When Should You Apply for an Education Loan?

If you are preparing to study abroad, a crucial point of concern, and in many cases, the deciding factor, can be your financial readiness. Especially if you are targeting study-abroad destinations like the USA and the UK, you will need to arrange for funds before you can start planning your admission. However, the question that remains is when you should ideally start applying, eligibility, and how to apply for an education loan.

In this guide, we will give you a short overview of education loans to study abroad.

What Is An Education Loan  For Abroad Studies And How It Can Help?

An education loan is money borrowed to cover expenses like tuition fees, books, and living costs while studying. It helps students manage the financial burden of education. Typically, repayments don’t start immediately. You get a grace period, which allows you to defer payments during your course and for six months after graduation.

This gives you time to find a job and become financially stable before starting to repay the loan. Some loans may require collateral for larger amounts. Education loans make higher education more accessible, allowing you to remain focused on studies without worrying about immediate financial constraints.

Now, to the important question:

Most banks ask for proof of admission when sanctioning your loan requests. In that case, you will obviously have to wait till you hear back from your school of choice. A few schools may also need your proof of solvency leaving you with little time to apply for and secure funds from an education loan. Hence, when applying to any program, check their requirements properly and accordingly plan your application.

A safe bet would be to start applying for loans as soon as you send in your program application. Thus, you will be ready with the funds as soon as you hear back from your school and even start the process as soon as you receive your admission offer. This is, however, applicable only in cases when schools don’t require proof of funds at the time of application. If that is the requirement, you will obviously have to apply well in advance to receive the loan sanction letter before the application deadline.

Hence, if you are comfortable taking loans from these NBFCs, you should apply for an education loan before sending your study abroad application to your program of choice. This will ensure your funds, helping your school of choice make a more informed decision regarding your solvency.

How to Get An Education Loan For Abroad Studies?

To get a loan for studying abroad, follow these essential steps:

1. Check Eligibility: Make sure you meet the bank’s requirements, like being an Indian citizen, having a good academic record, and getting admission to a recognized university abroad.
2. Secure Admission: Get an official admission letter from a university abroad. You will need this for the loan application.
3. Pick a Bank or Non-Banking Financial Company (NBFC): Look at different banks offering education loans. Compare interest rates, loan amounts, and repayment plans. Pick the one that fits your needs.
4. Gather Documents: Collect all the required documentation, such as your admission letter, passport, academic records, PAN card, income proof of your co-borrower (usually a parent), and proof of address.
5. Apply for the Loan: Fill out the loan application form and submit it with your documents to the chosen bank.
6. Loan Assessment: The bank will review your financial and academic details to decide the loan amount and interest rate.
7. Loan Disbursal: Once your loan is given approval, the amount will be given to you in installments according to your university’s fee schedule.

Before applying, check for any extra fees or conditions that could affect your loan. Some banks may also require collateral for larger loans.

Eligibility Criteria for Education Loans for Study Abroad

To apply for an education loan to study abroad, you’ll need to meet some basic requirements. While each bank has its own guidelines, here are the common criteria:

• Indian Citizen: The applicant must be an Indian citizen.
• Age: If you’re under 18, a parent will need to apply on your behalf.
• Good Academic Record: Banks usually prefer students with strong academic backgrounds.
• Admission to Recognized Institution: You should have an admission offer from a reputable university or college abroad.
• Type of Course: Banks generally favor courses with good job prospects, like technical or professional programs.
• Co-Applicant: A co-applicant, usually a parent or guardian, may be required to apply with you.
• Bank’s Underwriting Norms: Banks will review loan security, loan amount, and set interest rates based on their policies.

Each bank may have specific conditions, so check the exact requirements for the bank you’re applying to.

Documents Required to Apply For Education Loans

To apply for education loans to study abroad, organizing your documents well can help prevent delays. Here’s a simple checklist of what you’ll need:

For the Student:

• Identity Proof: PAN card, passport, or Aadhar card.
• Residence Proof: Aadhar card, utility bill, or passport (required for studies abroad).
• Academic Documents: Mark sheets (10th, 12th, and graduation if needed), entrance exam scores (GRE, GMAT, TOEFL, IELTS, etc.), and proof of admission (offer of admission letter).
• Study Costs: A document outlining your study expenses.
• Photographs: Two passport-size photos.
• Bank Statements: Last 6 months’ statements (if you have any previous loans).
• Loan Application Form: A complete loan application form.
• Collateral Documents (if needed): Property title deed, building plan, and a no-objection certificate (NOC) from the builder or society.
• Education Loan Sanction Letter: If you’ve already been approved for a loan from another bank.
• Additional Security Documents: Documents for any extra security you’re offering, such as Fixed Deposits or other investments.

