Education Loan For Study Abroad
Pursuing higher education abroad is a life-altering decision. However, achieving this dream can be difficult due to financial constraints. Many students, despite their interest, find it hard to arrange funds for overseas education. Thankfully, education loans for study abroad have made it possible for numerous aspirants to fulfill their dreams. These loans enable access to quality education at international universities with manageable financial options.
Benefits of Education Loans for Studying Abroad
Education loans provide students with the financial assistance required for higher studies, whether in India or abroad. These loans often come with flexible repayment options, competitive interest rates, and extended moratorium periods, making them a popular choice for students. Apart from covering tuition fees, these loans can also cover expenses related to hostel fees, equipment purchases, and other costs associated with the course. When it comes to international education, some lenders even include airfare in the loan package.
Factors to Consider When Choosing an Education Loan for Studying Abroad
There are numerous financial institutions and banks in India offering education loans. Each lender provides a unique set of services, so it’s essential to carefully evaluate the options before making a decision. Key factors to consider include processing fees, interest rates, repayment terms, moratorium periods, loan tenure, and tax benefits. Here are a few pointers to guide your decision:
- Tax Benefits: Loans taken from recognized financial institutions and Indian banks qualify for tax deductions under Section 80E of the Income Tax Act, 1961. Tax benefits can be claimed for eight years — starting from the year the loan was disbursed and continuing for the next seven years or until the interest is fully repaid, whichever occurs first.
- Interest Rate: The interest rate is a crucial aspect when choosing a lender. Even a small difference can save you a significant amount of money. It’s essential to understand the difference between fixed and floating interest rates and compare various lenders to find the most affordable option.
- Expenses Covered by the Loan: The total amount of the loan depends on various factors, such as the university’s reputation, the student’s academic background, and the co-applicant’s financial situation. While some lenders cover the entire cost of education, others may only cover part of it. Be sure to clarify what the loan covers before applying.
- Eligibility and Required Documents: Lenders typically assess a student’s eligibility for a loan by reviewing academic performance, family income, and the co-applicant’s credit history. The amount sanctioned may vary depending on the course of study and the student’s post-graduation employment prospects. Commonly required documents include previous academic records, income proof, and a confirmed admission letter. However, some lenders may provide loans without requiring an admission letter.
- Prepayment Terms: Early repayment of a loan can save a considerable amount of interest. However, some lenders impose penalties for prepayments. It’s essential to check whether prepayment penalties apply and plan accordingly to minimize interest costs.
- Moratorium Period: Lenders typically offer a grace period of six months to a year after graduation before loan repayment begins. This allows students time to find employment and achieve financial stability. In some cases, students may need an extension on the moratorium period due to unforeseen circumstances. Ensure you understand the lender’s policies and charges for such extensions.
- Total Cost Over EMI: While longer loan tenures may reduce monthly EMIs, they will increase the overall loan cost. Evaluate the total cost over the loan period and choose a lender with the most favorable interest rate and terms.
- Loan Processing Time: The time taken to process and disburse the loan is critical, especially when applying for visas and university admissions abroad. Make sure to ask about the lender's processing time to avoid delays.
- Service Charges: Education loans may come with various service charges, such as processing fees, moratorium extension fees, and prepayment penalties. Ensure you are aware of all these charges before finalizing a loan.
Leading Education Loan Providers in India
Here’s a comparison of some leading banks offering education loans for studying abroad:
| Bank Name | Interest Rate (p.a) | Loan Amount | Loan Tenure |
|---|---|---|---|
|
ICICI |
8.75% - 12.25% |
Up tp Rs. 1 Crore |
Up to 10 Year |
|
Tata Capital |
10.99% - 19% |
Up to Rs 30 Lakhs |
Up to 6 Years |
|
Axis Bank |
8% - 16% |
Up to Rs 5 Crore |
Up To 20 Years |
|
PNB |
9.25% |
Up to Rs 7.5 Lakhs |
Up to 15 Years |
|
Bank of Baroda |
5% - 15% |
Up to 7.5 Lakhs |
Up to 15 Years |
|
Kotak Mahindra Bank |
7.60% - 16% |
Up to Rs 45 Lakhs (unsecured) |
Upt o 6 Years |
|
Federal Bank |
10.05% onwards |
Up to 20 Lakhs |
Up to 15 Years |
|
Union Bank of India |
8.80% - 10.05% |
Upwards of Rs 4 Lakhs |
Up to 15 Years |
|
SBI |
6.85% - 8.65% |
Up to Rs.1.5 Crores |
Up to 15 Years |
|
HDFC Bank |
9.55% - 13.25% |
Up to Rs 45 Lakhs |
Up to 15 Years |
|
6.85% - 9.35% |
6.85% - 9.35% |
Up to 80 Lakh |
Up to 15 Years |
Key Terminologies in Education Loans
- Collateral: Collateral serves as security against the loan and can include property or liquid assets like fixed deposits and life insurance policies.
- Co-Signer: A co-signer agrees to share the responsibility of the loan and repays if the borrower defaults.
- Grace Period: The period after course completion when loan repayments are not required.
- Annual Percentage Rate (APR): This is the annual cost of the loan, including interest and fees.
- Variable Interest Rate: Interest rates that fluctuate based on market conditions.
By understanding these key factors, you can make an informed decision about education loans and ensure your study abroad experience is financially secure. Comparing various loan providers and their offerings will help you find the best fit for your needs.