Overseas Education Loans

Education loans provided by banks in India have different variants. There are ‘study in India’ loans, ‘study abroad’ loans and then there are loans that are given to students who get admitted to certain universities or institutions that have direct tie up with banks. The basic criteria of any of these would be that you can avail an education loan up to 7.5 lakhs without collateral provided wherein this amount would be covered under the regime scheme and any amount more than that would require a collateral. 

What Is A Collateral? 

Collateral is any valuable asset pledged as security for repayment of a loan. This can be a vacant land, land with building, term deposits, gold etc.

Eligibility Criteria

Students who apply for education loans can be categorized into two: one who has completed their 12th and is looking forward to doing graduation courses, the other who has completed their graduation and looking for post-graduation or post graduation diploma.

• Academic records of the student will be evaluated on the substructure of their category: General or reserved. General category candidates should have a score of minimum 60% and the reserved category candidates (SC, ST & OBC) should have a minimum score of 50%. Good academic records can make your loan application strong. 

• CIBIL score matters. (CIBIL – Credit Information Bureau India Limited) Whenever you apply for a loan, the first thing that the bank would check is your CIBIL score. This is a three-digit numeric summary of your credit history. It can range anywhere from 300 to 900, above 750 being the ideal score. A good CIBIL score can avail you in qualifying for loans but that doesn’t mean you’d not be qualified if your score is less. If your CIBIL score is below a particular range, your application would move to a superior authority for scrutiny. In addition, banks probe the reason why your CIBIL score is low. If your reason is genuine, your application will be considered. In most of the cases, students don’t have a Cibil Score since they would not have loans in their denominations.
• Does University Ranking Matter? YES. Each bank would have their own trustful sources for finding out the universities’ ranking. These website sources would be maintained by the government or government subsidiary agencies. Quoting an example, Bank of India refers to a website called Webometrics that categorizes universities on the basis of their ranking. 

(i) If the particular university comes under the ranking of 3000, your loan would be approved considering the merit of the university. 

(ii)If the ranking is in between 3000 to 10,000, your application would still be considered but would depend on the academic records of the student too. 

(iii)If you are admitted to a university (ranked above 10,000) and your academic records are not up to the mark, the chances of your loan approval would be low. Banks do not normally encourage this. 

Co-applicant

• Co-applicant is a must for education loans. Co-applicant should be your first family. It can be your parents, siblings, husband & in-laws (in the absence of your husband) 
• Siblings can be allowed as co-applicants if they are your personal guardian (if parents are not alive) 
• A financial co-applicant is required only when your primary co-applicant has no source of income. 

Time For Loan Approval

Loan processing time can depend on the papers you surrender. The time taken to process a loan for 5 lakhs and 50 lakhs would differ because the former requires no security (collateral) unlike the latter. Close scrutiny of the submitted collateral is additionally authorized when the loan involves security. Education loans, especially for international studies, are not customarily delayed. It could take up to fifteen working days. 

Documents To Be Submitted

By Applicant

• KYC – Copies of photo, PAN Card/Aadhar Card/Voter ID/Driving License/Passport/ NREGA Card (any two, catering to the need of both identification and address purpose)
• Academic Documents – copies of 10th and 12th certificates, university admission letter, fees structure document
• Collateral – In case of security loans, documents of the collateral must be submitted. 

By Co-applicant

• KYC – Copies of photo, PAN Card/Aadhar Card/Voter ID/Driving License/Passport/ NREGA Card (any two, catering to the need of both identification and address purpose)

• Account statement of the co-applicant (if the person is salaried)
• Copy of the latest Form 16 issued by the company (if an employee) or returns (if self-employed) 

How to Apply Education Loan

You can apply an education loan through Vidya Lakshmi Portal which is being monitored by the Central Government. If the loan is sanctioned / rejected, the same should be updated in the portal itself. The applicant and co-applicant need to give their basic details through this portal. They can choose any bank of their choice in the portal and can apply up to 3 banks.

Will Prior Loans Affect Your Chances?

• If you have an existing liability and are still doing the payback, you will have to close it prior to taking another. 
• Or else, you can inform the bank about your existing liability being willfully taken up by your financial co-applicant. The declaration document regarding this from the bank should be submitted in the current bank where you’re applying for the education loan. 

How Does The Bank Pay You?

A document consisting the fee structure of the course is to be submitted along with other documents for loan approval. The loan would cover everything that is mentioned in the fee structure. This would include tuition fee, gadget fees, books and periodicals, security deposits, flight charges and accommodation fees. If you are required to pay your fees per semester, the bank would either directly transfer the amount to the university or to a third-party institution that would reach the university. 

The bank loan and the margin amount would cover your entire course fee. The margin amount is the money you pay for yourself. The margin amount is different for medical and other courses. According to BOI, if you require a loan amount of more than & 7.5 lakhs for a medical course, the margin would be 10% of the total loan amount. For courses other than this, the margin would be 15%. This would depend on how secure the collateral is. Margin amount is a prerequisite for every amount above 4 lakhs. 

Repayment of the loan
The bank gives a moratorium of one year to the beneficiary. After the period of study, if the beneficiary is employed immediately, they can commence paying back the loan six months after gaining employment. Or else, one year after the period of study. 

Interest Rate

Interest rate depends on the loan quantity. Interest rate is calculated by integrating RBLR (Repo Based Lending Rate) and bank rate. Further, you can get concessions in interest rates. This differs from bank to bank. As per the BOI norms, if you’re doing a professional course, say engineering, you will get a 0.5% concession and for a lady beneficiary you’ll get another 0.5% concession. An further1% concession will be given if monthly interest is served without delay for one year during the period of study. 

Loan Processing Fee

For foreign education, banks charge an amount as loan processing fee. This differs from bank to bank. BOI charges Rs. 5000 plus GST. 

Bank loans deal with public money. While providing you with a loan, the bank is lending to you the money that another Depositor has invested in the Bank, which is authentically a liability to the bank. So always try to repay the Loan you have availed.

Feel free to share your queries about education loans.