An education loan is the easiest way to fund your higher studies. With several sources to get an education loan, it is equally difficult to choose one that will cover the cost without the need for collateral, since several borrowers do not own collateral or it is not eligible as per the lender’s criteria. In such a case, students can opt for an education loan without collateral from Indian lenders.
Here are some of the frequently asked questions answered for students hoping to get an education loan without collateral
How to get an education loan up to Rs 7.5 lakh without collateral?
The Government of India launched a Credit Guarantee Fund Scheme for Education Loans (CGFSEL) to help students get an education loan of up to Rs 7.5 lakh without any collateral and third-party guarantee. The credit risk guarantee fund scheme provides a guarantee on education loans given by banks under the Model Education Loan Scheme of the Indian Banks’ Association.
Students can apply for the loan under this scheme if they belong to the Economically Weaker Section (EWS) category, and the family income is less than Rs 4.5 lakh. Students are eligible under this scheme even if the loan amount they require is more than the amount stipulated in the same.
Features of this scheme that students should be aware of:
1. Eligible students get a subsidy on the loan amount of up to Rs 7.5 lakh.
2. The subsidy is valid during the course period and the moratorium period only.
3. Students can avail of this subsidy only once in their lifetime.
4. Aspirants have to submit income proof.
5. The lending institution can charge a maximum interest of 2 per cent per annum above the base rate on loans under this scheme.
How to get an education loan of more than Rs 7.5 lakh?
There are several lenders in the market that provide education loans without collateral to study in India and abroad. Public banks offer loans without collateral only up to Rs 7.5 lakh. However, private banks and Non-Banking Finance Companies (NBFCs) have numerous without-collateral loan products that cover the cost of education up to Rs 75 lakh.
Some salient features of loans without collateral:
1. The loans without collateral cover a wide range of courses, colleges, and countries as opposed to loans with collateral.
2. The interest rate starts from 10.5 per cent, and can go up to 14 per cent.
3. Any student without collateral to pledge can apply for an education loan as long as they can arrange for a co-applicant to co-sign the loan.
4. Almost all loans without collateral come without a holiday period. The interest charged during the study period has to be paid by the co-applicant fully or partially depending on terms and conditions.
To be eligible for a loan without collateral, students should –
— Arrange a co-applicant with sufficient income to take on the liability of paying the interest/partial interest amount during the study period.
— Have a good academic record and should be attending a university on the lender’s list of pre-approved universities. These universities are shortlisted by the lender, based on the employment opportunities after graduation.
Apart from this, the co-applicant needs to submit income proof, such as the ITR of the last two years, bank statements, and salary slips. If the co-applicant is self-employed, they will have to submit further business documents, such as the P/L statements and GST registration.
The process to apply for a loan without collateral is to approach a lender after performing due diligence about the lender and the loan product. Fill in the application form and submit the required documents. Since these loans do not come with the requirement of collateral, the document list is short and so is the processing time.
Finding the right loan product confuses students as the market is flooded with lenders promising to offer the best ‘without-collateral’ loan product in the market. Several marketplaces help students find the right product, providing end-to-end loan assistance. A dedicated loan counselor helps one navigate the loan process from choosing the right loan product to finally receiving the funds in the student’s registered account.
(The writer is the CEO and co-founder of GyanDhan)
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