Foreign Education Loan Bina Collateral Ke

Welcome to the viewing of the 3rd episode in the Loanflix web-series. This episode will mainly focus on details about how unsecured education loans work. This episode highlights the process an abroad education loan without collateral.

Loanflix is the most comprehensive web-series on abroad education loans. The motive is to empower students and their guardians so that they can take an informed decision about the education loan.

An unsecured education loan or an education loan without collateral is majorly given by private financial institutions to students in need. This episode will give you information about an education loan without collateral with the help of the following points.

What is an unsecured loan?

A loan that is given by any private or nationalized bank without any security is called an unsecured loan. Unsecured loans or non-collateral loans are approved on the basis of factors like the applicant’s future earning potential, co-applicants income profile, etc.

What are factors are considered to be eligible for an education loan without collateral?

Unsecured loans or non-collateral loans are approved on the basis of factors like the applicant’s future earning potential, co-applicants income profile, etc

Who can approve an unsecured loan?

Unsecured loans are approved by both nationalized banks as well as NBFCs(Non- Banking Financial Companies). However, nationalized banks are less keen on approving loans without collateral. Hence that leaves you with the remaining option- NBFCs. There are majorly four NBFCs that provide aspirants with unsecured education loan functioning in India at present: Credila, Avanse, Incred and Auxilo in the order of their age in the market. 

What is the eligibility criteria for an unsecured education loan?

There are two factors that are taken into consideration to be eligible for an unsecured education loan:

Academics- GRE score is the most important factor for US cases. Ideally, a GRE score of 300+ is advised. GRE scores below 290 mean extremely low chances of getting this loan. Other scores like 10th, 12th, IELTS, hold value for candidates who have opted for countries other than the US.

Co-applicants profile:  The Co-applicant has to be a blood relative i.e. Parents, siblings or parent’s siblings like a maternal uncle or a paternal aunt. Financial institutions accept cousins as co-applicants in rare situations. To do so, the banks may ask for proof of their relationship with the applicant. A spouse is not acceptable as a co-applicant by NBFCs but public banks do accept it.

The following factors are considered when it comes to the co-applicant.

Income:  The Co-applicant should have a decent income with clear proofs(eg. Salary slip) It will be beneficial if the co-applicant is a salaried employee. If they are self-employed, all documents related to the business will be required.

Income Tax Returns: It is mandatory to present the co-applicant’s Income Tax returns of a minimum of two years.

CIBIL (Credit Information Bureau of India Limited) score: For an unsecured loan, a good CIBIL score is mandatory. It must not be less than 685 (for NBFCs) and 700 (for Govt. Banks). 

How much amount is approved without collateral?

As of now, nationalised banks give a maximum amount of Rs. 7.5 lakhs for abroad education without collateral.

If the student is planning to pursue his/her higher education in the US, NBFCs approve loans of up to Rs. 50 Lakhs. However, the average amount approved by them is Rs. 35-40 lakhs.

For countries like Germany, the maximum amount approved is Rs. 20 lakhs, For Australia and Ireland it is Rs. 15 lakhs, and for Canada, the amount is up to Rs. 25-30 Lakhs. For the rest of the world, one can get an unsecured loan approved only if one is going to a reputed university, and the limit is Rs. 30-35 lakhs.

What is the Rate of Interest?

The rate of interest provided for an unsecured loan depends on whether it is approved by an NBFC or a nationalized bank.

Nationalized banks: The rate of interest offered by a nationalised bank varies from one bank to another. But the general RoI is 10.5%.

NBFCs: The Rate of Interest provided by NBFCs depends on the country that a candidate plans to go to. It starts from 10.5% to 10.75% and can go upto 14%.

Which are the eligible countries?

Both nationalised banks, as well as NBFCs, primarily approve unsecured loans for a select list of countries. It includes the US, Canada, Germany, Ireland, Australia. For other countries, only candidates who have applied to top universities are considered for an unsecured loan.

What is the processing time?

An unsecured loan takes lesser processing time as compared to the processing time for a  secured loan, as it does not involve the procedure of legal verification and property valuation. The average time taken is seven to fifteen days for NBFCs. For nationalised banks, the processing time is unpredictable. 

What are other factors to be considered while applying for an unsecured loan?

Another major aspect to be considered while applying for an unsecured loan is that NBFCs do not operate in smaller cities and conflicted areas like J&K and the North-East regions of India. For exceptional cases where a candidate’s profile fits all criteria for an unsecured loan, NBFCs agree to approve an unsecured loan provided that someone who stays in one of the metro cities is ready to act as guarantor to the candidate.

Which streams(trade) are considered for an unsecured loan?

Nationalized banks do not have a restriction for the chosen field of higher education, however, fields belonging to the STEM (Science, Technology, Engineering and Math) category are preferred. 

NBFCs provide unsecured loans only for Masters programs; preferably those in the STEM category.

We hope this brief run has given many of you a rough idea on what is to be expected when applying for an unsecured loan. For more details, please watch our web-series “Loanflix- Abroad Education Loan without Collateral.” The web-series will cover all the points discussed above in-depth. 

Also, stay tuned for our next video on  Documents requirement for abroad education loan with collateral, where our experts will be talking about the list of documents that are required for a secured abroad education loan.