Points To Be Considered While Taking An Educational Loan For Foreign Study

Updated on: 2023-10-19 - 5 mins read
Points To Be Considered While Taking An Educational Loan For Foreign Study

Are you someone who aspires to study abroad and build a promising career? Pursuing higher education in a foreign country can open doors to a world of opportunities and personal growth. You can turn your dreams into reality with determination and a sharp vision of your goals. Your career abroad awaits!

Key Points:

  • Educational loans facilitate access to prestigious international universities, expanding opportunities for global education.
  • Studying abroad equips students with valuable international experience, boosting their career prospects.
  • Overseas education not only offers personal growth but also the chance to build a global network that can open doors to future career opportunities.
  • Immersing in foreign educational systems nurtures personal development, independence, and problem-solving skills.
  • When considering an educational loan, it's crucial to assess the total cost, borrow judiciously, understand repayment terms, mitigate currency risks, and maintain open communication with lenders.

What Is An Educational Loan?

Opting to pursue education in a foreign country has the potential to alter one's life profoundly. For most students, studying abroad promises a new life experience in an unfamiliar country. For students from low-income families, this goal can be out of reach. Individuals aspiring to pursue advanced studies abroad but encountering challenges in securing financial resources can choose to self-finance their education.

Taking an educational loan to study abroad is a significant financial commitment, and reading and following the instructions while taking a loan is essential. Starting your journey with an educational loan can provide the financial support you need to pursue your desired degree and develop highly valued skills in the global market.

Importance of Educational Loan:

Educational loans for foreign study are crucial in enabling individuals to pursue their higher education abroad. Here are some of the key reasons why these loans are essential: -

  • Access to World-Class Education: Many of the world's top-ranked universities are in countries like the United States, the United Kingdom, Canada, Australia, and Germany. Educational loans make it possible for students to gain access to these prestigious institutions and benefit from high-quality education.
  • Career Advancement: Many employers value international education and experience. Graduates who have studied abroad often have a competitive edge in the job market, making it easy to secure well-paying jobs.
  • Networking: Engaging in overseas education presents the chance to establish an international network of acquaintances and companions, which can prove invaluable for future partnerships, career prospects, and personal development.
  • Personal Development: Living and studying in a foreign country fosters personal growth and independence. It encourages students to step out of their comfort zones, become self-reliant, and develop problem-solving and adaptability skills.

How To Apply for Educational Loan:

The loan process is time-consuming, from loan application to approval and disbursement, so applying for a loan a little early is always advisable. These are the steps by which one can use for getting an educational loan:-

  • Ensure the program you plan to enroll in is accredited by financial institutions.
  • Determine the total loan amount needed and the portion you can secure independently.
  • Evaluate student loan offerings from various banks for international education and select the one that aligns with your requirements.
  • Once settled on a bank and loan amount, complete the loan application and approach your chosen financial institution.
  • The bank will furnish a loan agreement outlining various terms and conditions upon loan approval.
  • After signing the agreement, the bank will disburse the funds in installments or per the university's disbursement schedule.

Key Points To Be Considered:

Obtaining an educational loan for international studies represents a substantial financial obligation, necessitating a thorough evaluation of multiple factors to ensure a well-informed and prudent choice.

Things to be considered while taking an education loan:

  • Cost of Education: Understand the total cost of your education abroad, including tuition fees, living expenses, travel, and other miscellaneous expenses. Make a comprehensive budget to determine how much you need to borrow.
  • Loan Amount: Borrow only what you need to cover your education expenses. Avoid taking on unnecessary debt.
  • Repayment Terms: Review the repayment terms, including the loan tenure and monthly installment amounts. Choose a loan with flexible repayment options that align with your future financial prospects.
  • Loan Servicer: Know who will service your loans. Some lenders may use third-party services to manage loan accounts. Understand how to contact them for inquiries, payments, and other matters.
  • Currency Fluctuations: Be aware of currency exchange rate risks. If your loan is in your home country, but you're studying in a country with a different currency, fluctuations can affect your repayment amount. Consider strategies to mitigate this risk, such as using currency hedging options.
  • Communication with Lender: Sustain transparent communication with your lender throughout the loan. If you encounter repayment challenges, reach out to explore potential solutions or alternative repayment arrangements.

Countries With The Most Students Studying Abroad:


Types Of Educational Loans:

Loans based on Collateral:

  • Secured Educational Loan: A secured education loan, or collateralized loan, requires the applicant to provide tangible or intangible assets as security. These assets include real estate, fixed deposits, LIC insurance policies, etc. The approval process for this type of loan is typically lengthier as the bank must thoroughly verify all collateral-related documentation. However, it offers lower interest rates, extended repayment durations, and no repayment obligations during the study period. Furthermore, this type of education loan has a higher likelihood of approval, and approval is not contingent upon parental income.
  • Unsecured Educational Loan: Unsecured education loans do not necessitate the applicant to provide any collateral, making them a suitable option for students without assets to offer as security. Nonetheless, it's important to note that unsecured education loans have a higher interest rate when compared to secured loans and have a more challenging approval process. They also typically feature shorter repayment terms and require some repayments during the study period. A minimum co-applicant income is a prerequisite for securing education loans without Collateral.

Loans based on Lenders:

  • Loans From Public-Sector Banks: Government or public-sector banks primarily extend education loans to individuals aspiring to study abroad, predominantly relying on Collateral as a security measure. Students can access unsecured loans up to INR 7.5 Lakhs from government banks. However, for loan amounts exceeding this threshold, applicants are required to furnish Collateral as security. It's noteworthy that government banks generally offer more favorable interest rates than private lenders. Additionally, education loans obtained from government banks often come with tax benefits.
  • Loans From Private Banks: Private banks can provide study-abroad students with secured and unsecured loans, with the sanctioned amount contingent on various factors, including the chosen country, course, applicant profile, and co-applicant's financial standing. Unlike government banks, private-sector banks typically offer higher interest rates but present more favorable rates than non-banking financial companies (NBFCs) and international lenders. The interest rate for these loans usually commences at 11% per annum (p.a.). Furthermore, education loans obtained from private banks are eligible for tax benefits under Section 80E. Notably, the processing time for education loans from private banks is typically shorter than that of government banks.
  • Loans From Non-Banking Financial Companies(NBFCs): The approval amount for loans can fluctuate significantly, influenced by various factors such as the chosen country, academic program, the applicant's credentials, and the financial situation of the co-applicant. NBFCs (Non-Banking Financial Companies) generally impose higher interest rates than private and government banks. Typically, the interest rate for education loans from NBFCs ranges from 11.5% per annum (p.a.) to as high as 16% p.a. Notably, education loans obtained through NBFCs do not offer tax benefits under Section 80E. Moreover, the processing time for education loans from NBFCs is generally shorter than that of government and private banks.


The loans make dreams come true. In the world of education, where the pursuit of knowledge has no boundaries, educational loans stand as a beacon of hope, bridging the gap between dreams and achievement. You can start with all this procedure, take an educational loan, and fulfill all your ambitions. An educational loan can be a significant boost to your career.

In the comment section, let me know for which college you will take an educational loan.

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