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12 Guidelines for Successful Study Abroad Education Loan Application

Acquiring a quality education from a reputable institution is a must to secure one’s career. For many students it is equivalent to graduating from a foreign university situated overseas. With the cost of education rising every year, it is quite difficult for both students and their parents to manage the expenses from their savings as the cost of education is constantly on a rise. 

According to a recent research, the cost of education is increasing with 10% every year and it is going to rise in the coming days. Although the cost of education differs from country to country, at present, an average cost of a bachelors’ and masters degree from an international institution goes around 60-70 Lakhs and 35-45 Lakhs, respectively. 

To pay the whopping cost for this international degree, aspirants look for the ways to finance their higher education. One of the most common ways is of course by availing an overseas education loan from a financial institution. There are four types of financial lenders viz nationalized banks, private banks, NBFCs and international lenders that offer an education loan to study in a foreign university

Every year, lakhs of international students apply for an overseas education loan but only a handful of them manage to receive funds from their lender institutions. A lot of students are not even aware of the reasons behind the rejection of their loan application. But not to worry as in this article, we are aiming to provide you guidelines that should be considered before approaching any of the financial institution for your education loan. So, let’s dive straight into the topic. 

12 Guidelines to Consider before approaching a financial institution

Here we have mentioned some of the common rejection clauses that should be kept in mind while submitting an overseas education loan application: 

1. Choose the international university and the course wisely

The university and the course for which a student has applied for, plays an important role in the process of getting the overseas education loan approved. Financial institutions easily approve the education loan for the STEM courses such as science, technology, engineering, mathematics and even for management courses as the earning potential is higher after the successful completion of these courses whereas it is quite difficult to get the education loan approved for the courses such as medicine, arts, commerce, and other humanities related courses. If the student is applying for any course at bachelors or UG diploma level, he/she must opt for secured education loan. 

2. Past academic performance of the student

The academic record of the student is another important aspect in the overseas education loan process. A student who has consistently performed well in the past and has gained admission to a premier overseas institution has higher chances of getting an education loan application approved whereas a student who has scored below average consistently or have 5-6 backlogs with academic gap might not get the education loan application approved from the bank. 

3. Age of the Applicant and Co-applicant

The age of the applicant and co-applicant plays a crucial role in getting the overseas education loan application approved from the financial institution. For secured education loan, there is no age criteria whereas for unsecured overseas education loan, the maximum age limit of the applicant should be below 28 years of age. 
In case of the co-applicant, the age should not be close to the retirement age otherwise the lender institutions are hesitant in approving the overseas education loan.

4. Big NO to submitting incomplete or fake documents

Submission of incomplete or fake documentation can lead to the cancellation of an overseas education loan application. Hence, it is of utmost important to read the guidelines and adhere to the list of documents while submission of loan application to the bank. 
In case of submission of the fraudulent documents to the banks such as mark sheets, degree certificates, college approval letters etc there are higher chances of facing an education loan rejection. Apart from this, the applicants might also face legal consequences for the wrongdoing. 

5. Maintain a good CIBIL score

Financial lender institutions consider CIBIL scores of the applicant, co-applicant or guarantor while approving the education loan. A good CIBIL score indicates that the borrower has repaid the previous loans on time. It automatically improves the chances of getting an education loan. If in case the borrower has failed to repay his/her previous loans on time due to delay in EMI, cheque bounce or delay in repayment of credit card bills, the CIBIL score of the borrower will badly affect resulting into the rejection of the loan application. To avail the secured education loan and unsecured education loan, one should maintain CIBIL score above 650 and 700, respectively with good credit history.

6. Avoid making multiple loan enquiries and applications

When a person applies for any loan, the bank makes an inquiry for the credit report with the CIBIL Agency to check the credit score of the person. The CIBIL Agency takes these as hard inquiries and mentions it in the person’s credit report. On receiving the offer letter from the university, students tend to apply to the number of financial institutions without consulting loan experts. This affects the CIBIL score of the applicant due to the number of enquiries. Hence, it is advisable to do the research in advance and apply for an appropriate financial institution after considering all the valued options.  

7. Ensure to fulfil the income criteria

The financial institutions have defined the minimum income requirement for the overseas education loan. On failing to meet the same, the education loan application of the student is likely to get rejected. 

Here are the criterias for the rejection for both secured and unsecured overseas education loan:

Criterias
Unsecured Loan
Secured Loan
If parents’ income is less than 5,00,000/-
No Loan
Will get loan
If parents are getting rental income
No Loan*
Will get loan
If parents are agriculturist
No Loan
Will get loan
If parents are pensioner
No Loan
Will get loan
If parents do not file ITR
No Loan
Will get loan
If parents are having IT return but no business proof
No Loan
Will get loan
If only the student is earning & filing the IT return
No Loan
Will get loan
8. Analyse the repaying capacity

The repaying capacity of the applicant is an important factor in deciding whether an applicant will get an education loan or not. The two reasons due to which the repaying capacity of the applicant usually gets affected are:  

  • Lack of income: If the co-applicant loses or quits the job midway during the education loan application process, the financial institution comes to know about the same through background checks. Since the applicant has lost the repaying capacity, the overseas education loan gets rejected even though it has passed the initial approval stages. 
  • Unpaid Dues: When a borrower takes overseas education loan, one of the foremost things that is involved in the approval for the same is the credit history and record. The credit history check involves determining timely payment of dues and EMIs of other loans, etc. 

9. Make sure there are no higher existing debts

If the applicant is already deb-ridden with previous loans, the bank has the right to reject the overseas education loan on the grounds of the liabilities being higher than the income. In case, if the borrower intentionally minimizes his/her existing debt repayments to get the higher loan amount. This can easily misfire on the borrowers as the lender institution refers to their credit report before approving the overseas education loan amount.

10. Types of collateral offered for loan

Financial institutions have defined the types of collateral properties that are accepted for secured overseas education loan. Let us look at those:

Collateral
Secured Loan
If parent is having a rural/gram panchayat property (i.e., Agriculture land, Farmhouse, Village house)
No Loan
If property with minor rights
No Loan
If parent is having an urban property (i.e., House, Flat, Open Plot, Blocks, Shop)
Will get Loan
If property title deed documents are laminated
No Loan
If property documents are not in the name of present owner
No Loan
If property is facing any dispute, court of law or is already mortgaged against some other loan
No Loan

11. Loan application should meet the bank policy

In some cases, the internal policy of the bank may find faults in the areas of construction or in the credit profiles then there are chances of getting the overseas education loan application rejected. Secondly, the banks do not fund buildings that are 25 years older. Hence, it is advisable to check all the areas and ensure that your loan application matches the bank policy. 

12. Absence of admission letter from the university

To approve the overseas education loan application, financial institutions require a letter of admission from the university while sanctioning the loan. The absence of the admission letter decreases the chances of getting an education loan application approved from the bank.  

These were some of the major reasons that plays a crucial role in an overseas education loan application. Now that you know what things to keep in mind while submitting an education loan application, make sure to take your higher education decision wisely. Get in touch with us at ELAN loans and our loan experts will assist you in taking a right step towards fulfilling your educational dream. Visit us or call us today and increase the chances of getting your overseas education loan application approved. 

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