What’s the Procedure to Apply for Education Loan in India for Study Abroad Without Collateral?

To get a loan from a lender, generally, you’ll have to pledge security such as fixed deposits, house property, bond, shares, etc. to take an overseas education loan in India. This is done so that if you default on the loan, lenders can recover it by selling the pledged security called collateral. However, you can attain an education loan without collateral.

Procedure to apply for education loan in India for study abroad without collateral

Before applying for an education loan without collateral, you must know that the student is the primary borrower of the education loan and parent, sibling or spouse can be the co-applicant. Banks generally ask for the co-applicant details when you apply for a collateral-free education loan in India for study abroad. Further, the banks will ask for the income documents such as income-tax returns (ITR) or salary slips of the co-applicant before sanctioning the education loan without collateral.

As per the guidelines of Reserve Bank of India (RBI), there are no limitations on the upper age limit, but a few banks may have it as per their internal rules and regulations. To apply for an education loan in India for study abroad, you should be an Indian citizen with a secured admission into a college/university that’s recognised by a competent authority such as a NAAC/NBA accredited institutions or programmes or Central Funded Technical Institutions (CFTIs) or Institutions of National Importance in India or abroad.

The lender will need the admission letter of the university or college with the fee structure of the course that you’ve applied for the education loan without collateral. Apart from this, lenders may need documents such as mark sheets of Class X, XII and graduation, if applicable. When your education loan in India for study abroad gets approved, the lender will disburse the amount directly to the university as per the given fees structure.

Points to Remember

All students taking education loan without collateral, also get a one-year moratorium for repayment after completion of their studies. Lenders can give a relaxation of about a year to start repaying the loan after the end of their education. As per the tax deduction benefit under Section 80E of Income Tax Act, the interest paid on the education loan in India for study abroad is available only when you have taken the loan from an eligible institution/trust as per the prescribed rule or a financial institution operating under the Banking Regulation Act, 1949.

So, when applying for an education loan without collateral of over INR 7.5 Lakh from the non-qualified institutions, you miss out on the tax deduction benefit under the Income Tax Act. Usually, a repayment period of education loan is 15 years. Try repaying the loan amount at the earliest to avail the tax deduction benefits that last for eight years only.