Acquiring a quality education from a reputed institution expands your career opportunities and horizons resulting in living a successful life career-wise. With the hunger in eyes for the world-class education, most Indian students are moving overseas to fulfill their dream. The cost of education is increasing day by day, and when it comes to fund an international degree in a foreign country, an overseas education loan comes to the rescue.
There are a number of lender institutions including nationalized banks, private banks, NBFCs and international lenders in the market that provides education loan for abroad studies. But before finalizing on the lender institution, study abroad aspirants must do thorough research and comparative analysis of various lender institutions on the multiple factors like ROI, processing time, loan tenure, borrowing limits, processing fees, moratorium period, etc.
In this blog post, we are going to discuss the mentioned factors of various financial institutions that will help you in taking a wise decision to fund your abroad studies. Let’s begin.
The processing time is the time span required for the sanctioning of the loan amount from the bank. Government and private banks take up to 1-1.5 months for the processing of loan amount whereas NBFCs and international lenders take up to the processing time of 10-15 days.
If a student is planning for a bachelor’s degree, the cost project will go around 1 Cr whereas, for a master's degree, the cost will go up to 40 lakhs. Students must look for a suitable financial lender as per their cost project.
The borrowing limit for State Bank of India and Bank of Baroda for secured education loan is 1.5 Cr and 80 lakhs respectively whereas for an unsecured education loan, government bank sanctions up to 7.5 lakhs. Private banks like Axis Bank avails secured loans up to 75 lakhs while unsecured loans up to 40 lakhs. ICICI Bank offers up to 1 Cr for a secured loan and up to 40 lakhs for an unsecured loan.
The rate of interest is one of the key factors that should be considered before finalizing the bank. The ROI of government banks changes after every year whereas the ROI of private banks and international lenders fluctuates from time to time.
The ROI of government banks namely, State Bank of India and Bank of Baroda falls between 8.35% to 9.30% while the ROI of private banks like Axis Bank and ICICI Bank is between 11.00% to 13%. NBFCs namely Auxilo, Avanse, Incred and Credila offer between 12% to 14% whereas the ROI for International Lenders like MPower Finance and Leap Finance varies for undergraduate and post-graduate courses but it is somewhere between 8% to 10.50%.
The loan repayment tenure of various banks is between 10 to 15 years. For government and private banks, the repayment tenure goes up to 15 years whereas for NBFCs the tenure is up to 10 years. International lenders give the repayment tenure of 10-12 years.
Direct EMI is the option where the moratorium period is not applicable, and students are required to pay EMI from the next month once the loan amount is disbursed. For government banks, private banks, NBFCs and international lenders the option of serving direct EMI begins after the moratorium period only. However, for NBFCs, there are some exceptions. In case, if students are going to pursue an undergraduate degree or any non-STEM program and are opting for an unsecured education loan, they will have to serve direct EMI to the NBFC. Secondly, if the academic or financial profile of the student is weak, he/she will be given an option of direct EMI from the next month of loan amount disbursal.
A moratorium period is the time span of the study period and job search period of 6-12 months given by the bank. Serving simple interest during the moratorium period is not compulsory for government banks whereas for private banks it is mandatory. In the case of international lender Leap Finance, students are required to pay a small touch payment of $50 per month after the disbursement of the loan amount whereas, for MPower Finance, payment of full simple interest is required. For NBFCs, students have the option of paying both simple and partial interest.
The processing fees is the upfront amount charged by the lender institution for sanctioning of the education loan. The processing fee for the government banks is 10,000 excluding GST. For ICICI Bank, it is 1% of the loan amount whereas for Axis Bank, if the loan amount is more than 20 lakhs then the processing fee is 15,000. NBFCs charge the processing fee as 1.5% to 2% of the loan sanctioned amount whereas, for International lenders, the processing fee is between 2% to 5%.
Most of the countries require pre-visa disbursement whereas few countries require post-visa disbursement of the loan amount. Pre-visa disbursement loans are given out as a way for students to secure their seats by making an initial tuition fee deposit or first-semester tuition fees paid to the university/college before visa. Once the student secures admission to the university, they can obtain their visa using a Pre-Visa Disbursement loan.
Post-visa disbursement loans are given to the students on getting the e-Visa approval or actual visa stamping on Passport. Students must provide the visa copy to the disbursement officer and accordingly bank officer will disburse the loan for tuition fees, living expenses, OSHC, air ticket, laptop, visa fees, etc. Hence, it is important to check with the bank about pre/post visa disbursement before submitting the overseas education loan proposal as only selected banks provide pre-visa disbursal. International lenders provide post visa disbursement after reaching the study abroad destination.
Students should check the process of remittance of the loan amount with the bank whether they are going to transfer the funds to the student / co-applicant account or to the university account.
Nationalized and private banks remit the tuition fee amount directly to the university and living expenses are disbursed in Forex card or as per the visa norms. For NBFCs, the loan amount is fully disbursed in the student or parent’s account. In the case of international lenders, the tuition fee and on-campus accommodation charges are remitted semester-wise to the university on providing the invoice.
These are the top 9 factors that should be taken into consideration while finalizing a bank for overseas education loans. Do in-depth research on various financial institutions and their terms and conditions. Talk to bank officials and clear all your concerns. Choose a suitable financial institution for your study abroad loan according to your financial profile and criteria.
There are a lot of technicalities for study abroad education loans and it sometimes gets difficult for a student or a layman to understand those. Hence, it is always recommended to get in touch with the overseas education loan experts as it will help you in a smooth approval of your education loan process. Contact us at ELAN Loans and we will get your education loan sanctioned without any hassles.