Visa approval is one of the major concerns when you plan to study abroad. However, if you have applied for an education loan, there might be a very important question which is what happens to an education loan if the visa is rejected. Communicating with your bank is the key to dealing with the situation if the visa is rejected post taking an education loan. You must inform your lender and discuss the situation of visa rejection. Most banks disburse the loan after visa approval so in that case it will be called off anyway. Let’s understand all the details about visa rejection and education loans.
Table of contents
Also Read: If you are planning to take education loans from the top Indian Banks to study abroad, check out our blog on Top Indian Banks providing education loans to study in the USA.
What to do if the Visa is Rejected?
Before understanding the outcome of visa rejection on an education loan, it is important to stay positive about the circumstances. You might consider dropping your study abroad plans on visa rejection. But, you are on the safer side if you consider reapplying for the visa. Let’s see what happens to an education loan when the visa is rejected and you are looking at reapplying for the visa-
Scenario #1: Reapplying for a visa to the same country, university, and course with the education loan applied
Considering the uncertainties due to the COVID-19 pandemic, many banks have adopted policies where students can hold the sanction letter for up to six months. This applies to students who have taken collateral-based loans. Most NBFCs have extended this period of up to one year for unsecured education loan borrowers.
In such case, your study abroad education loan is not affected and you can re-apply for the visa with the same sanction letter which was issued initially.
Scenario #2: Reapply for a visa to a different country, university, and course with the education loan applied
In case of visa rejection on the first attempt, you can apply for a visa in another country, for another course or in a different country. There are chances of securing an offer letter from either of them.
If you have already applied for an education loan, you can request your bank to change the name of the country/ university/ course. Thus, necessary changes are made to the education loan sanction letter.
Education Loan: What Happens if Visa is Rejected?
When a visa application is rejected, the outcome regarding your education loan can vary based on the terms and conditions and the policies of the banks. There could be various possibilities and this is what can happen to your education loan if your visa is rejected-
Loan Cancellation
If you are sure about dropping study abroad plans due to visa rejection, you must immediately inform your lender and ask them to cancel the education loan. If the loan amount has not been disbursed, it can simply be cancelled by contacting the bank manager and requesting a loan cancellation. Most banks’ loan agreements have a provision that allows the borrower to cancel the loan within a certain period, usually 14 days, after signing the loan agreement.
Loan Grace Period/ Deferment Period
In case of visa rejection, many banks allow you to resolve the visa issues or find alternative educational opportunities. This can include reapplying to the same or different countries/ universities/ courses and obtaining an offer letter from them. During this period, you wouldn’t be required to make regular payments, but the interest might accumulate over time.
Also Read: Do you intend to study for a Postgraduate Diploma in Canada? Check out our blog on Education Loan for PG Diploma in Canada: Eligibility, Process, Types of Loan Available.
Difference Between Loan Sanction and Loan Disbursal
Let us understand the difference between loan sanction and loan disbursal with the help of an example.
Shruti is planning to study abroad in the US for her postgraduation degree. To secure funds and be able to manage her future expenses, she opts for a YES Bank education loan to study abroad. She went to the bank, completed the application form and submitted all the relevant documents as required by the bank. Upon checking her eligibility, CIBIL score, and minimum family income requirements for an education loan, the bank agreed to provide her with the loan.
In this case, the bank will provide her with the loan sanction letter which is only the approval letter. It’s a document stating the bank’s intent to help her with the funds required and mentioning the interest rates, loan repayment tenure, and other important details.
Till now, the loan amount hasn’t been credited to her university account. Once the actual amount is paid by the bank to the university, it would mean loan disbursal.
FAQs on Education Loan if Visa is Rejected
You can either cancel your education loan or immediately repay the loan amount if the visa is rejected. The bank also allows you a grace period to look for other options and avail of the same education loan. However, you must know about the policies of the bank and the terms and conditions on which the education loan was provided.
If your student visa is rejected, you can reapply to the same country/ university/ course. You can also reapply to different countries/ universities/ courses.
If you hold on to the sanction letter for 6 months or one year as allowed by your banks and NBFCs, your education loan is not affected. However, if you reapply for the visa to different countries/ universities/ courses, your education loan can be modified and necessary changes to the name will be made.
Submitting an incomplete application form or a set of wrong documents can lead to visa cancellation. Having insufficient funds is also another reason for visa rejection.
100% tuition fees are refundable in case of visa rejection, but the applicant must inform the university within the specified time.
This is all about an education loan if your visa is rejected. In case of rejection of your visa, it is best to contact your lender and discuss your situation with them. They may offer different options such as temporarily postponing the repayment, restructuring, or cancelling the loan. It’s always better to have a clear understanding of the terms and conditions of your loan agreement, and options available to you. So, identify this well before you make any decisions about cancelling or paying off your loan in full.
To know more about the loan application process, the best international bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
| Related Blogs |
| Currency Exchange in Victoria |
| Education Loans in West Bengal |
| Income Tax Rebate on Education Loan Under Section 80E |
Follow Us on Social Media
