Comparing Student Loans for Studying Abroad: Secured vs Unsecured Loans

As an international student, you need to plan every step carefully. From your intended study destination to the University and course, and even the items you pack for your journey abroad, everything needs to be thought out intricately. That’s even more so the case for the financial considerations of studying abroad. With the rising competition for the top Universities and courses abroad comes an increase in the tuition fees, living costs, and travel expenses in various student cities. Fully funded scholarships are incredibly competitive, and your savings may not be sufficient to cover everything. So, an overseas education loan might be a foolproof and trustworthy option to make the journey smoother.

When you start researching student loans for studying abroad in the Indian financial market, you’ll come across lots of unfamiliar terminologies, including the two major types of loans: secured and unsecured education loans. The loan type you choose will affect your loan amount, interest rate, assets, and repayment terms. This article will walk you through all the details without any additional jargon to make this decision easier.

The first thing on our agenda is exploring the difference between secured and unsecured education loans. The major difference lies in the security you provide for the loan. Let’s get a better idea of this difference below.

Now that we know the major difference between secured and unsecured education loans, let us go into detail about their benefits and demerits for international students.

Secured Education Loans: Advantages & Disadvantages

When you opt for a secured or collateral-based education loan, lenders tend to provide lower interest rates and higher loan amounts. However, the detailed eligibility criteria and longer approval process might give you pause. Let us understand both sides of getting a secured education loan below.

A secured student loan to study abroad is a smart move if you want to reduce your overall financial stress, access to lower interest rates, and breathing room for repayment. Next up, let us go over the pros and cons of an unsecured education loan.

Unsecured Education Loans: Advantages & Disadvantages

Opting for an unsecured education loan is ideal if you do not have assets to pledge as collateral or you don’t want to risk your assets during repayment. This makes unsecured loans more accessible for students with various financial backgrounds, but also increases the scrutiny of lenders. Get a balanced perspective about unsecured loans below.

So, unsecured education loans for abroad can make the approval and sanction process easier, but require trade-offs in terms of interest rates and repayment plans. It’s necessary to decide the ideal loan type before proceeding with other steps, so let’s compare them across various factors in the following section.

Comparing Types of Student Loans for Studying Abroad

Going for a secured or unsecured student loan for studying abroad isn’t as simple as it sounds. You have to balance many aspects, from the available loan schemes to the rate of approval for your chosen University and course, and its eligibility according to visa authorities. The table below will help you visualize this decision more clearly.

Apart from all these differences, there is also the matter of lenders and schemes varying for each loan type. In the next section, we’ve provided a brief glance at the most popular ones for secured and unsecured student loans for studying abroad.

Lenders Offering Secured & Unsecured Student Loans for Studying Abroad

The Indian financial market is home to a supportive infrastructure for banks, NBFCs, and International Lenders to come up with unique secured and unsecured education loan schemes for international students with different requirements, backgrounds, and study destinations. Let’s get a glimpse of some of those schemes below.

Lenders Offering Secured Education Loans

Lender	Maximum Loan Amount	Rate of Interest
Saraswat Bank	Up to INR 5 crores	Starts at 8% per annum
State Bank of India	Up to INR 3 crore for Prime-Listed Universities	Starts at 8.40% per annum for Prime-Listed Universities
Canara Bank	Up to INR 2 crores	Starts at 8.60% per annum
Bank of Baroda	Up to INR 1.5 crore for Premier-Listed Universities	Starts at 8.70% per annum for Premier-Listed Universities
Union Bank of India	Up to INR 1.5 crore	Starts at 8.25% per annum for Prime-Listed Universities
Punjab National Bank	Up to INR 1.5 crore	Starts at 8.85% per annum for Premier-Listed Universities
ICICI Bank	Up to INR 3 crores for Premium-Listed Universities	Starts at 9.50% per annum for Premium-Listed Universities
IDFC First Bank	Up to INR 2 crores for Prime-Listed Universities	Starts at 9.50% per annum
Axis Bank	Up to INR 1.5 crore for Premier-Listed Universities	Starts at 10.35% per annum
Yes Bank	Up to INR 1.5 crore for Prime-Listed Universities	Starts at 11.50% per annum for Prime-Listed Universities
Credila	As per the cost of attendance/requirement	Starts at 10.25% per annum
Avanse	As per the cost of attendance/requirement	Starts at 11% per annum
InCred	As per the cost of attendance/requirement	Starts at 10.25% per annum
Auxilo	As per the cost of attendance/requirement	Starts at 10.25% per annum
Poonawala Fincorp	Up to INR 3 crores	Starts at 10% per annum
Tata Capital	Up to INR 2 crores	Starts at 10.20% per annum

