Table of Contents
- Types of Abroad Education Loans Offered by Indian Banks
- How are Interest Rates Charged by Indian Banks?
- Interest Rates for Abroad Education Loans from Indian Banks
- Tips to Secure a Lower Interest Rate from Indian Banks
- Frequently Asked Questions
Studying abroad has become a normal trend in India in the last few years. The Bureau of Immigration states the number of Indian students who went abroad was 7.6 Lakhs in 2023. Many of them fulfill their dream with the help of an education loan, as the Indian banks offer flexible loan options to attract more student borrowers. In 2022-2023, around 17.6 k Crore was disbursed by Indian banks for education loans, both domestic and abroad.
Types of Abroad Education Loans Offered by Indian Banks
Indian banks offer study abroad loans with or without collateral. Usually, education loans with collateral have a lower interest rate compared to study loans without collateral.
| Abroad Education Loan Category | Description |
| Secured | Secured education loans are offered on the guarantee of collateral like a plot, a house, a fixed deposit, or a government bond. Students can secure up to 70% – 100% of the collateral value as the loan amount. A third party can also pledge collateral for the student. |
| Unsecured | Unsecured education loans offer funding on the guarantee of a financially sound cosigner with a standard CIBIL score. Many Indian banks offer a high amount to students admitted to colleges listed by them. Otherwise, the loan amount is limited to INR 7.5 Lakhs. |
How are Interest Rates Charged by Indian Banks?
In India, loan rates aren’t fixed. Banks and financial institutions (FIs) set their own “benchmark lending rates” based on the Reserve Bank of India’s (RBI’s) repo rate and reverse repo rate. These RBI rates act like a compass, steering loan rates up or down.
Repo Rate: The rate at which the RBI lends money to banks. Higher repo rate means costlier loans for banks, often leading to higher interest rates for borrowers.
Reverse Repo Rate: The rate at which the RBI borrows money from banks. A lower reverse repo rate discourages banks from parking funds with the RBI, potentially leading to lower loan interest rates.
The RBI adjusts these rates to influence the economy. For instance, increasing the repo rate aims to control inflation by making borrowing more expensive. Conversely, lowering the repo rate can stimulate economic growth by making borrowing cheaper.
Remember, the RBI considers other factors like inflation and economic growth when making its decisions.
Interest Rates for Abroad Education Loans from Indian Banks
The Monetary Policy Committee (MPC) announced on 8 February 2023 that the repo rate was increased by 25 basis points. This makes the current repo rate 6.50% (from the 6.25% that it was earlier).
The reverse repo rate stands unchanged at 3.35%. The Bank Rate and the Marginal Standing Facility (MSF) rate have changed to 6.75%. The Standing Deposit Facility Rate is 6.25%.
- Based on the changes, the current abroad education loan interest rates are 8% – 12% for collateral loans in public and private banks.
- For no-collateral loans, the interest rates vary from 9% – 13% in public and private banks.
Tips to Secure a Lower Interest Rate from Indian Banks
Indian banks offer affordable interest rates for abroad education loans in general. The following tips will help you lower the interest rates further:
- Have a cosigner with a strong financial profile: A cosigner with a strong financial profile can provide the required creditworthiness. With a high CIBIL score and fewer existing debts, chances are higher for lower interest rates.
- Provide high collateral security: For secured education loans, interest rates are influenced by collateral values. If your collateral is of a higher amount, the interest rates can get as low as possible.
- Have a good academic record: Students with a good academic record have better chances of getting interest benefits. For premier institutions abroad, many banks offer special loan products with lower interest rates.
- Explore interest subsidies and tax benefits: The Indian government offers interest subsidies for eligible students. All students who have secured an education loan abroad from an Indian bank can apply for tax benefits under Section 80 E of the Income Tax Act.
Indian banks support your study abroad dream by offering education loan products at affordable interest rates. Carefully read the terms and conditions before you start with the application.
However, the application process includes the hassles of frequent bank visits and documentation. Often, Indian banks take a long time to process your application. Save yourself from the hassles as Nomad Credit smoothens the process for you. With our industry partnerships and experience, we fast-track the whole process and assist you at zero cost. Experience a better loan application with us!
Frequently Asked Questions
How are public and private banks abroad study loans different?
Public banks offer study abroad loans at a lower interest rate than private banks. Mostly, public banks have secured education loans for high amounts, whereas private banks offer unsecured loans of high amounts for listed universities abroad.
Can students get a 100% loan to study abroad from Indian banks?
Most banks offer 70% – 100% of the total cost of attendance in education loans to study abroad.
Can students get up to INR 40 Lakhs without collateral from Indian banks?
There are banks in India offering up to INR 40 Lakhs for study abroad loans without collateral. The student’s course of study and institution abroad must be listed by the bank.
What is the minimum CIBIL score for study abroad loans from Indian public banks?
750 – 900 is the minimum CIBIL score for study abroad loans by Indian banks. The cosigner must have the minimum CIBIL score.
Public banks or private banks, which is better for study abroad loans?
Both public and private banks in India offer affordable education loan products for studying abroad. Compared to private banks, public banks in India offer a lower interest rate, but often for secured options.
