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International education loan process for Indian students

A comprehensive guide to securing education loans for Indian students pursuing international studies

Pursuing education abroad opens up valuable opportunities for Indian students, providing access to world-class programs, diverse cultures and career growth. The interest in studying overseas remains high, with around 1.2 million Indian students enrolled in institutions overseas during the 2023-24 period and approximately 750,000 of them beginning their studies abroad in 2023. 

To support this growing trend, education loans play a crucial role in enabling students to achieve their academic ambitions at prestigious universities in the USA, Canada and other countries. This guide offers a comprehensive overview of the education loan process for international studies, covering loan types, eligibility and step-by-step application advice.

Why consider education loans for international studies?

Education loans empower Indian students to pursue their dream of studying abroad, enabling them to cover significant costs such as tuition fees, living expenses and other academic-related expenditures. These loans make it possible for students to access prestigious programs without the immediate financial burden.

Benefits Description
Access to prestigious programs Enables students to study at top universities abroad without immediate financial pressure
Flexible repayment plans Offers options like standard and interest-only payments while in university to suit different financial needs
Grace period Includes a postgraduation grace period (e.g. six months) to focus on job hunting, with only interest payments required
Builds credit history Helps students establish a credit history through timely repayment, which can be beneficial for future financial needs
Fixed loan term
 Provides a fixed repayment term (e.g., 10 years) for predictable monthly payments
No prepayment penalties
 Permits early repayment without extra charges, helping reduce total interest costs

What are the types of education loans?

When planning to study abroad, understanding the types of education loans available is essential for Indian students. Education loans are broadly categorized into secured and unsecured loans, each with distinct features and requirements. These loans can be obtained from public and private sector banks, as well as international lenders, each offering unique benefits and terms.

Parameter Secured loans Unsecured loans
Collateral Requires assets like property No collateral needed; more accessible
Loan amount Typically higher due to collateral Based on academic profile and future potential
Interest rate Around 9% to 12% but with collateral 10% to 15%; often includes fixed-rate options
Repayment terms May have conditions Flexible plans, such as interest-only during studies
Eligibility Strong credit history required Focuses on academic merit; cosigner not always needed

What’s the eligibility criteria for international education loans for Indian students?

While all Indian students have access to international education loans, specific requirements can vary between lenders.  Here are the common criteria to keep in mind:

General eligibility criteria

    • Age: Applicants should be at least 18 years old. For those under 18, a parent or guardian must apply on their behalf.
    • Academic record: Applicants who have already started their academic program will generally need to show a minimum GPA (e.g., 2.5 or 3.0) to be eligible for a future semester .
    • Admission status: Students must have secured admission to a recognized or accredited institution abroad, including universities and colleges offering higher education programs.
    • Credit score: A minimum credit score may be required by some lenders for unsecured loans or to secure favorable terms.
    • School selection and course type: Lenders typically have a specific set of schools or geographies that are eligible under their underwriting guidelines. Lenders may also prefer or require applicants pursuing job-oriented technical or professional courses, such as engineering, medicine or management.

Potential underwriting considerations:

    • Income source: For some loans (especially those with cosigner requirements), the income of the applicant(s) should be stable and sufficient to cover loan repayments. Some lenders may specify a minimum annual income requirement (e.g., above INR Six lakhs for unsecured loans).
    • Collateral: Tangible collateral (e.g., property) may be required for secured loans. Some lenders offer unsecured loans based on academic performance and standardized test scores, such as the GRE.
    • Cosigner criteria: Some lenders may need the cosigner to be a close relative or a resident of the loan-originating country.

Documentation applicants typically need to provide:

    • Proof of identity and address (e.g., Aadhaar card, passport)
    • Admission letter from the institution
    • Academic records (mark sheets, degree certificates)
    • Financial documents (bank statements, income proof of co-applicant)
    • Proof of visa application or a valid student visa
    • Any additional documents as specified by the lender

Additionally, students seeking loans without a cosigner or collateral have more accessible options available through certain international lenders, such as MPOWER Financing. MPOWER has eligibility criteria tailored for international students.

Step-by-step loan application process

    • Research and compare lenders.

Evaluate public, private and international loan providers for terms and rates

    • Check eligibility requirements.

