Education Loan Without Collateral: Student loans are a great financial help for students who wish to pursue their studies overseas without having to put up any education loan without collateral. Millions of students would not have been able to attend their dream institutions if it weren’t for education loan without collateral.
However, not everyone is qualified for an overseas education loan without collateral, since lenders turn too many loan applications down. Read further to know those that are eligible for education loans without collateral.
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What Is an Education Loan?
An education loan is an amount of money borrowed to pay for post-secondary education or costs associated with higher education.
They designed education loans to pay the costs of tuition, books, and supplies, as well as living expenses while a student is pursuing a degree.
It frequently delayed payments while students are in college, and depending on the lender, it may extend for another six months after graduation. A “grace period” is a term used to describe this interval.
Types of Education Loans
Although there are a variety of education loans, they can be broken down into two basic types: federal loans sponsored by the federal government and private loans.
1. Federal/ Secured/Collateral Education Loan
Collaterals are assets that you commit to the lender as a guarantee against your school loan.
Personal real estate, home equity, and personal automobiles can all be offered as collateral. The borrower pledges collateral to take a loan against it.
2. Private/ Unsecured/Non-collateral Education Loan
The borrower is not required to pledge any collateral. However, instead of that, they have to meet certain criteria set by the lending institution like study program, and country, among others.
Eligibility Criteria for a Broad Education Loan Without Collateral
The applicant’s academic background is used to assess his or her “Employability Potential.” In 10th, 12th, and degree classes, a minimum of 60% is needed.
Additionally, students with more than three missed classes may not be eligible for an unsecured education loan.
Income and CIBIL score of financial co-applicant Because no security is required for an unsecured education loan, lenders may rest comfortably that if a student fails to repay the loan, their financial co-applicant will pay on the student’s behalf.
An applicant’s desired course of study or degree. Lenders favor UG and PG STEM courses over Public Policy or Aviation, but never Ph.D., Mbbs, Theology, Tailoring, and other related studies.
The country is also important. With unsecured loans, most lenders focus on large study abroad destinations such as the United States, United Kingdom, Canada, Australia, Ireland, and Germany.
However, they are wary of lesser-known countries such as China, Ukraine, and others.
You’ll be attending university. Private banks maintain a list of colleges for which they will only grant an unsecured loan.
Rejected Loan applications for Unsecured Education Loans
Apart from failing to meet the lenders’ eligibility standards, there are other unwritten guidelines that lenders use to deny student loan applications.
1. Age of the Applicant and Co-applicant
For NBFCs, age does matter. NBFCs are not ready to lend to students above the age of 27. If the other profile characteristics are good, they can consider for up to 30 years.
2. Undergraduate Program
Private lenders will support a UG program overseas if the university is on the list, but they are more likely to decline it at first since they prefer to fund a PG program because the course period is shorter.
3. FOIR
Only private banks adhere to the FOIR regulation, which is a fixed obligation to income ratio.
If your co-applicant does not fulfill the FOIR norm, it simply indicates that the co-responsibilities, an applicant’s i.e. the EMIs, are greater than what he or she can pay.
As a result, when students approach these lenders unaware of these circumstances, they declined their loan.
Students’ loans could have been accepted if they had known who to designate as a co-applicant sooner.
Steps to Apply for an Education Loan Without Collateral via WeMakeScholars
1. Request a callback by visiting our website and clicking the button.
2. Then click Proceed after selecting the area.
3. Fill out the form with the needed basic information, course information, and so on.
4. Within 1-2 working days of submitting your request, you will receive a call from our finance officer.
5. Your financial officer will be able to assist you in selecting the appropriate lender for you after receiving some further information about your education loan needs.
6. Your designated financial officer will provide you a secure connection to a site where you must upload all of the banks’ needed documentation.
7. Once you’ve uploaded all the necessary paperwork, your financial officer will match you with numerous lenders that are most suited to your needs and assist you in getting the best offer possible.
