Are you looking to pursue higher education abroad but cannot provide collateral for an education loan? You might wonder, ‘Can I get an education loan without collateral?’ Yes, you can! An education loan without collateral is a great way for students to finance their education without providing any security against the loan amount.

Student loans serve as great financial aid to students who want to pursue higher education abroad. If it weren’t for education loans, millions of students would never have made it to their dream universities. However, many students cannot pledge collateral as security to get a study abroad education loan. Hence, these students rely on unsecured education loans to fund their education abroad.

In this article, we will cover all about non-collateral loans, including the eligibility criteria, process, and how to apply for a foreign education loan without collateral. We have also covered the factors affecting unsecured education loan approval.

What is an Education Loan Without Collateral?

An education loan without collateral, also known as a non-collateral education loan, is a type of credit offered by financial institutions, such as banks and NBFCs,  to help students cover their educational expenses. An unsecured education loan, unlike secured loans, doesn’t require the applicants to provide any collateral as security for the loan amount. Financial institutions offer these loans based on the income and credit score of the applicant and their financial co-applicant. 

Also Read:  Collateral Education Loan for Abroad Studies

Differences between Collateral and Non-Collateral Education Loans

 Loan Parameter  Education Loan with Collateral Education Loan without Collateral
 Loan Amount Offered  Up to 3 Cr (Based on the value of the collateral) Up to 1.25 Crores 
Interest Rates Starts from 8.15% Starts from 10.15%
Lenders  Both Public and Private Lenders Both Public and Private Lenders(Mostly offered by Private banks and NBFCs)
Processing Time  It can take up to a month to process Can be processed within a week 

The above-mentioned interest rates can vary based on various factors, including the repo rate, creditworthiness, and the lender. To know the exact interest rate you can get on an education loan, get in touch with us so that one of our experienced financial officers can connect with you to analyze your profile and provide you with the information. 

Can we get an Education Loan without Collateral?

Yes! You can get an education loan without collateral by meeting the eligibility criteria of the lender. Students planning to pursue higher education from reputed universities in India or abroad can apply for an education loan without collateral in India. Private lenders in India, such as Private Banks and NBFCs, are more specialized in offering unsecured loans to students, especially abroad education loans without collateral.

You can apply for a foreign education loan without collateral to pursue undergraduate, post-graduate, and doctoral programs from well-recognised institutions abroad. As there is no collateral involved in the loan, lenders often have strict eligibility criteria for education loans without collateral in India, which we will discuss further in this article. 

The eligibility criteria for an unsecured education loan vary from bank to bank, which we will discuss further in this article. 

Both public and private lenders offer unsecured study abroad loans. However, these lenders offer varying terms for unsecured education loans. Request a callback from us or comment down your queries to know which lender would be perfect for your profile to take an education loan.

Benefits of an Education Loan without Collateral in India

  1. No need for Collateral: These loans do not require the applicants to pledge their properties, such as a house, land, fixed deposits, etc, to secure the loan amount.
  2. Broad range of applicants: These loans cater to the needs of students from all backgrounds, and are available for both studies in India as well as abroad.
  3. High Loan Amounts: Many lenders offer higher loan amounts for abroad education loans without collateral. These funds can be used to cover various expenses associated with education, including tuition fees, living expenses, purchase of books, and a laptop etc.
  4. Quick process: Unsecured loans are processed faster than secured loans, since there is no collateral in the loan.
  5. Tax Benefits: Under Section 80E of the Income Tax Act, applicants can claim tax on the interest paid on education loans for up to 8 years.

