Education Loans without Collateral

Educational loans enable students to enroll in a degree of their choice in India or abroad even if they are having a low budget.

Several banks offer education loans without needing collateral or security for loans up to a specific amount.

Students who might not have the resources to present such collateral will benefit from this.

Here is all the information you need to know about uncollateralized student loans for both domestic and international study.

What is a Collateral Loan?

Education loans are of two types.

Secured loan which is a loan with collateral and unsecured loan that is a loan without collateral.

A collateral loan is where a specific valuable, asset, or property is pledged as security to the lender by the borrower against the borrowed amount.

This is done to safeguard the lender’s interest in case the borrower fails to repay the loan amount and benefits the borrower to get a loan at a low interest rate for a longer tenure.

Salient Feature of Education Loan without Collateral

Here are some of the salient features of education loans without collateral.

Covers a wide range of courses and colleges in numerous countries.

Interest rates for education loans without collateral generally range between 10.50% to 14%.

Students can apply for this loan with the sign of a co-applicant.

These loans come without a holiday period.

Benefits of Education Loan without Collateral

Here is the list of benefits of education loans without collateral.

• Around Rs.40 lakh to Rs.50 lakh of loans can be availed by the student without pledging any security.
• Loans can be availed before admission.
• EMIs are not required to be paid in the moratorium period.
• 100% finance is provided for higher studies.
• Students can also avail top-up loans.
• No pre-payment penalty.
• Flexible repayment option.
• Quick and paperless process.

Eligibility Criteria

Students must fulfil the below eligibility criteria to avail an education loan without collateral.

• After all liabilities and expenses, annual income should be above Rs.4 lakh.
• Co-applicant should have more than 700 CIBIL score.
• For studies in the USA, students must have a GRE score of more than 300.
• For all other countries, IELTS scores should be above 6 or 6.5 bands.
• Parents of the applicant must have their own residential house.

Loan cannot be availed for

• Pathway courses.
• Foundation courses.
• Integrated courses.
• UG degree or certificate courses.
• MBBS degree.
• Pilot Aviation programs.

Documents Required for Education Loan Without Collateral

The following is the list of documents required to avail of an education loan without collateral.

• University offer letter mentioning tuition fees.
• Academic documents.
• Employment documents.
• KYC documents of both applicant and co-applicant.
• Address proof along with an electric bill.
• For salaried co-applicant, income proof to be provided are as follows.
• ITR.
• Form 16.
• Salary slip.
• Salary account detail.
• For business owners, income proof to be provided are as follows.
• ITR.
• Profit & loss account.
• Balance sheet.
• Business registration certificate.
• Business current account.
• Applicant’s saving account details.

Collateral Required for Education Loan

The highest sum allowed for a study loan, according to RBI, is Rs.10 lakh for programs in India and Rs.20 lakh for programs abroad.

According to the rules, collateral security is not needed for loans up to Rs.4 lakh.

Only when the loan surpasses a predetermined sum determined by the bank will collateral and a third-party guarantee be necessary.

Banks Offering Education Loans and Collaterals Required

Here are details of banks that offer education loans and the collateral required.

HDFC Bank

Domestic Education – Up to Rs.30 lakh.

Foreign Education – Up to Rs.45 lakh.

For loans up to Rs.7.5 lakh no collateral is required.

HSBC

Loan up to Rs.5 lakh does not require collateral.

State Bank of India (SBI)

Domestic Education – Up to Rs.15 lakh.

Foreign Education – Up to Rs.1.5 crore.

For loans up to Rs.7.5 lakh no collateral is required.

Punjab and Sind Bank

Domestic Education – Up to Rs.15 lakh.

Foreign Education – Up to Rs.20 lakh.

For loans up to Rs.4 lakh no collateral is required.

IDBI Bank

Domestic Education – Up to Rs.20 lakh.

Foreign Education – Up to Rs.20 lakh.

For loans up to Rs.4 lakh no collateral is required.

ICICI Bank

Domestic Education – Up to Rs.50 lakh.

Foreign Education – Up to Rs.1 crore.

