- Public sector banks like SBI and Canara Bank provide the most competitive interest rates starting at 7.15% for collateral-based education loans.
- NBFCs like HDFC Credila and Auxilo now offer education loans up to ₹80 Lakhs with flexible documentation, covering 100% tuition plus living expenses abroad.
- Moratorium periods of 6-12 months after course completion allow graduates to secure employment before education loan repayment obligations commence.
- What is a Secured Education Loan?
- What is a Collateral Security for an Education Loan?
- Features of Secured Education Loan
- What is an Unsecured Education Loan?
- Features of Unsecured Education Loan
- Differences between a Secured and an Unsecured Education Loan
- Popular Lenders in India - Secured Education Loans
- Popular Lenders in India - Unsecured Education Loans
- Ways to Choose the Best Type of Loan
- Key Takeaways
- FAQs
An education loan gives immense opportunities to students to pursue academic courses in foreign universities. However, before opting for a suitable education loan, they often feel a dilemma about whether to take a collateral and non-collateral education loan. While both have their advantages and drawbacks, they provide sufficient financial coverage for educational expenses.
In this blog, we have discussed the features of both secured and unsecured education loans, including their comparisons, top lenders, and tips to follow before taking an education loan.
What is a Secured Education Loan?
A secured education loan is a type of education loan that requires students to pledge or lend their security or collateral asset to a bank, financial institution, or authorised lenders. This also known as collateral education loans. This collateral asset may be either movable (tangible collateral) or immovable (intangible collateral). While taking an education loan, the collateral asset is pledged to assure the lender that the repayment of the loan will be made on time.
Otherwise, they have the authority to seize and sell the property to recover the loan amount. The collateral asset acts as a sense of security for the lenders or financial institutions.
What is a Collateral Security for an Education Loan?
A collateral is a valuable asset or property that belongs to the person who wants to borrow the collateral education loan. The market value of such an asset is generally very high, and it is pledged whenever there is a requirement for a higher loan amount for overseas education. It should be noted that in most of the cases, the collateral security for an education loan does not belong to the student legally. While taking a secured education loan, students have to involve their parents/guardians since the collateral security belongs to them.
Types of Collateral Security for an Education Loan
Tangible Collateral Security
Tangible collateral security for an education loan includes an immovable property or asset such as a house, flat, land, agricultural land, plot, etc., with a clearly defined boundary.
Intangible Collateral Security
Intangible collateral security for an education loan includes movable assets such as fixed deposits (FD), insurance policies, government bonds, gold, etc.
The borrower should keep the following points in mind while opting for an intangible secured education loan:
Third-Party Collateral
In some cases, the closest friend or relative can assure the lender about the timely repayment of the secured education loan from the borrower’s side. If the borrower fails to repay, then the third party has to take full responsibility to repay the loan amount.
Why is Collateral Required for a Secured Education Loan?
When it comes to dealing with finances, a lot of risks are involved. For lending institutions, their capital is at stake since it belongs to the general public, and in case of default on a loan, the lender may lose their finances. On the other hand, the borrower also takes a certain degree of risk by pledging their property to get an education loan. In case of failure to repay the loan amount, the financial institution or bank can sell the asset to make a recovery.
Features of Secured Education Loan
Now, it is clear that the collateral education loan includes a lot of risks, such as the risk of losing valuable assets, which many times halts the steps of students and their families to take an education loan. However, taking a secured education loan also provides several benefits, as illustrated below:
- These loans are provided at comparatively lower interest rates since lenders already have partial or full possession of an asset. It facilitates students to repay the loan on time without increasing the extra financial burden.
- Lenders and financial institutions provide secured education loans up to the amount of INR ₹80 Lakhs, depending on the student’s requirements, the value of the property, and offers.
- The loan tenure of these types of education loans is higher than unsecured education loans. It may vary from 10-15 years, depending on the interest rates, loan amount, and the lender.
- According to the Income Tax Act 1961 and Section 80E, borrowers can claim income tax deduction on the interest paid on education loans for up to 8 consecutive years, starting from the year repayment begins. There is no maximum limit on the interest amount that can be claimed as deduction under Section 80E
- Students get a moratorium period of 6 months-1 year, after which they are required to repay the loan amount.
What is an Unsecured Education Loan?
A non-collateral education loan is a type of loan that grants financial assistance to students to cover their education expenses without pledging any kind of collateral or security.
These types of loans are quite popular among students since they do not possess any kind of property or valuable asset on their own, also, sometimes, the financial condition of their family is not so good enough to own any property or asset. In such cases, the lender emphasises the following points before granting a loan:
- Extraordinary academic record
- Participation in extracurricular activities/sports activities at the district, state, or national level
- Presence of co-applicant/co-signer (either parents, brother, sister, uncle, spouse, grandparents, etc.)