Education Loan without Collateral Eligibility Criteria

  1. Citizenship: To secure an abroad education loan without collateral, both the applicant and the co-applicants have to be Indian citizens.
  2. Admission Status: The student should have secured admission to the university.
  3. Academic History: Students are to have a good academic history with at least a 50% score in their previous academic records.
  4. Co-applicant Profile: The co-applicant should meet the income and CIBIL score requirements of the lender. Since there is no collateral involved in the loan, lenders thoroughly assess the income and creditworthiness of the financial co-applicant.
  5. Recognized University: The university that the student is going to should come under the recognized list of universities of the lender.
  6. Course/Degree: Lenders consider the course you are choosing to study. Courses like UG and PG in STEM disciplines are preferred over courses like Public Policy or Aviation.
  7. Age: Students should be aged between 16 to 35. And, private banks typically don’t accept co-applicants aged more than 60 years or nearing their retirement age. However, these criteria differ from bank to bank.

If you are still confused about the eligibility criteria for an unsecured loan, feel free to comment on your questions below.

Banks offering Abroad Education Loan without Collateral to Students

Many lenders offer foreign education loans without collateral to students pursuing education abroad. The following are the prominent lenders that can offer unsecured education loans to students:

Unsecured Study Abroad Loans from Public Banks in India

Most public banks in India offer an unsecured education loan of up to ₹7.5 lakhs under the CGSEL Scheme. Apart from this scheme, you can also obtain a higher loan amount without pledging collateral, depending on the bank. The State Bank of India (SBI), one of the leading public banks in the country, can offer up to 50 lakhs for a foreign education loan without collateral, depending on the university of the student.

Private Banks  Abroad Education Loan without Collateral 

Private banks can offer education loans of up to 1 crore rupees to study abroad without collateral. They are known for their higher loan amounts and strict eligibility criteria for education loans without collateral. These banks have a list of recognized universities, according to which they approve unsecured study abroad loans.  Unsecured education loans from private banks can fund both PG and UG programs.

Unsecured Education Loans from NBFCS 

NBFCS refer to the non-banking financial companies in India that offer unsecured education loans in India. They are more specialised in offering an abroad education loan without collateral to students. You can get an education loan of up to ₹1.25 crores without collateral through NBFc. Similar to private banks, NBFCS offer higher loan amounts and have strict eligibility criteria for unsecured study abroad loans.

Foreign Lenders Offering Unsecured Study Abroad Loans

  • Apart from lenders in India, you can also get an unsecured study abroad loan from international lenders such as Prodigy and Mpower Finance.
  • These lenders offer student loans in foreign currency, which means that students can avoid currency conversion charges.
  • You can get an unsecured education loan from foreign lenders even without a co-applicant, as they provide loans based on the future earning potential of the students. 

Comparison of Lenders Offering Unsecured Education Loans

Here is a comparison of unsecured student loans from different lenders:

Loan Parameter Public Banks Private Banks NBFCs Foreign Lenders
Loan Amount Up to ₹50 lakhs Up to ₹1 crore Up to ₹1.25 crores Up to USD 1,00,000
Interest Rate Starts from 8.15% Starts from 10.5%  Ranges from 11%  12% to 14%
Processing fee  ₹10,000 plus GST 1% to 2% of the loan amount 1% to 2% of the loan amount  5% of the loan amount 
Repayment Tenure Up to 15 years  Up to 15 years  Up to 15 years  Up to 20 years 
 Moratorium Period Course duration plus 6 to 12 months Course duration plus 6 to 12 months Course duration plus 6 to 12 months  Course duration plus 6 to 12 months
Co-applicant requirement Yes  Yes  Yes  No 
Currency  INR INR INR USD

How much Education Loan can I get without Collateral?

The maximum loan amount you can get for an unsecured education loan depends on the lender you are taking the loan from. The education loan limit without collateral varies by lender, depending on the eligibility criteria. Below are the loan amounts for unsecured education loans from various prominent banks in India:

Bank/ Financial Institution

Loan amount
State Bank of India Up to ₹50 lakhs
ICICI Bank Up to ₹1 crore
Axis Bank Up to ₹1 crore
IDFC Bank Up to ₹75 lakhs
Credila Up to ₹75 lakhs
Avanse Up to ₹1.25 crores
Auxilo According to the requirement
Incred Up to ₹80 lakhs
International Lenders Up to USD 1,00,000