For the Co-Applicant:

• Identity Proof: PAN card, passport, or similar.
• Residence Proof: Proof of address (matching the student’s residence proof).
• Photographs: Two recent passport-size photos.
• Bank Statements: Statements from the last 6 months (if needed).
• Income Proof:
  • For Salaried Co-Applicant: Salary slip, Form 16, income tax returns, and bank statements for the last 6 months.
  • For Self-Employed Co-Applicant: Business address proof, income tax returns, TDS certificate, and bank statements.

It’s always best to check the official website or visit the bank or NBFC branch to confirm the specific documents required to apply for education loans.

Things to Keep in Mind Before Applying for an Education Loan

When applying for an education loan, it’s essential to keep certain factors in mind to ensure a smooth process. Here’s a list of important things to consider:

1. Loan Amount: Calculate the amount that you need to take out an education loan to study abroad. This should include the tuition fees, travel costs, accommodation costs, emergency funds, and also provision for a scholarship if you plan on applying for one.
2. Interest Rates: Compare fixed and floating rates across lenders, as rates can impact the total repayment amount.
3. Repayment Terms: Check repayment options, including any grace period after graduation, and choose a tenure that fits your future plans.
4. Eligibility: Confirm you meet all requirements, like academic criteria, admission to a recognized institution, and co-signer if needed.
5. Collateral: Some loans may need collateral, such as property or a fixed deposit, so be sure you can provide it if required.
6. Processing Fees: Be aware of any extra fees, including processing or prepayment charges.
7. Loan Disbursement: Understand if the loan amount will be paid directly to your school or to your account.
8. Credit and Co-Signer: If your credit history is limited, a co-signer (like a parent) may be needed, which can also affect interest rates.
9. Tax Benefits: Some loans offer tax deductions on interest, so explore any available tax advantages.
10. Lender’s Reputation: Check reviews and feedback on the lender’s customer service and transparency.
11. Approval Time: Apply early to avoid delays, especially if you need the funds for tuition or living expenses.
12. Prepayment Options: Look for loans that allow early repayment without penalties to save on interest.
13. Loan Insurance: Some lenders offer insurance for added protection—understand its benefits before deciding.
14. Portability: If studying abroad, ensure the loan is usable across countries.
15. Future Job Prospects: Pick a loan amount and plan that you’ll be able to manage with your expected salary after graduation.
16. Government Schemes: Some government schemes may offer lower rates or benefits, so check if you’re eligible.
17. Top-Up Loans: Ask if the lender offers extra funding options for emergencies or project expenses during your studies.

Manya – The Princeton Review Advantage

To learn more about securing an education loan for studying abroad, you can also get in touch with the expert advisors at Manya – The Princeton Review.

Manya – The Princeton Review offers end-to-end study abroad services encompassing admissions consulting services, test preparation, English language training, career assessment, and international internship opportunities to study abroad aspirants. Manya, started in 2002, has helped over 4 lakh students like you make their study abroad dreams come true. With 47+ centers across India, they’re ready to guide you every step of the way.

Manya has formed long-lasting global alliances with several market leaders in the education industry in order to maximize the benefits of its large service portfolio. Their list of esteemed partners and affiliations includes – The Princeton Review (TPR), Cambridge University Press (CUP), Cogito Hub, British Council, and Tuding, to name a few. Manya has teamed up with over 600 universities worldwide, offering you many options for studying abroad.

Frequently Asked Questions (FAQs)

Can I apply for an education loan before getting an admission offer?

Yes, some lenders let you apply for a loan even before you get admission, especially if you have a conditional offer. But, you will need to show proof of admission before the loan is given.

How does my course and country choice affect loan approval?

Your course and the country where you’ll study can affect your loan. Some lenders may have rules for specific courses or countries, especially if the cost of living is higher or if the job market is uncertain.

Can I use an education loan for living expenses abroad?

Yes, it can cover not only tuition fees but also living expenses like accommodation, food, and travel. This depends on the loan amount and the lender’s terms.

What happens if I don’t start paying back my loan right after graduation?

Most loans give a grace period before payments start. If you delay payments after this period, you may face penalties, higher interest rates, or damage to your credit score.

Can I change lenders after my loan is approved?

Once your loan is approved, it’s hard to switch lenders. However, you may be able to refinance the loan with another lender to get better terms, though this could come with extra steps and fees before you can begin studying abroad.