Study Abroad Loan FAQs: Types, Lenders, Features & More

Studying in a foreign country miles away from home takes courage, preparation, and a whole lot of planning. Although it is challenging, higher education abroad is a dream for lakhs of aspirants in India, who aim to access interdisciplinary research opportunities, global job platforms, and a diverse networking group alongside up-to-date academic and practical skills. However, finding the funding for foreign Universities can be difficult, especially with rising costs and more competition for scholarships each year. Study abroad loans have emerged as a popular option for international students, with plenty of loan schemes and offers.

For first-time borrowers, it can be difficult to determine the most suitable loan options according to their intended University, course, financial profile, eligibility, and requirements. This article will try to simplify that process with study abroad loan FAQs, guiding students through the research process with up-to-date and clear information.

20 Study Abroad Loan FAQs for International Students

A study abroad loan is an important financial decision, requiring a fair amount of thought and research. It is natural for students and their co-applicants (wherever applicable) to have questions at every step of the process. Below, we will address some of those questions.

Q1. Why should I get a study abroad loan?

Ans. There are many expenses to consider when investing in a foreign qualification. The tuition fees and living expenses are a big part of the expenses, alongside other necessary costs. These can be too difficult to bear on savings alone. Study abroad loans give students the financial flexibility to choose the best options for their field and focus on their studies without worrying about finances. With the potential return on investment of studying abroad, students will be able to repay the loan with ease.

Q2. What are the types of study abroad loans?

Ans. There are two types of study abroad loans: secured and unsecured education loans. While secured education loans rely on collateral as security against the loan amount, unsecured education loans are based on the borrower’s financial profile and creditworthiness.

Q3. What do study abroad loans cover?

Ans. Generally, study abroad loans cover the tuition fees for the duration of the course, the living expenses, the travel costs, student visa fees, health insurance, study material, academic supplies, and other expenses related to higher education abroad. The margin for the coverage may vary across lenders.

Q4. What is the maximum loan amount I can avail of?

Ans. The maximum loan amount available to international students may change according to the loan type, lender, University, course, and their profile. However, the highest secured loan amount can be up to INR 3 crores, while the highest unsecured loan amount is INR 1 crore.

Q5. How many lenders offer study abroad loans in India?

Ans. All Indian banks provide study abroad loans in the Indian financial market. Additionally, many NBFCs and International Lenders have joined their ranks. They can be divided into five types: Nationalized Banks, Co-operative Banks, Private Banks, Non-Banking Financial Companies (NBFCs), and International Lenders. Each lender has a unique study abroad loan scheme as per their functioning, regulations, and resources.

Q6. What is the difference between Nationalized Banks and Private Banks?

Ans. Nationalized Banks are owned by the Central or State Government, while Private Banks are owned by companies or shareholders. The schemes, loan amounts, interest rates, and benefits offered by them can also differ. However, since both types of banks are under the RBI, they have similar responsibilities and ways of functioning.

Q7. Are there any study abroad loans without a co-applicant necessary?

Ans. Yes, International Lenders like MPower Finance and Prodigy Finance offer study abroad loans without collateral and co-applicants. The loan amount and interest rates depend on the student’s academic and financial profile, as well as their chosen course and University.

Q8. How should I narrow down the best study abroad loan?

Ans. Many factors go into selecting the best student loans for studying abroad. According to their requirement, students should narrow down options based on the following factors:

• Collateral requirements

• Loan according to the chosen study destination, University, and course

• Interest rate type, amount, and concessions

• Loan margin, moratorium period, and repayment tenure

• Processing fees, time, and disbursement schedule

The eligibility criteria of the lender is also an important factor in determining the best study abroad loan amount.

Q9. What is margin money?

Ans. Margin money is the portion of the study abroad loan that the borrower needs to pay. For example, if the student receives a loan of INR 50 lakhs with a 10% margin, it means that 90% of the loan amount (INR 45 lakhs) will be financed by the lender, while the student must pay the remaining 10% (INR 5 lakhs). The concept of margin money is generally applied in secured education loans to reduce risk and share financial responsibility for the loan.

Q10. Which courses are funded by study abroad loans?

