A Student Guide for Non-Collateral Education Loan: Complete Details & Analysis
Indian students in their early adulthood may not possess any kind of property or asset on their own. When it comes to taking an education loan, lenders often ask for security, but what should they do in such cases where students are empty-handed?
Non-collateral loans are becoming more popular nowadays, eliminating the necessity of pledging security or collaterals at lenders to get an education loan. In this blog, we have discussed non-collateral education loans, including their features, differences between secured and unsecured loans, eligibility criteria, application process, and more.
- What is a Non-Collateral Education Loan?
- Features of Non-Collateral Education Loan
- Collateral vs Non-Collateral Education Loans: Key Differences
- Some Key Terms related to Non-Collateral Education Loan
- Top Lenders Offering Non-Collateral Education Loans
- Non-Collateral Education Loan - Eligibility Criteria
- Documents Required for Non-Collateral Education Loan
- How to Get an Education Loan without Collateral?
- Conclusion
- FAQs
What is a Non-Collateral Education Loan?
A non-collateral education loan is a type of loan that grants financial assistance to students to cover their education expenses. It is also known as an unsecured education loan because it does not involve pledging any type of collateral or security at lenders or other financial institutions.
Education loans without collateral are popular among students who do not possess any kind of financial asset or collateral to offer but have a clear vision of excelling in academic as well as professional pursuits. Keeping these in mind, lenders prioritize those who have outstanding academic and extracurricular backgrounds before granting unsecured education loans.
Features of Non-Collateral Education Loan
Below, we have discussed some of the salient features and advantages of an education loan without collateral.
Higher Interest Rate: Since banks or other lenders do not ask for any collateral or property to be pledged, they impose high interest rates on unsecured education loans to safeguard their security. It may vary between 11.00-14.85% per annum, depending on the lender and loan amount.
Flexible Loan Amount: An unsecured education loan amount may vary from INR 7.5 Lakhs to 75 Lakhs, depending on the lender and the financial status of the borrower. It covers a substantial portion of tuition fees, accommodation, stationary and other type of educational expenses.
Flexible Repayment Duration: The terms and conditions of repayment of the loan amount are quite adaptable, and it allows the student to continue their education without worrying about security or collaterals.
Faster Processing and Approval: Since an education loan without collateral doesn’t involve lending any type of security, the approval process is more rapid in comparison to a collateral education loan.
Improvement in Credit Score: Successful repayment of unsecured education loans improves the CIBIL score of an individual and allows them to take other types of loans in the future without any fear of getting rejected by the bank.
Along with the above features, an education loan without collateral or unsecured loans can offer the following benefits:
- An education loan without collateral covers a wide range of courses and universities in 50+ countries
- Students need to apply for this loan with the sign of a co-applicant.
- Around 40-50 Lakhs INR can be availed by the student without pledging the collaterals.
- Non-collateral education loans provide up to 100% financial assistance to students.
- EMI is not required to be paid in the moratorium period.
Collateral vs Non-Collateral Education Loans: Key Differences
Below, we have tabulated the main key differences between secured and unsecured education loans in order to understand their significance:
| Features | Education Loans with Collateral | Education Loans without Collateral |
|---|---|---|
| Collateral or Security | Movable or immovable security is required to be pledged at the bank | No security or collateral is required to pledge at the bank |
| Loan Amount | It ranges from INR 20 Lakhs-1 Crore | It ranges from 4 Lakhs-70 Lakhs, depending on the bank |
| Interest Rates | Lower interest rates, e.g. 8.25%-11.25% | Higher Interest rates due to risk, e.g. 10.00%-14.00% |
| Requirement of Co-Applicant | Co-applicant is not required | Co-applicant is required in most cases |
| Processing Time | Takes about 20-30 days due to the assessment of collaterals | Takes less time in comparison to a collateral education loan |
| Advantages | Provide large loan amount Improves CIBIL score if repayment is done on time Flexible repayment options in small EMIs. | Students do not have to worry about security Covers a wide range of colleges and universities across the world Co-applicant is there to help the student in case of failure to repay the loan amount. |
Also read – Ways to Fund your Overseas Education
Some Key Terms related to Non-Collateral Education Loan
Here is a detailed description of some of the important key terminologies that an Indian student must understand before applying for an education loan without collateral:
- Moratorium Period: It is the period for which the borrower is not required to repay the loan amount. It ranges from 6 months to 1 year. It starts after the date when the course is completed.
- Co-applicant/Cosigner: A co-applicant or cosigner is an individual who jointly applies for a unsecured education loan with the main applicant (student). The co-applicant could be a parent or guardian.
- Interest Rate: It is a percentage charge imposed on the loan amount (principal amount) that the student has borrowed.
- Loan Tenure: It is the duration the borrower must repay the loan amount which is typically a few years after the moratorium period ends. It depends on the loan amount, interest rate, and borrower’s financial situation.
- Margin Money: It is also known as a down contribution, which is the portion of the total educational expenses the borrower (student) must bear. The lender covers the remaining amount through the unsecured education loan.
