Getting a chance to study overseas is an excellent opportunity that one should never miss. But before that, you should be aware of the fact that studying abroad is a costly affair. Contrasted with the expense of studying in India, students who wish to study overseas generally need to organize and show verification of amounts as a part of their college and visa application. But don't worry, many financial institutions provide Study Abroad Education Loans at a very low rate of interest. However, the interest rate increases with the increase in loan amount.
Many banks in India provide loans such as HDFC, Punjab National Bank, Bank of Baroda, State Bank of India offer instruction credits for studying abroad. However, interest rates may vary from bank to bank. On average, a minimum of Rs. 45 lakhs is required as a loan in order to study abroad. But there are certain requirements that need to be fulfilled before getting a loan. In this article, we will discuss everything about securing a Study Abroad Education Loan.
Different types of Educational Loan
There are basically two types of educational loans in India. These are:
- Secured loan: A secured loan is a loan where the borrower promises some resource as collateral for the loan, which at that point turns into a secured debt owed to the creditor who gives the loan. Basically, such loans have a lower interest rate, but the processing period is long, and non-payment of the loan amount may result in losing the security.
- Unsecured loan: An unsecured loan is a loan that doesn't need any sort of security or collateral. Rather than depending on a borrower's resources or assets as security, banks endorse unsecured loans dependent on a borrower's financial soundness and creditworthiness. These types of loans generally have high interest rates. But the repayment of the interest amount is very short. You have to choose between both wisely, based on your resources and ability to repay the loan amount with interest within a stipulated time.
Eligibility criteria to get a loan
A student loan is allowed to a person who can show a reasonable probability of taking care of the bank credit. There are certain criteria that are necessary to be fulfilled before a bank can sanction the Study Abroad Education loan. First, you have to check whether you are qualified to take a Study Abroad Education loan or not. The following are the eligibility criteria.
- The applicant must be an Indian resident.
- If the borrower is under 18, their parents will have to apply for the loan on their behalf.
- The candidate must have a good academic record.
- The applicant must have been accepted into a renowned international university, institution, or college.
The above-mentioned eligibility criteria may differ from bank to bank. However, these are general eligibility criteria for all types of educational loans.
Many documents are required, so it would be better to make a checklist of the documents mentioned below. It will aid you in ensuring that all the documents are adequately covered. All the below-mentioned documents are very crucial.
- Application Form
- Passport size photo of the applicant and the co-applicant
- KYC records for candidate's photo identification verification, such as the Aadhaar Card and PAN Card
- A valid passport
- Applicant's and co-applicants proof of residence
- The applicant's transcripts and relevant certificates
- Scores of GRE, GMAT, TOEFL, IELTS, etc.
- Letter of acceptance from the university or college
- Bank accounts statements for the previous six months of the co-applicant
- The income proof of the co-applicant
The following documents are required in the case of collaterals:
- Deed of Title on real estate
- A building scheme that has been certified
- A builder's or society's letter of approval for a mortgage
Sometimes banks tend to ask for the following documents of the co-applicant:
- Identity Proof
- Address Proof
- Evidence of income
- Bank statement of the salary account
- IT Returns
- Company Registration & tax documents
How to apply for a Study Abroad Education Loan?
There are two ways of applying for a Study Abroad Education Loan. The first is online, and the second is offline. But it is advisable that you should choose the offline mode. The loan process is lengthy and time-consuming. It would be better to apply early. Follow these simple steps to procure a loan easily:
- First, decide the Study Abroad Education loan amount. Fix an upper limit.
- Begin looking at the educational loans accessible from different banks for going abroad, and pick the one that works best.
- Fill in the bank loan application form accordingly.
- The bank will provide you with some loan documents containing information about the loan. It contains the rules set by the government for studies opting for various courses.
- The bank will dispense the loan amount in installments or as per the college demand, once the loan agreement is signed.
As per section 80E of the Income-tax Act, you can claim tax deductions only on the interest paid on your education loan during a financial year. As per section 80C, you can claim tax deductions on interest paid; parents can claim income tax deductions on tuition fees paid to any educational institution. A tax benefit of 1.5 lakhs can be claimed on tuition fees paid for up to two children. The tax deductions can only be claimed for a maximum of 8 years. But, you have to ensure that the financial institution that is sanctioning the loan is recognized by the Reserve Bank of India.
Many banks in India provide education loans. You just have to ensure that you follow all the legal and ethical rules to acquire the loan. In most cases, the total term of an education loan is from 5-7 years. In the case of larger debt sizes, though, certain lenders will be able to negotiate a longer-term of up to 15 years.
Undoubtedly, foreign education enhances the whole personality of a child. It gives them exposure to different people and their cultures. But after getting admission to a good foreign university, especially in the US, you must have funds to finance it. But, if you don't have funds to finance your education, you can take a Study Abroad Education loan.