Ensure you meet criteria on academics, income, admission status, collateral or co-signer

    • Gather required documents.

Prepare ID, address proof, admission letter, academic records and financial statements

    • Submit the loan application.

Complete the application, either online or in-person, as per lender requirements

    • Attend loan interview (if required).

Some lenders may assess your plans and repayment ability through an interview

    • Receive loan approval.

Approval letter will confirm the loan amount, interest rate and repayment terms

    • Sign the loan agreement.

Review and sign after understanding all terms and conditions

    • Funds disbursement.

Loan funds are disbursed to the institution in installments or lump sum, as agreed

Need help covering the full cost of your education?

Explore MPOWER Financing’s no-cosigner and no-collateral student loans to cover the costs that scholarships might not.

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Interest rates and repayment options

Below is a comparison of fixed and floating interest rates, along with common repayment plans:

Type Description Pros Cons
Fixed interest rate The interest rate remains constant throughout the loan tenure Predictable monthly payments; easier financial planning Generally higher initial rate compared to floating rates
Floating interest rate The rate fluctuates based on market conditions Potential for lower payments if market rates drop Payments can increase if market rates rise

Repayment options

Repayment plan Description
EMI (equated monthly installments) Regular monthly payments of both principal and interest
Interest-only payments Pay only the interest during the study period and grace period, with full payments starting later
Step-up repayment plan Start with lower payments that gradually increase over time as your earning potential grows
Balloon payment plan Smaller payments throughout the term, with a larger final payment due
Graduated repayment plan Payments start low and increase at regular intervals
Income-driven repayment plan Payments adjusted based on income and family size

Final thoughts: Navigating your path to international education funding

Securing an education loan for studying abroad can be a smooth process when approached strategically. By understanding eligibility, comparing lenders and avoiding common pitfalls, students can confidently finance their international education journey and focus on achieving their academic and career goals.

Ready to fund your international education? MPOWER Financing offers no-collateral, no-cosigner loans with flexible repayment options, making it easier for students to fund their education without additional financial stress. Explore MPOWER’s loan solutions and take a step closer to your dream university.

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FAQs

1. How long does it take to process an education loan application? 

The processing time can vary by lender but typically takes between two to four weeks. Completing your application early and ensuring all documents are in order can help speed up the process.

2. What’s the maximum loan amount one can borrow? 

Loan amounts vary by lender. Secured loans from banks often have higher limits, sometimes up to INR 1.5 crore or more, while unsecured loans may cap at lower amounts depending on the student’s profile.

3. Are there specific courses preferred by lenders for education loans? 

Yes, many lenders prefer to fund job-oriented courses such as engineering, medicine and management, as these have higher postgraduation earning potential.

4. Do I need a cosigner or collateral for an education loan? 

Secured loans require collateral, while unsecured loans may need a cosigner unless you opt for international lenders like MPOWER, which don’t require collateral or a cosigner.

5. What’s the typical repayment period for education loans? 

Repayment periods generally range from 5-15 years, depending on the lender and loan terms. Some loans have interest-only payments while in-school and full repayments after a grace period. 

6. Can education loan interest be tax-deductible? 

Yes, under U.S. Section 80E of the Income Tax Act, the interest paid on education loans is tax-deductible, offering financial relief during repayment.

7. How does the loan disbursement process work? 

Loan disbursement usually occurs in installments directly to the educational institution. Some lenders may offer a lump sum payment based on the university’s requirements.

8. What happens if my loan application is rejected? 

If your loan application is denied, review the reasons provided and consider improving your application by adding a cosigner, improving your credit score or applying to different lenders.

Ready to fund your education abroad?

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*Rates as low as 9.99% (10.89% APR). This interest rate and APR includes a 0.25% discount for automatic recurring payments.

DISCLAIMER – Subject to credit approval, loans are made by Bank of Lake Mills or MPOWER Financing, PBC. Bank of Lake Mills does not have an ownership interest in MPOWER Financing. Neither MPOWER Financing nor Bank of Lake Mills is affiliated with the school you attended or are attending. Bank of Lake Mills is Member FDIC. None of the information contained in this website constitutes a recommendation, solicitation or offer by MPOWER Financing or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.

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