Expenses Covered Under Education Loans without Collateral

These loans are designed to help students afford higher education by covering various expenses associated with their education. The expenses covered can vary by lender. The various expenses covered under the unsecured education loans include:

  • Payment of Tuition Fees: Unsecured education loans help students cover their entire tuition fee.
  • Cost of Living Expenses: Non-collateral education loans cover the living expenses of the student, including their accommodation costs, such as hostel fees or rent, and food costs.
  • Travel Expenses: These loans can cover travel costs such as flight tickets and transportation, depending on the lender.
  • Purchase of Course-Related Books and Equipment: They also cover the cost of purchasing study materials and course-related equipment, such as a laptop and other academic tools
  • Insurance: When you take a foreign education loan without collateral to study abroad, it is mandatory to take health insurance. Hence, many lenders include health insurance in the expenses as part of an unsecured education loan.
  • Exam Fees: Education loans without collateral also cover the various additional costs, such as payment of exam fees and other miscellaneous expenses.

What Documents are Required for an Unsecured Education Loan

Since collateral is not involved in the loan, lenders thoroughly asses the documents required for unsecured education loans. The documents required to process a non-collateral education loan can vary by lender. The following documents of the student and their co-applicant are required for an education loan without collateral.

  1. KYC Documents:

    Documents proving the identity and address of the student and their co-applicant have to be provided. These can include:
    • A photo ID proof( Aadhar card, Voter Id, Driving license, etc.), 
    • PAN card, and 
    • Passport. 

  2. Admission Letter:

    You should submit an admission letter from the institute stating proof of your acceptance into the university. 

  3. Academic Records:

    You should provide your previous academic records specified by the lender, such as the 10th,12th, and UG marksheets.

  4. Financial Documents:

    Documents proving the income and creditworthiness of the financial co-applicant should be provided. These documents can vary depending on whether the co-applicant is salaried or self-employed.

  5. Additional Documents:

    Lenders can also require other documents such as:

    • Passport-size photos of the applicant and the co-applicant

    • Applicable test scores, such as CAT, IELTS, TOEFL, and GRE.

    • Caste certificate for government schemes

These are the basic documents that lenders require to process an unsecured student loan. And as we have mentioned, the financial documents of the co-applicant vary depending on whether they are working or self-employed. Read our blog about the list of documents required for unsecured education loans to know the exact documents you would need to get an education loan without collateral.

How to Apply for an Education Loan Without Collateral

The following is a step-by-step guide on how to get an unsecured education loan:

  1. Initial Research: First, choose a bank according to your needs and requirements. 
  2. Apply for the Loan: Go to the website of the bank and fill out their application form for an unsecured education loan.
  3. Submit the Documents: Prepare and submit the necessary documents for the loan application, such as proof of admission, KYC documents, and the co-applicant’s income proof documents.
  4. Pay the Processing Fee: You must pay the processing fee to get your unsecured education loan sanctioned on time. Post the payment of processing fees, the sanction letter will be granted to you.
  5. Loan Sanction: After successful verification, the bank will approve the loan and issue a sanction letter with loan details such as the Loan amount, Interest rate, Repayment terms, and Moratorium period.
  6. Sign the Loan Agreement: Carefully check all the terms and conditions mentioned in the loan agreement and sign it.
  7. Disburse the Amount: After the loan agreement is signed, funds are disbursed to the university or the student's account, accordingly.

Things to Consider before Getting an Unsecured Education Loan

Moratorium Period:  

Lenders offer a moratorium period of the course duration plus 6 months to 1 year for education loans. Public banks do not charge interest on the disbursed amount during the moratorium period. However, private lenders do not offer such an interest-free moratorium period to students. Yes, the EMIs start after the moratorium period, but during their moratorium period, students are required to pay either partial or full interest.

Processing Fee: 

Private banks charge up to 1% on the loan amount plus GST, or, it is 15k plus GST. The processing fee can be 1% to 1.5% plus GST on the loan amount for the NBFCs and a minimum of 2% plus GST on the loan amount for the foreign lenders. 