For loans up to Rs.20 lakh (UG) and Rs.40 lakh (PG) no collateral is required.

Bank of India

Domestic Education – Up to Rs.10 lakh.

Foreign Education – Up to Rs.20 lakh.

For loans up to Rs.7.50 lakh no collateral is required.

Lenders

Loan Amount (without collateral).

Interest Rate Range.

Public Banks

Up to 7.5 Lakhs.

Private Banks

Up to 40 Lakhs.

10-12%.

NBFCs

Up to 40 Lakhs.

10-18%.

Foreign Lenders

Up to 80% of total expenses.

10-16%.

The repayment period and interest rates for public banks and NBFCs may vary and it is advisable to check with the specific lender for accurate information.

How to Apply for an Education Loan Without Collateral

Here is a step-by-step guide for the application process to apply for an education loan for abroad studies without collateral.

Step 1: Choose the most suitable overseas education loan without collateral security for your needs.

Step 2: Thoroughly review all the loan information, including the moratorium period, repayment tenure, interest rates, and any special provisions offered by the Indian government for education loans for studying abroad.

Step 3: Visit the official website of the selected lender that provides the education loan you wish to apply for.

Step 4: Fill out the application form on the lender’s website. Provide accurate and complete information as required.

Step 5: Scan and upload the necessary documents as specified by the lender. These documents may include academic records, admission letter, financial statements, and any other documents requested by the lender.

Step 6: After completing the application and uploading the required documents, submit the application form.

Step 7: Wait for the lender’s decision on your loan application. The processing time may vary depending on the lender, but typically you will receive a response within a certain period.

FAQs on Education Loans without Collateral

What are the different types of education loans that are provided?

The two different types of education loans that are provided are secured and unsecured education loans.

What are the factors that are considered when providing an education loan without collateral?

The two different factors that are considered when providing an education loan without collateral are the future income of the co-borrower and borrower along with their creditworthiness.

Would there be any processing fee levied for availing an education loan without providing collateral?

Yes, a processing fee may be levied for availing an education loan without collateral. Depending on the lender, the processing fee will vary.

What are the advantages of availing an education loan without proving collateral?

The advantages of availing an education without providing collateral are mentioned. Quick processing time. Paperwork is less.

Are the interest rates higher for education loans without collateral?

Yes, lenders levy higher interest rates for education loans without collateral, as the lenders do not ask for anything as security to safeguard their interest in case the borrower fails to repay the loan amount.

What are the types of collateral accepted from the borrower?

The types of collateral accepted by the lender are non-agricultural land, fixed deposit, life insurance, bungalow, flat, house, and others.

What are the factors on which collateral values depend on?

The collateral values depend on the creditworthiness of the co-borrower, academic history of the student and reputation of the institute.

Which banks can you approach to get a collateral free education loan?

Most of the private and public banks provide collateral-free education loans. You can get up to Rs.7.5 lakh loan from public banks, whereas private banks provide collateral-free education loans up to Rs.40 lakhs. Apart from this, there are various NBFCs which provide education loans without collateral.

What is the loan procedure for a collateral-free education loan?

It is very easy to apply for a collateral-free education loan. First, you need to fill out the online application form and submit it to the bank’s official website. The bank will check your online application and will get in touch with you for further steps.

What to do if you don’t have any collateral?

In such a case, you need to pledge a security like your fixed deposit, property, shares, or bonds.

Will I be charged a processing fee to get a collateral-free education loan?

Usually, public sector banks do not charge any processing fee for collateral-free education. However, private sector banks charge up to 1% of the loan amount as a processing fee.

I want to pursue MBBS abroad. Can I apply for a collateral-free education loan?

Yes, you can apply for a collateral-free education loan if you wish to pursue MBBS abroad.

What are the documents needed to apply for a collateral-free education loan?

To apply for a collateral-free education loan, you need to submit documents like university offer letter, income proof of the family, academic records, birth certificate, PAN card, Aadhar card, bank statement, address proof, duly filled loan application form, and self-declaration.

What is a collateral education loan?

In a collateral education loan, you need to pledge a collateral as a security to get an education loan.