EDUCATION LOAN- Secured and Unsecured
Educational loans are a great financial aid to students who want to pursue studies in India or abroad. It helps students pursue their dream of studying and achieving admission in a university. And most important part to fulfill this dream is getting loan form a bank. Banks in India do not generally provide unsecured (collateral free) loans above Rs 7.5L. Premier institutions like IIMs, ISB, XLRI, IITs, BITS etc might be exceptions to the above statement, but apart from these, banks don’t consider colleges for unsecured loans above Rs 7.5L. For pursuing education abroad, the maximum unsecured lending is generally upto Rs 7.5L, except in a few exceptional cases. And most important factor is that this facility is limited to STEM branch student whose destination is US or UK. Unsecured education loan is highly unlikely to be given to a MBBS student when in fact it’s necessary looking at the fee structure private institute imply on our students applying in India.
Educational loans are mainly of two types – secured and unsecured, i.e. educational loan with collateral and education loan without collateral respectively. It is important to understand what is collateral, why is it needed and the difference between the two before making your decision to avail an education loan. For example, Axis Bank in case of MS in US. Axis Bank is the only bank that provides unsecured education loans over Rs 7.5L, specially for MS in US. This is made possible by predicting the future employability potential of the student, considering factors like past academic records, standardized test scores( for example, GRE), work experience and so on. Better the future employability potential, higher would be the loan amount the student is eligible for. However, the maximum amount for the unsecured loan through Axis Bank is limited to Rs 30L in any case.
What is collateral?
Collateral is an immovable property (House, Flat or Land) or any other asset, preferably liquid asset, such as FD, shares, bond etc. that a borrower offers to a financier to secure the loan.
There is also the option of approaching Non Banking Financial Companies (NBFCs) as they may provide higher amounts of unsecured loans. But then, the NBFCs, except one, do not qualify for sizable tax benefits. Also, they generally charge a rate of interest which is about 1-2% higher than the rates given by banks.
Suppose you are applying for Australia. Cost of education in australia is somewhere around 25 to 30 lakhs. Indian banks don’t provide loan to anyone above 7.5 lakhs without any security. Reason being the applicant will be in that particular country (Australia in your case), and there will be no other means for the bank to recover the money. Hence only immovable thing on which they are assured to provide loan is home or shops or FDs. This will insure them that their money will be retuned back to them. This is where the banks get unfair. For STEM selected institutes there is a possibility of unsecured loan of upto 30L, but there is no such arrangement for admission of MBBS students where it is needed the most due to large amount of fee which a middle class family cannot afford.
Like STEM branch, loan for MBBS can also be given with the help of criteria based on past record of the student as explained in an example above. But there has been no such development in the policy by the banks. There are very few good Medical colleges in India and instead of making a fuss about NEET results and making student life miserable, there should be less strained condition implied on loan related to MBBS admission which will make it easier for student to apply easily to there respective favored colleges with equal opportunity provided by the money bank will provide without any collateral for security, as not every students parent has that much property or investment, which then leads to no admission at all.
And specifically speaking about Australia https://gkworks.in/study-and-settle-abroad/study-settle-australia/ (for details click on the link) as a destination for education, banks are not at all aware about the changing trends in the education abroad they still consider only USA universities applicable for unsecured education loan, whereas the fact is student are now applying for Australian universities and banks need to consider some of the universities there to avail unsecured loans. Similarly for MBBS https://gkworks.in/mbbs-admissions/top-destinations-mbbs-course/ (for details click on this link) there are few popular destinations and banks should consider at least the top ten universities in those countries for making it possible for meritorious, middleclass student to get unsecured loan.
Things to know before applying for foreign education loan
Basically, when you apply for a loan, you will be treated as the borrower and your parents or guardians as co borrower. The loan is permitted based on the borrower’s papers. The loan amount or the terms of loans differ from bank to bank. As of the present, Indian banks lend up to a maximum of Rs 20-30 lakhs for studying abroad. It generally covers:
• Tuition fees payable to college/school
• Examination /library /hostel charges
• Travel expenses
• Purchase of books /equipment /uniform
• Cost of two-wheelers (optional)
Repayment of loan
You can repay your loan in the form of EMIs which will start one year after the course or six months after the graduate has got a job, whichever is earlier. The term can be from 3-8 years. Most banks do not require any margin up to Rs 4 lakh and, beyond that, 15 per cent margins are charged.
Considering the various option, even with few condition which make it hard to get a loan, you can always be sure that in some or the other way money can be managed but never give-up on your dream to study abroad, it’s a one time opportunity, give it your everything-take efforts, try your best to keep a good academic record and score well in your respective exams for admit, talk to our experts https://gkworks.in/personal-coaching/ and you will definitely find a match for your financial capacity without any compromise in the quality of education.
Wish you a bright future and let your career prosper!