- Motivation to pursue the course or foreign university
- Future plan after course completion, etc.
Features of Unsecured Education Loan
The following are the significant features and benefits of taking an unsecured education loan for studying abroad:
- Since taking an unsecured education loan does not involve lending or pledging any collateral, students can solely focus on their studies abroad without worrying about them.
- Unlike secured education loans, unsecured education loans are often provided at a competitive interest rate, which facilitates students and co-applicants to plan their finances accordingly.
- One of the greatest benefits of taking an unsecured loan is that the approval process is fast because it does not require scrutiny or evaluation of the property.
- Successful repayment of unsecured education loans improves the CIBIL score of the student. It helps them gain the trust of the lender or financial institution for future financial transaction purposes.
- The repayment tenure of unsecured loans varies between 5-10 years depending on the loan amount, lender, and interest rate.
Differences between a Secured and an Unsecured Education Loan
Below, we have discussed the differences between a secured and an unsecured education loan in a tabulated form:
| Features | Secured Education Loan | Unsecured Education Loan |
|---|---|---|
| Collateral or Security | Tangible or Intangible security is required to get a larger loan amount | No security or collateral is needed to get the education loan |
| Loan Amount | It ranges from INR 20 to 80 Lakhs | It ranges from INR 4 Lakhs-70 Lakhs, depending on the lender |
| 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 tax benefit on interest rate after moratorium period. Improves CIBIL score if repayment is done on time The loan tenure is larger, and flexible repayment options are available | Approval process is fast The loan is provided on a fixed interest rate Co-applicant can provide every kind of possible help to the student if repayment is delayed. |
Popular Lenders in India – Secured Education Loans
Following is a list of popular lenders in India that grant education loans to students.
Public Sector Banks
We have tabulated some popular public sector institutions of India along with the maximum loan amounts and interest rates on which they offer unsecured education loans.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| State Bank of India | Up to 70-80 Lakhs | 7.15% - 10.15% |
| Canara Bank | Up to 70-80 Lakhs | 7.25% - 10.10% |
| Punjab National Bank | Up to 70-80 Lakhs | 9.15% - 12.50% |
| Bank of India | Up to 70-80 Lakhs | 8.30% - 10.90% |
| Indian Bank | Up to 70-80 Lakhs | 7.80% - 11.50% |
Private Sector Banks
We have tabulated the popular private sector institutions of India along with the maximum loan amounts and interest rates on which they offer education loans.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| Axis Bank | Up to 80 Lakhs | Repo Rate + Margin (currently around 11.00% - 13.70%) |
| Kotak Mahindra Bank | Up to 20 Lakhs (75 Lakhs via Credila) | 9.00% - 16.00% |
| IDBI Bank | Up to 90 Lakhs | 9.50% - 11.00% |
| ICICI Bank | Up to 80 Lakhs | 11.25% onwards |
| IndusInd Bank | Up to 80 Lakhs | 10.50% - 12.00% |
Non-Banking Financial Corporations (NBFCs)
We have tabulated the popular NBFCs along with the interest rates on which they offer secured education loans to students in India.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| Avanse | Up to 80 Lakhs | 10.75% - 14.00% |
| HDFC Credila | Up to 80 Lakhs | 9.75% - 13.00% |
| Auxilo | Up to 80 Lakhs | 12.50% - 13.50% |
| Incred | Up to 80 Lakhs | 11.00% - 15.00% |
| Eduvanz | Up to 75 Lakhs | 11.00% - 13.50% |
Popular Lenders in India – Unsecured Education Loans
Following is a list of popular lenders in India that grant unsecured education loans to students.
Public Sector Banks
We have tabulated some popular public sector institutions of India along with the maximum loan amounts and interest rates on which they offer unsecured education loans.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| State Bank of India | Up to 20 Lakhs | 10.65% - 11.50% |
| Canara Bank | Up to 60 Lakhs | 11.75% - 14.50% |
| Punjab National Bank | Up to 70 Lakhs | 9.85% - 14.75% |
| Bank of India | Up to 50 Lakhs | 10.00% - 13.75% |
| Indian Bank | Up to 65 Lakhs | 11.25% - 14.50% |
Private Sector Banks
We have tabulated the popular private sector institutions of India along with the maximum loan amounts and interest rates on which they offer unsecured education loans.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| Axis Bank | Up to 80 Lakhs | 11.00% - 11.50% |
| Kotak Mahindra Bank | Up to 70 Lakhs | 11.50% - 13.75% |
| IDBI Bank | Up to 75 Lakhs | 10.75% - 13.50% |
| ICICI Bank | Up to 65 Lakhs | 11.25% - 12.50% |
| Induslnd Bank | Up to 45 Lakhs | 11.00% - 13.75% |
Non-Banking Financial Corporations (NBFCs)
We have tabulated the popular NBFCs along with the maximum loan amounts and interest rates on which they offer unsecured education loans.
