Interest (ROI) of 11%. Noteworthy is the tax benefit under Section 80E available for education loans from private banks, and their processing times are generally quicker than government banks.
Similarly, NBFCs like HDFC Credila, Avanse, InCred, and Auxilo also require a cosigner in order to approve your education loan. The sanctioned amount depends on factors similar to private banks, and while NBFC interest rates are higher (ranging from 11.50% to 13.75% per annum), their processing times are notably shorter than those of government and private banks. However, unlike private banks, NBFC education loans do not provide tax benefits under Section 80E.
Lenders that provide no cosigner student loan
Certain international lenders offer education loans for Indian students pursuing studies abroad, without a cosigner. While Indian banks and NBFCs typically require cosigner, international lenders like MPOWER Financing and Prodigy Finance stand out by providing education loans without this requirement. However, it’s essential to note that the eligible colleges and countries are limited in scope. These international lenders disburse loan amounts in foreign currencies, depending on the chosen study destination. Notably, these loans are tailored to a specific list of colleges and countries, ensuring a focused approach to financing education for aspiring students. Key players in this realm include MPOWER Financing and Prodigy Finance.
Eligibility for an abroad education loan without collateral
Qualifying for an education loan without collateral may differ among lenders, but some common factors apply:
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Co-Applicant Criteria: Your co-applicant needs a good credit score (often called CIBIL), meets specific income conditions (usually around 30,000 INR to 40,000 INR without existing financial commitments), and meets the lender’s set standards.
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Test Scores: Doing well in English proficiency and standardized exams like IELTS, TOEFL, GRE, SAT, etc., is crucial for loan approval. Your scores should meet or surpass the benchmarks set by your lender.
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Academic Record: Your past academic achievements are vital for non-collateral education loans. These loans rely on your academic performance as collateral is not required.
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Selection of Country, University, and Course: Ensure that the country, university, and course you choose align with the lender’s approved list for non-collateral education loans For a non-collateral education loan, specific documents are essential. Below is an inclusive list for both the applicant and co-applicant:
Documents required for loans without collateral
When applying for a non-collateral education loan, you will need to provide a set of documents. Here’s a comprehensive list of the typical documents required for both the applicant and co-applicant:
Applicant documents:
1. Loan application form
2. Identity proof (PAN Card, Passport, Voter ID)
3. Address proof (recent utility bill)
4. Passport
5. Academic records (10th, 12th, undergraduate mark sheets, entrance test scores)
6. Proof of admission (conditional offer accepted)
7. Statement of expenses (total cost of education)
8. Passport-size photographs
9. Loan account statement of the last year (if applicable)
Co-Applicant’s Documents:
1. Identity and address proof
2. Income proof (varies for self-employed and salaried)
– For self-employed:
– Business address proof
– Last 2 years IT returns
– TDS Certificate
– Certificate of Qualification
– Bank account statement (last 6 months)
– For salaried:
– Salary slips (last 3 months)
– Form 16 or IT Returns (last 2 years)
– Bank account statement (last 6 months)
Application process for education loan without collateral
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Check Eligibility: Assess eligibility based on academic background, admission to a recognized foreign institution, and financial status.
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Apply and Seek Assistance: Connect with a GyanDhan Education Loan Counselor for personalized guidance. The system matches you with two lenders fitting your situation.
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Document Submission and Verification: Submit required documents, including academic and financial records, for lender review.
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Loan Approval: Upon approval, receive notice of the sanctioned amount. If terms are agreeable, sign the agreement, and the needed funds will be disbursed for studying abroad. This ensures your choices are in line with the lender’s criteria.
Opting for a non-collateral education loan for international studies comes with several benefits, such as streamlined documentation, flexibility in selecting institutions, the option of a co-applicant, and extensive coverage of educational expenses. Should you have any queries or uncertainties, don’t hesitate to reach out to GyanDhan. Their dedicated support is available to assist you at every stage of the loan application process, ensuring you find the perfect lender tailored to your specific situation. Just assess your loan eligibility with them, and they will walk you through each phase, addressing any questions or concerns you may have.