Lenders may ask you to transmit your papers individually by mail or WhatsApp. However, this is discouraged since the confidentiality of the documents is jeopardized.
Instead, request that the lender view them exclusively through the WeMakeScholars portals.
WeMakeScholars is well-known for keeping the documents uploaded by students on our secure connection secret.
Documents Required for an Unsecured Education Loan
Without collateral, education loans for overseas studies might pay for your trip, tuition, living expenses, study supplies, and more.
When you submit the completed loan application form, together with all the relevant papers specified below, the lenders will award you with an unsecured school loan quickly and easily. There are:
- KYC documents
- 2 passport-size photographs of the applicant and co-applicants
- Bank Statement for last 6 months
- Optional – Guarantor Form
- Copy of offer letter of the Institute/university with fees schedule
- Mark sheets / passing certificates of S.S.C., H.S.C, Degree courses, entrance tests like IETLS, TOEFL, etc.
- Income proof of the guarantor or co-applicant/borrower (i.e. salary slips/ Form 16)
The financial co-applicant, particularly their wages, is critical for an unsecured college loan. A co-applicant may be salaried or self-employed, and lenders may need various documentation depending on this.
Banks That Give Education Loans Without Collateral Abroad
There are two categories of lenders who grant education loans without collateral: state banks and private lenders. Non-collateral education loans from private lenders can give a bigger sum.
Public Banks
According to their regulations, public banks like SBI, BOB, and others can only lend up to 7.5 lakhs in student loans without collateral, regardless of the course or nation.
However, SBI offers unsecured student loans up to 40 lakhs for certain of India’s leading universities.
Private Banks
Private banks can provide education loans for up to 40 lakhs for study abroad without requiring collateral.
As previously said, these banks maintain a list of prestigious colleges with whom they only allow unsecured loans.
With an interest rate of 10.5 percent or more, private banks can fund up to 40 lakhs for a PG program and up to 25 lakhs for a UG program.
Non-Banking Financial Companies (NBFCs)
A Non-Banking Financial Company (NBFC) is another alternative for Indian students, as there are four NBFCs in India that offer student loans with no collateral.
NBFCs decide the loan amount based on the students’ choice of a country for the USA they can fund up to 60 lakhs at the interest rate of 11-12%, For Canada -35 lakhs at the interest rate of 12-13%, For the UK- 45 lakhs, Germany- 20 lakhs, Australia- 30 lakhs at the interest rate of 12-13.5%.
Foreign lenders such as Leap Finance, Prodigy Finance, and others can pay up to 80% of your entire expenditures.
Their interest rate is approximately 9.25-16 percent, but because it is based on the London Interbank Offered Rate (LIBOR) rather than the Marginal Cost of Funds-based Lending Rate (MCLR), it reaches around 14-15 percent when translated to INR, making it the most costly unsecured school loan choice.
All the above lenders can provide you with a non-collateral education loan for your study abroad.
There are several advantages and disadvantages to taking for an unsecured student loan that you should be aware of before applying.
Additional Cost
Be mindful of the additional cost listed below:
1. Moratorium Time
A moratorium term is equal to the length of the student’s course plus 6 to 12 months. Students can now opt out of paying their accrued interest on the disbursed amount during the moratorium period by using public banks.
Private lenders, on the other hand, do not provide students with a payment moratorium.
2. Processing Fee
While public banks do not charge a processing fee for an unsecured school loan, private banks charge up to 1% plus GST on the loan amount, with some charging up to $15,000 plus GST.
For NBFCs, the processing charge can range from 1% to 1.5 percent plus GST on the loan amount, while international lenders must pay a minimum of 2% plus GST on the loan amount.
3. Loan Insurance
Loan insurance is not required by governmental banks, but it is required by private lenders.
Private banks pay 1 percent to 1.5 percent of the loan amount, whereas NBFCs pay 2 percent or more.
It’s important to remember that private lenders’ processing costs and loan insurance are negotiable, which is why students who contact these lenders on their own wind up paying more.
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