Educational loans have become a provision for students who cannot afford to study abroad, but have mindful of the meaning of education. In order to help such deserving students, RBI introduced the concept of study loans from banks that have also collaborated with institutions overseas to provide financial aid.
An education loan for study abroad without collateral is a loan policy where the candidate does not need to furnish security along with the loan submission. The major determinant of the loan approval in unsecured loans is the co-applicant’s monthly income, credit history, and the course, college, and country chosen by the student.
An education loan without collateral for studies overseas has made funding for further education hassle-free. Many aspirants get into their dream institution without collateral and are able to accomplish their goals. Several banks and private firms have now come up with innovative strategies to simplify education loans without collateral with low-interest rates and easy repayment options.
If you are also looking for an unsecured loan to study abroad, here are the top 6 things you should keep in mind while looking for an educational loan without collateral:
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1- Co-applicant should be your immediate family member
In the eventuality where the loan applicant defaults to repay the education loan within the scheduled time banks may turn to the co-applicant for the same. The co-applicants are also called co-borrower or co-signer, all refer to the same individual. The co-applicant by no means should be a minor. Most banks allow a few specified relatives to be co-applicants – brothers, parent, and son, and husband and wife, etc.
2- Co-applicant’s financial history is an important determinant of loan approval
As there is no collateral or security involved, the co-applicant’s financial history becomes an important determinant of loan approval in the case of unsecured loans. This is to ensure that the installments will be paid on time.
For non-salaried co-applicant’soccupational address proof (if any), IT returns for last 2 years (if any), TDS Record (Form 16A, if related), certificate of education (in case of C.A. / doctor or any other specialized field), and bank account report for past 6 months have to be submitted. For salaried co-applicant, salary proof of the last 3 months or and a corresponding salary statement is needed along with a copy of Form 16 of the past 2 years. A copy of IT returns for the last 2 financial years and a bank account statement for the last 6 months of the account in which the salary is credited are also required to be submitted to the lender.
3- The interest rate is higher than secured loans:
The interest charges are 1.5% – 4% higher than the secured loan based on the applicant’s profile. There are other funding institutions that can offer the same for a lower price. In Cred is an NBFC that offers education loan schemes without collateral up to INR 40 lakhs and in certain exceptions, the amount can be increased.
4- The repayment tenure is lesser than secured
The repayment for unsecured education loans borrowed from renowned NBFCs begins once candidates receive the first disbursement of their education loan. NBFCs need students to make their interest payments during the moratorium period. After the completion of studies, in general, students get 7-10 years to repay their unsecured loans. Whereas in secured loans, the repayment tenure can go up to 15 years.
5- You will have to pay some amount during your study period
The good news is that NBFCs accept the part payments of interest during the moratorium period. For instance, if you are being charged a monthly interest of Rs.5000 per month during your moratorium period and you are unable to pay that amount, NBFCs allow you to pay only Rs.2000 to Rs.3000, depending on their policies.
6- Not all courses get unsecured loans
All courses do not come under the bracket of unsecured loans. It is ideal to check with the banking institution if you intend to procure the same. Find out details like the amount you qualify for and if it matches the figure you are looking out for. Moreover, you may also want to decide how much interest you will be paying before the EMI hits in.
It is important to note that only private banks and NBFCs will be able to give you unsecured education loans of more than INR 7.5 Lakhs. If you are also looking for an unsecured loan unable to understand the nitty-gritty of it, it is recommended to consult any education loan consultant. With a little bit of homework and expert consultation, you can get a study loan without collateral devoid of any major hassle.