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March 14, 2019

Overseas Education Loans - An Insight

Education loans have become the most reliable source of funding higher education overseas for many aspirants over the years. The exorbitant cost of global quality education can be seldom met with scholarships or personal savings. As such taking an education loan for pursuing higher studies abroad usually becomes a highly sought-after alternative.

Advantages of Overseas Education Loans

There are numerous advantages of taking overseas education loans like

  • 100% Funding
  • Pre-admission Loan
  • Income Tax Benefits

Let’s check this out in detail.

100% Funding

All the NBFCs (Non-Banking Financial Corporations) provide 100% funding up to Rs 45 lakhs in the form of unsecured loans.

In case you want to approach a nationalized bank then Bank of Baroda is the only bank which provides 100% funding even up to Rs 80 lakhs. But do keep in mind that they do it only for the universities under their listing.

So, if you are able to get 100% funding for your overseas education, your sponsors are relieved of the initial financial burden of arranging the sponsors sharing.

Pre-admission Loan

This is a great advantage for all the students aspiring to study in the US as the pre-admission loans are sanctioned only for this top most overseas study destination.

The possibility of getting the pre-admission loan depends on the following factors and these are mandatory for consideration.

  • Parents Annual Income - More than Rs 5 lakhs
  • Standardized Test Scores (whichever applicable)
    • GRE - above 300 points
    • TOEFL- above 90 points
    • IELTS- more than 6.5 bands

Income Tax Benefits

The interest paid on education loan is allowed as deduction under the Income-Tax Act, provided the loan is taken for higher education in India or abroad. The deduction is available for regular as well as vocational courses.

You just need to ensure that you obtain the interest certificate from the bank/ lending institution to claim the benefit.

You also need to keep in mind that the Income Tax Benefit can be claimed only if the loan has been taken from a bank, approved financial institution or an approved charitable institution.

Other Essential Aspects

Quantum of Finance

The quantum of finance up to which the financial institutions sanction secured loan for Overseas Education is up to Rs 1.50 Crores. But the time for processing takes longer than unsecured loans and only 75% of the amount will be sanctioned against the valuation of the property.

If you want to opt for unsecured loans then NBFCs and only a few Private Banks offer up to ? 45 lakhs whereas Nationalized Banks provide unsecured loans only up to Rs 7.5 lakhs.

Expenses Covered

Most of the financial institutions sanctioning education loans for studies abroad cover expenses like

  • Tuition and examination fees
  • Library and laboratory charges
  • Purchase of books, laptop, equipment, instruments, uniforms, etc…
  • Any other expenses like study tours and project work
  • On campus or off campus accommodation charges
  • Travel expenses
  • Insurance premium for student borrower

Tenure

The tenure of overseas education loan generally ranges from 10 to 15 years for loan above 7.5 lakhs, giving the student enough time to repay in smaller instalments.

A longer tenure can reduce your EMIs, making repayments comfortable; while opting for a shorter tenure increases your EMI but you’ll be paying the interest only for that span of time instead of the full tenure.

By and large, the repayment starts one year after the course completion or six months after the student is employed - whichever is earlier.

Rate of Interest

Overseas Education Loan interest rates vary from 9.5% to 14% depending on the kind of financial institution.

Servicing of monthly interest during the study period and moratorium period is optional for students.

Few Nationalized Banks offer 1% concession on interest rate, if the student starts paying the simple interest during the study period and moratorium period.

Concession on Rate of Interest (Based on the Financial Institution)

Concession for students

  • Getting admission in top rated Premier Institutions
  • Merit students
  • GRE Top Scorers
  • Girl students ( 0.5% concession)
  • Existing home loan customers

So this gives you a broad overview of overseas education loans. Check out for our next article to know about the Loan Process in detail.

Contact our Education Loan Advisor for in-depth guidelines.

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