Indeed, embarking on a higher education journey, particularly abroad, can be rewarding. However, an important concern for students revolves around financing their education. With a 5.1% inflation rate across emerging nations which are the key contributors to the international student landscape, education costs are escalating year-on-year. Looking at this, a question arises among those aspirants – Do we need to abandon our dreams of studying abroad?
This is where education loans take center stage in addressing this issue. In this article, we explore two primary types of foreign education loan – Loans against property (secured loans) and unsecured education loans. By providing concise information on both loan types, this article aims to help you make an informed decision on which loan may be suitable to cover your educational costs.
Types of Financing Options for Your Abroad Studies
Let us cover both types of loan options for your abroad studies, and also talk about the features of each one of them.
1. Loan Against Property (Secured Loans)
If you are considering a loan for higher education abroad every bank can provide a Loan Against Property (LAP). This secured loan requires you to pledge a property, such as a plot, commercial shop, flat, etc. as collateral security. The sanctioned loan amount can go up to 100% of the total applied amount, depending on the bank. One can avail of LAP for part-time, full-time, or vocational training at both bachelor’s and master’s levels of studies in all major study areas. Let us look at some of the notable features of Loan Against Property or secured education loans,
Features of Loan Against Property (Secured Loans)
- Lower Interest Rates: As you have your assets to keep as collateral, the banks whether be nationalized or private, provide you loans at comparatively low-interest rates.
- High Amount Financing: Depending upon the factors like total loan amount for your higher studies abroad and your collateral’s market value, your bank, etc. the sanctioned amount could be up to 100%.
- Tax Benefits for Loan Takers – In this type of loan, the applicant or co-applicant can avail of tax benefits on interest paid.
2. Unsecured Education Loan
This is a collateral free education loan for abroad studies. The category of unsecured loans removes the need for any property to be pledged as collateral. The bank’s assessment of risk hinges on elements within the candidate’s academic profile, including test scores, the reputation of the university, and the degree’s recognition for future job prospects. After a thorough examination of your profile, banks and financial institutions offer education loans of up to ₹60 lakhs to support your overseas education journey. Some of the notable features of an unsecured education loan are listed below,
Features of an Unsecured Education Loan
- Simplified Documentation Process: When initiating an unsecured loan application, rest assured that the documentation process is simplified and minimal. You only need to present essential documents, including your identification proof, address proof, and property-related documents.
- Quick and Easy Disbursement: there is no collateral document verification needed, the disbursement of the loan amount from the bank is quick.
- Shorter Repayment Periods: Unlike a Loan Against Property, this loan type comes with shorter repayment periods, resulting in higher EMIs. Consequently, one needs to keep restraint on monthly expenses during the repayment duration.
In conclusion, we believe that this article serves as a valuable resource for making an informed decision on the most suitable overseas education loan type for you. It is crucial to emphasize that regardless of the overseas education loan you choose, timely repayments are essential. Non-payments can negatively impact your CIBIL score, diminishing the possibility of securing substantial loans in the future.
In addition to loans, explore opportunities like paid assistantships, internships, and government-backed scholarships, such as national overseas scholarships, etc., to ease financial burdens. To gain a comprehensive understanding of finances and scholarship opportunities, consider seeking guidance from a nearby overseas education loan advisor.