A Dream – Studying Abroad for millions of students across the globe.
It provides them with the opportunity to experience a new culture, broaden their horizons, and gain access to world-class education. However, the financial aspect of this dream is often the most significant barrier for many students. This is where overseas education loans come to the rescue. Understanding the various interest rates and options available to students can make this dream a reality.
In this article, we will explore the importance of study abroad loans, the interest rates offered by various lenders, factors that affect interest rates, and how to calculate your EMI on education loans.
Study abroad loans help students cover their expenses such as tuition fees, living costs, travel, and other miscellaneous costs associated with studying in a foreign country. These loans not only ease the financial burden but also allow students to focus on their academics without worrying about money. Additionally, many lenders provide attractive interest rates, flexible repayment options, and tailored solutions to make education loans accessible and affordable for all students.
Public Banks - Public sector banks such as the State Bank of India (SBI), Bank of Baroda, and Bank of India offer competitive interest rates on overseas education loans. These banks have interest rates that typically range from 9% to 11% per annum, depending on the credit profile of the borrower and the loan amount. Public banks provide the lowest interest rate for education loan abroad compared to private banks, making them a popular choice among students. To know about the best banks for studying abroad and what are their key features click here, after reading this article.
Private Banks - Private sector banks such as IDFC First, ICICI Bank, and Axis Bank also offer education loans for studying abroad. The interest rates for these banks can range from 11% to 14% per annum, depending on the bank and the borrower's credit profile. The advantage of getting a loan from a private bank is that there is an easy process, your paperwork reduces as well as a pre-approved loan is provided and a customer-centric approach. For example, you can get an axis bank education loan for abroad without collateral if you are already a customer of Axis Bank and have maintained your account well.
NBFCs (Non-Banking Financial Companies) - NBFCs such as Avanse, HDFC Credila, and InCred have emerged as strong competitors in the education loan market. They provide customized loan solutions and have interest rates ranging from 11% to 15% per annum. NBFCs are known for their flexible loan terms, easy documentation process, and faster loan disbursement. For example, the HDFC Credila education loan for abroad can be disbursed within a week of your application submission.
International Lenders - International lenders such as Prodigy Finance and MPower Financing cater specifically to international students. These lenders offer interest rates, starting from 13% per annum, depending on the country of study, the borrower's credit profile, and the loan amount. International lenders also provide benefits such as no collateral or co-signer requirements and flexible repayment options.
|Bank||Secured Loan Interest rate||Unsecured Loan Interest Rate ||Max. Loan Amount|
|State bank of India||11.15||11.15||Secured: 1.5 Cr |
Unsecured : 7.5 L
|Bank of Baroda||Listed University : 10.40|
Non Liststed University : 10.75
|11.15||Secured : 1.5 Cr (listed University)|
Secured : 80 L (Non-Listed Universities)
Unsecured : 7.5 L
|Bank of India||11.85%||NA||Unsecured : 7.5 L |
Unsecured (listed Universities) : 20 L
|Union Bank of India||10.80% - 11.40% ||9.55% - 9.80%||Secured : 1.5 Cr|
Unsecured : Listed Universities : 40 L
|Axis Bank||10% - 10.5%||10.5% - 12%||Secured: 1.5 Cr|
Unsecured: 80 L
|Auxilo||10.5% - 12%||12.5% - 14%||Secured: 80 L|
|Avanse||10.5% - 12%||12.5% - 14%||Secured: 80 L |
Unsecured: 60 L
|Incred||10.5% - 12%||11.65% - 13%||Secured: 80 L |
Unsecured: 60 L
|HDFC Credila||10.5% - 11%||11.5% - 12.5%||Secured: 80 L |
Unsecured: 60 L
|Mpower||NA||11.99% - 13%||Secured: NA|
Unsecured: 85 L
|ICICI||9.85% - 11%||10.85% - 13%||Secured: 1.5 Cr|
Unsecured: 1 Cr
|IDFC First Bank||10.5% - 11%||10.75% - 12.5%||Secured: 80 L|
|Prodigy Finance||NA||12% - 14%||Secured: NA|
Unsecured: 85 L
|Credenc||NA||12% - 14%||Secured: 80 L |
Unsecured: 60 L
|Bank of Maharashtra||10.2%||9.45% - 10.45%||Secured:1.5Cr|
Unsecured: 7.5 L
|Saraswat Bank||10% - 10.5%||NA||Secured: 1.5Cr |
Fixed Interest Rate: In this type, the interest rate remains constant throughout the loan tenure, providing the borrower with predictable monthly payments. This is suitable for those who prefer stability and want to plan their finances accordingly.
Floating Interest Rate: In this type, the interest rate varies according to the market conditions and changes in the reference rate (MCLR or Repo Rate). This option is suitable for borrowers who are comfortable with fluctuations in their EMIs and believe that interest rates will decrease over time.
The interest rate at which the loan can be sanctioned to you depends on various aspects. Let’s look at a few of them enlisted below.
Credit Score - A higher credit score indicates lower risk to the lender, resulting in a lower interest rate. Maintaining a good credit history can help you secure a better interest rate on your education loan.
Co-applicant's Credit Profile - If you have a co-applicant with a good credit score and stable income, it can help you secure a lower interest rate.
Collateral - Providing collateral can reduce the risk to the lender and result in a lower interest rate. Collateral can be in the form of property, fixed deposits, or any other valuable asset.
Loan Amount and Tenure - Higher loan amounts and longer loan tenures typically attract higher interest rates due to the increased risk associated with lending larger sums for extended periods.
Country and Course of Study - The interest rate may also depend on the country and the course of study, as some lenders consider specific courses and universities to be lower risk, resulting in more favourable interest rates.
Existing Relationship with the Lender - If you or your family have a strong existing relationship with the lender, it can help you negotiate better interest rates on your education loan.
To calculate your EMI (Equated Monthly Instalment) on education loans, you can use the following formula:
EMI = P × r × (1 + r) ^n / ((1 + r) ^n - 1)
P represents the principal loan amount
r represents the monthly interest rate (annual interest rate divided by 12)
n represents the total number of monthly instalments (loan tenure in months)
The duration is denoted in months, corresponding to the frequency of Equated Monthly Instalment (EMI) payments.
For instance, if you acquire a student loan of Rs 10 lakh at a typical 12% interest rate, your EMI for a two-year period will be calculated as follows: Principle (P) = 10 lakhs, Interest Rate (R) = 12/100/12 (converted to a monthly rate), and Tenure (N) = 2 years or 24 months.
The EMI is then calculated using the formula: EMI = [10,00,000 x 12/100/12 x (1+12/100/12)^24] / [(1+12/100/12)^24-1], resulting in an EMI of Rs 47,073.
Alternatively, you can use online EMI calculators available on the ELAN Loans website, which can help you calculate your EMI quickly and easily. By calculating your EMI, you can plan your finances accordingly and ensure that you can comfortably repay the loan within the specified tenure.
Understanding the various aspects of overseas education loan interest rates is crucial for making an informed decision about which lender and loan product best suits your needs. By comparing interest rates, loan features, and eligibility criteria of various lenders, you can find a loan that not only supports your study abroad dream but also fits your financial situation. Remember to consider factors that affect interest rates, weigh the pros and cons of fixed vs. floating interest rates, and calculate your EMI to ensure you can manage your loan repayments without undue stress.
By doing thorough research and making informed choices, you can embark on your journey to study abroad with the confidence that you have made the best financial decision for your future.
And for any assistance related to Study Abroad Loans, Approach ÉLAN Loans.
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