Ans. The types of courses funded by study abroad loans differ as on the loan type and lender. Some lenders may accept applications from students applying for Master’s and Bachelor’s courses, PG/UG Diploma courses, as well as Pathway and Foundation courses. Others may only fund degree courses or prefer STEM/Management courses. It is best to check the lender’s regulations before applying.

Q11. What is the eligibility criteria for study abroad loans?

Ans. The eligibility criteria for study abroad loans relies on a few factors, like nationality, age, academic records, proof of admission, financial records, and the co-applicant’s financial background (wherever necessary). The exact requirements vary across lenders, so students should check thoroughly.

Q12. Which documents are required for a study abroad loan application?

Ans. The list of documents required for a study abroad loan varies across lenders, but students and their co-applicants (wherever required) generally need the following documents:

• Complete loan application form with all the borrower’s details

• Recent passport-sized photographs, government ID, and address proof

• Proof of admission (confirmed/unconfirmed acceptance letter) from a recognized University abroad

• Academic documents such as previous qualifications, marksheets, and entrance test scores (IELTS, TOEFL, GMAT, etc.)

• Financial documents such as salary slips, income tax returns, and bank statements

• Collateral documents such as property deeds or FD receipts (wherever applicable)

In some cases, the lender may require additional documents during verification, sanction, or disbursement.

Q13. What is a CIBIL Score? What is the minimum score needed for a study abroad loan?

Ans. A CIBIL score, sometimes called a credit score, is a 3-digit number that sums up the borrower’s creditworthiness. It helps lenders understand how trustworthy the borrower is in terms of financial behavior, so that they can gauge the risk of lending appropriately. The required CIBIL score for international students generally needs to be above 700, although some lenders may accept a score above 650.

Q14. What factors affect the interest rate for study abroad loans?

Ans. The interest rate for study abroad loans is influenced by several aspects beyond the loan type and the lender’s internal mechanisms. These include the type of interest (fixed or floating), market conditions, the student’s chosen University and course, their academic profile, and their credit score. Students can also access exclusive interest rates or concessions based on their profile.

Q15. Are there any interest rate subsidies for study abroad loans?

Ans. Yes, Indian students can access the Dr. Ambedkar Central Sector Interest Subsidy Scheme for a 100% interest subsidy scheme. It is designed for students from minority communities and economically weaker sections of society in an effort to make overseas education loans more accessible.

Q16. Do I get any tax benefits on study abroad loans?

Ans. Absolutely! Under the Income Tax Act, Indian students with an overseas education loan are exempt from paying tax on their interest payments for up to 8 years. This helps them save money in the long run and repay their loan at a quicker rate.

Q17. What is the moratorium period?

Ans. The moratorium period refers to a time during which the student is exempt from repaying the loan amount. This generally applies during the course and up to 6 or 12 months beyond, ensuring that the student can focus on studies and a job search without financial stress. Generally, students are liable to pay simple interest during the moratorium period.

Q18. What is the study abroad loan disbursement process like?

Ans. The overseas education loan disbursement process refers to the movement of the loan amount from the lender to the University account or the borrower’s account. It follows the loan approval process. Once the loan is sanctioned, the student negotiates the final terms and submits the necessary documents. Students can get a pre-visa disbursement in some cases, depending on their student visa requirements.

Q19. How long is the repayment tenure for study abroad loans?

Ans. The repayment tenure for study abroad loans can range from 10 to 20 years, including the course duration. Based on the type of lender, the repayment process can be fixed or flexible.

Q20. Can I prepay my overseas education loan?

Ans. Yes, in some cases. Once the student finds full-time work, they can use strategic saving and repayment techniques to finish their overseas education loan early and save up on interest. Some common strategies for early repayment include making extra payments, refinancing the loan, and using windfalls to reduce the loan amount.

In summary, these study abroad loan FAQs have provided a clear picture of the whole process, from types of loans and lenders to disbursement and beyond. With this, students can resolve the query of how to get an education loan for studying abroad and focus on the loan application. They can also seek assistance from Élan Overseas Education Loans. We provide expert guidance, help students compare lenders and loan schemes, and negotiate for the best possible deal to connect them with their future.