Top Lenders Offering Non-Collateral Education Loans
Below, we have tabulated the list that corresponds to lenders that provide education loans without collateral, along with their interest rates and the maximum loan amount that they offer:
| Lenders | Loan Amount (without collateral) | Interest rates (per annum) |
|---|---|---|
| Public sector banks | Upto 60 Lakhs | 11.75-14.00% |
| Private sector banks | Upto 75 Lakhs | 10.00%-12.00% |
| NBFCs | Upto 70 Lakh | 10.00%-16.00% |
Let’s go through the list of the individual banks along with their loan amount (without collateral) and interest rates:
| Banks | Loan Amount (without collateral) | nterest rates (per annum) |
|---|---|---|
| State Bank of India | Upto 20 Lakhs INR | 10.65% - 11.50% |
| Union Bank of India | Upto 40 Lakhs INR | 9.80% - 11.30% |
| Axis Bank | Upto 50 Lakhs INR | 11.00% - 11.50% |
| ICICI Bank | Upto 50 Lakhs INR | 10.85% - 12.50% |
| IDFC First Bank | Upto 50 Lakhs INR | 11.50% - 13.25% |
| HDFC Bank | Upto 65 Lakhs INR | 11.25% - 13.00% |
| Avanse | Upto 75 Lakhs INR | 12.50% - 13.50% |
| Auxilo | Upto 65 Lakhs INR | 11.25% - 14.00% |
| HSBC Bank | Upto 20 Lakhs INR | 10.00% - 14.00% |
| Bank of India | Upto 30 Lakhs INR | 11.25% - 12.00% |
Non-Collateral Education Loan – Eligibility Criteria
Below, we have mentioned the eligibility criteria required for Indian students to apply for an education loan without security:
- The borrower/applicant must be an Indian citizen.
- The co-borrower/co-applicant must be an Indian citizen.
- The minimum age of an applicant should be 16 years.
- The applicant must have at least 60% overall in their previous academic program.
- The applicant should accompany the parents/guardian.
- Co-borrower(s) must have a an account in any bank in India.
- The applicant must present a letter of acceptance from a reputable overseas college/university.
- The applicant’s chosen course must provide job opportunities after its completion.
Documents Required for Non-Collateral Education Loan
Below, we have listed the required documents for applying for an education loan without collateral:
For Applicant (Student)
- Fully completed and signed loan application form
- Two passport-size photographs
- Photo ID card (Aadhar card/Voter ID card/Passport/PAN Card, etc.)
- Residence Proof (Passport/Voter ID card/Aadhar card)
- Previous academic documents (mark sheets, transcripts, and certificates)
- Certificate of participation or achievement in extra-curricular activities
- Language proficiency certificates (TOEFL/IELTS/Duolingo etc.)
- Standardised test certificates (college/university entrance tests such as SAT/ACT and GMAT/GRE)
- Admission letter or letter of acceptance from the foreign institute on its letterhead with the address
- College and course’s prospectus
- Statement of cost of study
For Co-Applicant
A co-applicant can be a student’s father, mother, brother, sister, spouse (husband/wife), grandparent, parents-in-law, or maternal/paternal uncle.
- Two passport-size photographs
- Photo ID card (Aadhar card/Voter ID card/Passport/PAN Card, etc.)
- Residence Proof (Passport/Voter ID card/Aadhar card)
- Last 6-8 months bank statement
- Income proof of co-applicant
In the case of Salaried Employees
- Latest 3 months’ salary slips or salary certificate on Employer’s Letterhead
- Last two year’s Form-16 from employer or last 2 year’s Income Tax Returns
In the case of Self-Employed
- Last 2 year’s Income Tax Returns
- Last 2 year’s certified financial statements or provisional financial statements duly certified by CA.
- Proof of office (any one of the following: lease deed, utility bill, title deed, etc.)
How to Get an Education Loan without Collateral?
The application process for the unsecured education loan can be made in the following ways:
- By visiting the Bank branch
- By visiting the Bank’s website
- Vidya Laxmi Portal
For the offline process, the students need to visit the nearest branch along with documents and co-applicants.
Below, we have provided the step-by-step details of the online application process for an education loan without collateral.
Application on the Bank’s Website
- Log on to the bank’s official website.
- Read all the terms and conditions related to the application process and then proceed to complete the loan application form.
- Fill out the mandatory details and upload documents.
- Confirm and review the details.
- Click on ‘submit.’
After Application Submission:
- Banks or other lending institutions may call the applicant for an in-person interview, along with a co-applicant, to discuss on course and motive for pursuing education in a particular country.
- After the interview, the bank will take around 15-20 days to process the application and disburse the amount.
Application on the Vidya Lakshmi Portal
Following is the process to apply on Vidya Lakshmi Portal:
- Visit the official website of Vidya Lakshmi Portal
- Create an account on the portal and activate the account.
- After successful activation, login into the portal
- Proceed with the application process; click on ‘loan application form.’
- Fill in all the mandatory fields, such as:
- Basic information
- Personal information
- Present banker details
- Course details
- Cost of finance details
Now, upload the required documents and click on ‘save.’
Conclusion
Non-collateral education loans, unlike collateral education loans, do not require students to lend or pledge any type of security and collateral. Due to this reason, it is often known as an unsecured education loan. Most students do not possess any valuable assets or property on their own. Regardless of this, Indian financial institutions provide them attractive offers on non-collateral loans so that they can pursue their dream courses in their chosen universities.
One of the significant benefits that a borrower can get is that they do not have to worry about collaterals or security.
FAQs
Can I get an education loan without collateral?
Yes, many lenders in India do understand the aspirations and dreams of Indian students, so they offer attractive offers on non-collateral education loans, which depend on lenders.
Indian public banks provide education loans upto 60 Lakhs INR without collateral, whereas private banks provide education loans upto 75 Lakhs INR without collateral.
In what cases does the application for non-collateral loans get rejected?
If the income of the co-applicant is not adequate to support the loan, then the lender might reject the loan application to prevent repayment difficulties. Along with this, failure to produce relevant documents can also lead to loan rejection.
What are the processing fees for an education loan?
A processing fee or service charge is a type of fee required to process the loan application request. It differs normally ranges between 1.00 and 2.50% of the total loan amount.
If you are an aspirant looking to study at your dream university, book an appointment with AdmitX today and start your applications early to avail yourself of all the benefits.