| Lenders | Maximum Loan Amount (INR) | Interest Rate (per year) |
|---|---|---|
| Avanse | Up to 75 Lakhs | 11.25% - 14.00% |
| HDFC Credila | Up to 80 Lakh | 11.25% - 13.25% |
| Auxilo | Up to 65 Lakhs | 11.25% - 14.50% |
| Incred | Up to 1.25 Crore | 12.50% - 14.25% |
| Eduvanz | Up to 30 Lakhs | 11.00% - 15.50% |
Ways to Choose the Best Type of Loan
If you are considering applying for an education loan, there are several factors you should be aware of to make an informed financing decision. When you apply for education loans in India, here’s what you should consider:
- It is essential for every student desiring to take an education loan to investigate and check whether the course can provide sufficient ROI or return on investment. This is an important aspect to consider very carefully because the repayment of the loan is to be made through future income.
- Estimate the loan amount carefully by calculating the upcoming educational expenses so that unnecessary expenditures can be avoided and the burden to repay the loan can be reduced.
- Check all the terms and conditions of the loan agreement before signing the papers to avoid last-minute surprises. It is always better to have a consultation with a financial advisor before taking an education loan.
- An education loan taken at a comparatively lower interest rate is better because it affects the total repayment cost made after the moratorium period.
- Always look for an education loan that provides flexible repayment options.
- Consider and discuss the additional charges, such as processing fees, prepayment charges, and penalties for late payment with the lender because these could add up and affect the total repayment cost of your education loan.
Key Takeaways
Education loans for studying abroad come in two formats: secured loans requiring collateral (property/FD) offering up to ₹80 Lakhs at 7.15%-13.70% interest, and unsecured loans with no asset pledge providing ₹40-80 lakhs at 9.85%-15.50% rates. Public sector banks like SBI and Canara Bank deliver the most competitive rates starting at 7.15%, whilst NBFCs like HDFC Credila provide faster approvals within 15 days.
Section 80E grants unlimited tax deduction on interest for 8 consecutive years from your first repayment. Secured loans offer 10-15 year repayment tenure versus 5-10 years for unsecured options. Students without property can still secure unsecured loans based on academic merit, university reputation, and co-applicant income. The moratorium period of 6-12 months post-graduation allows you to find employment before EMI obligations begin.
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FAQs
Which is better, a secured or unsecured education loan?
It wholly depends on the borrower to choose between collateral and non-collateral education loans. If you do not have significant assets to offer in exchange for an education loan, then go for this type of loan, which is generally offered at a slightly higher interest rate but also provides flexible repayment options.
How long do secured education loans have to be repaid?
The average loan tenure for collateral or secured education loans varies between 8-15 years depending on the loan amount, interest rate, and the lender. In some of the cases, lenders can extend the loan tenure upto 30 years.
Does the academic record of the student matter while taking a secured education loan?
No, in such cases, lenders are more concerned about evaluating the market value of the collateral and income of the parents rather than considering the student’s academic record as the eligibility criteria.
What is the difference between secured and unsecured education loans for studying abroad?
Secured education loans require collateral (property/FD) offering up to ₹1.5-2 crore at 7.15%-13.70% interest, whilst unsecured loans need no asset pledge and provide ₹40-80 lakhs at 9.85%-15.50% rates.
Can I claim tax benefits on my education loan repayment?
Yes, Section 80E allows unlimited tax deduction on interest paid for 8 consecutive years starting from your first repayment year, with no maximum limit on the deductible amount.
Which banks offer the lowest interest rates for secured education loans in 2026?
SBI offers the most competitive rates starting at 7.15%, followed by Canara Bank at 7.25% and Indian Bank at 7.80% for secured education loans.
What is the moratorium period for education loan repayment?
Most lenders provide a moratorium period covering your course duration plus 6-12 months after completion, allowing you to find employment before EMI repayments begin.
Does interest accrue during the moratorium period?
Yes, interest continues to accumulate during the moratorium period and is typically added to the principal amount unless you opt for simple interest servicing during this phase.
Can my parents claim tax deduction on the education loan they took for me?
Yes, the person in whose name the loan is sanctioned and who is repaying it can claim Section 80E benefits, regardless of whether it’s the student or parent.
Can I port my education loan to another bank offering lower interest rates?
Yes, loan portability is permitted; you can transfer your education loan to another lender offering better terms, subject to the new lender’s approval and processing requirements.
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.