Loan Insurance:

It is not mandatory to have loan insurance with public banks, but it is compulsory for private lenders. It ranges from 1% to 2% of the loan amount for private banks and NBFCS. 

It is to keep in mind that the processing fees and the loan insurance with private lenders are negotiable. Students end up paying more when they approach these lenders on their own, and this can be avoided. Reach out to us by requesting a callback, so that we can provide you with accurate information about all the additional costs and hidden charges that you can avoid.

Common Challenges of Unsecured Education Loan Approval and How to Overcome Them

Apart from failing the eligibility criteria set by the lenders, there are some unwritten rules based on which sometimes lenders reject students' loan applications. The following are the common challenges affecting the chances of approval for unsecured education loans.

  1. Field of Study:

    Private lenders do fund a UG program abroad if the university falls under the list; they prefer funding a PG program more, due to the course duration being shorter compared to a UG program. NBFCS, on the other hand, rarely fund a UG program abroad. They consider funding a UG course only if a student's financial co-applicant has an exceptionally good income source. Foreign lenders do not fund UG programs altogether.

  2. Age of the Applicant and Co-applicant: 

    Yes, age matters for NBFCS. For students older than 30 years, NBFCS are hesitant to offer education loans. NBFCS won't accept the profile if your co-applicant is retired (pensioner or not) or about to be retired in 3 years. 

  3. FOIR Norms:

    A fixed obligation to income ratio or FOIR norm is followed by the banks while lending loans. Private banks reject the loan if your co-applicant does not meet the FOIR norm, which means that the co-applicant's obligations, i.e., the EMIS, are higher than how much they can afford. 

Obtaining an unsecured study abroad education loan on your own can be quite difficult, with various factors affecting the loan approval. WeMakeScholars can help you avoid these challenges. Our financial officers have the experience to solve your issues and help you get the most suitable education loan according to your profile. Request a call back from us so that our team can help you solve your education loan issues. 

How Applying for an Unsecured Study Abroad Education Loan Through WeMakeScholars Can Help

WeMakeScholars is an organization funded and supported by the Ministry of IT, Government of India. Our team is dedicated to providing support to students applying for an education loan. We are partnered with more than 15 public and private lenders to help students get the best education loans according to their profiles. Here are the reasons why you should apply for an unsecured study abroad education loan through WeMakeScholars:

Easy Application Process: Applying for an unsecured education loan through WeMakeScholars is very simple because of its online document portal, where students can upload all of their documents in one place. And the online education loan application procedure provides students with the power of digitization to offer an easy application for the loan.

Personalized Solutions: Our team of financial officers is well-experienced to give you the best guidance while processing your loan. They are dedicated to helping students get the most suitable loan according to their profile. And our services don’t just end with loan sanction, we have a dedicated post-sanction team to help students resolve any issues they can face after their loan is sanctioned. 

Fast Process: Getting an unsecured education loan can usually take a month or even more. However, when you apply via WeMakeScholars, you will get your loan processed within 7 days from private banks and 15-20 days from government banks after all the required documents are submitted.

Customer Support: Even after your loan has been approved, we will assist you with the disbursement and repayment process right up to the last EMI payment.

Negotiation Support: When you apply for an unsecured education loan through us, we can negotiate on your behalf to bargain with the banks & lenders team to get you the best interest rate and other loan terms.

Free of Cost: As WeMakeScholars is a government of India-funded initiative, supported by the IT Ministry under the ‘Digital India Campaign’, we offer our services free of cost to all the students.

Applying for unsecured study abroad education loans can be quite confusing, as various lenders offer diverse loan options. Get in touch with WeMakeScholars for a fast and simple loan process for abroad education, so that our team of experienced financial officers can help you obtain the best education loans for your studies. As WeMakeScholars is funded and supported by the Ministry of IT, Government of India, they offer their services at no cost to students.