Lenders Offering Unsecured Education Loans

Lender	Maximum Loan Amount	Rate of Interest
State Bank of India	Up to INR 50 lakhs for Prime-Listed Universities	Starts at 8.90% per annum for Prime-Listed Universities
Union Bank of India	Up to INR 40 lakhs for Prime-Listed Universities	Starts at 9% per annum for Prime-Listed Universities
ICICI Bank	Up to INR 1 crore for Premium-Listed Universities	Starts at 11.25% per annum for Premium-Listed Universities
Axis Bank	Up to INR 1 crore for Prime-Listed Universities	Starts at 11% per annum
IDFC First Bank	Up to INR 1 crore for Premier-Listed Universities	Starts at 11% per annum
Yes Bank	Up to INR 75 lakhs for Prime-Listed Universities	Starts at 11.50% per annum
Prodigy Finance	Up to $220,000 for Masters	Starts at 10.55% per annum
Avanse Dollar Loan	Up to $150,000	Starts at 10.50% per annum for STEM courses and at 11% per annum for Management courses
MPower Finance	Up to $50,000 per year for 2 years	Starts at 11.99% per annum
Poonawala Fincorp	Up to INR 1 crore	Starts at 10.75% per annum
EdGro Finance	Up to INR 1 crore	Starts at 11.50% per annum
Credila	Up to INR 75 lakhs	Starts at 11.50% per annum
Tata Capital	Up to INR 75 lakhs	Starts at 11.25% per annum
InCred	Up to INR 45 lakhs	Starts at 11.50% per annum
Auxilo	Up to INR 45 lakhs	Starts at 11.50% per annum
Avanse	Up to INR 40 lakhs	Starts at 11.50% per annum

Having briefly gone over the secured and unsecured student loans schemes for studying abroad, we can focus on narrowing down the best options. But where do you start from? Read through the next section for some insights.

By now, you have a clear concept of the difference between secured and unsecured education loans, including some details surrounding loan amounts and interest rates. To decide between the two, you need to ask yourself a few questions. We’ve listed them below.

1. Are You Comfortable Using Collateral?

If you or your co-applicant is willing to offer land, property, fixed deposits, or government bonds towards the loan amount, a secured loan is your best bet. However, an unsecured loan is more accessible if that is not the case.

2. What is your Required Loan Amount?

For this question, you need a thorough budget plan including all your academic, professional, and personal needs, wants, goals, and lifestyle. If the course or living costs put you at a figure of about INR 75 lakhs or beyond, it might be wise to consider a secured education loan to support that amount and make repayment easier.

3. What are your Major Payment Timelines?

Do you need a tuition fee deposit or a pre-visa disbursement within the next week? If so, an unsecured loan is your most convenient option. The verification, sanction, and disbursement procedures for these loans happen quickly and efficiently.

4. Will your Profile Succeed in A Strict Approval Process?

For unsecured loans, approval is based on your academic performance, your University and course, and your co-applicant’s financial profile (if one is required). If you or your co-applicant cannot show a stable income or good credit score, your loan approval may be difficult or come with higher interest rates.

All said and done, choosing the right student loan for studying abroad requires a firm knowledge of your financial background, career plans, and repayment priorities. It would be better not to rush to any decision without carefully considering all the factors and looking at your long-term financial health. As a first-time borrower, however, this might be difficult without any external support.

This is where Élan Overseas Education Loans can be your best ally. We help you compare the best lenders and figure out how to get education loans for abroad studies according to your needs. With our assistance, you can deep dive into technical terms like fixed or floating interest rates, balance moratorium periods, and make the documentation process go off without a hitch.

Q1. What are the documents required for secured or unsecured education loans?

Ans. To apply for both secured and unsecured loans, you and your co-applicant (wherever required) need the following documents:

• Passport-sized photos and KYC documents
• Admission letter from a recognized foreign University
• Academic records and cost of living estimate
• Income proof and recent credit score
• Collateral documents (wherever required)

Q2. Can I get a student loan for studying abroad without a co-applicant?

Ans. Yes, absolutely! International Lenders such as Prodigy Finance and MPower Finance offer unsecured education loans without a co-applicant for international students.

Q3. How is collateral value calculated?

Ans. Lenders calculate collateral value based on a report that measures its value in the current market. The maximum loan amount is based on the reported value of the asset.

Q4. Who should be my co-applicant for student loans for studying abroad?

Ans. The accepted co-applicants for foreign education loans change across lenders. Generally, however, parents, grandparents, siblings, spouses, and legal guardians are accepted as financial co-applicants if they have a stable income and good credit score.

Q5. Can I combine secured and unsecured loans to cover the cost of higher education abroad?

Ans. Yes, you can! Opting for a secured education loan for the major expenses and getting an unsecured top-up loan amount is a smart strategy, especially if you’re studying in a country with a flexible currency exchange rate or rapidly rising costs.