Education loans without collateral have become popular, especially for students who want to pursue higher education abroad. They help students finance their education without pledging assets like property. While standard guidelines allow banks to offer collateral-free loans without up to INR 4 lakhs, many banks offer higher amounts based on the borrower’s creditworthiness. Let’s explore how much education loan you can get without collateral, the eligibility criteria, interest rates, and some essential factors to keep in mind while applying for such loans.
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Amount of Education Loans Without Collateral
As per RBI guidelines on education loans, banks can provide collateral-free education loans up to INR 4 lakhs. For amounts ranging from INR 4 lakhs to INR 7.5 lakhs, a third-party guarantor is required. Education loans above INR 7.5 lakhs require collateral. The rule applies to all Scheduled Commercial Banks (SCBs).
| Loan Amount | Collateral Requirements |
| Up to INR 4 lakhs | No collateral is required |
| INR 4 lakhs to INR 7.5 lakhs | A third-party guarantor is required |
| Above INR 7.5 lakhs | Collateral is required |
Despite the limits set by RBI, banks have the leverage to offer higher loan amounts based on their guidelines. You can apply for education loans without collateral up to INR 1 crore with ICICI Bank. Here’s the list of banks offering higher amounts of collateral-free loans to study abroad and complete a wide range of expenses-
| Education Loans without Collateral | Maximum Loan Amount |
| ICICI Bank | Up to INR 1 crore |
| Axis Bank | Up to INR 75 lakhs |
| HDFC Bank | Up to INR 50 lakhs |
| IDFC First Bank | Up to INR 50 lakhs |
| Union Bank of India | Up to INR 40 lakhs |
| YES Bank | Up to INR 40 lakhs |
Also Read: Find out how much education loan you can get for pursuing higher education in India and abroad. Explore factors like family income and creditworthiness.
Features of Education Loan Without Collateral
An education loan without collateral also referred to as an unsecured education loan, is financial aid offered by banks and financial institutions to help students and their families cover educational expenses. Unlike conventional loans, this type of loan does not require the borrower to pledge any assets or security as collateral.
Here are the key features-
- No Need for Collateral: Borrowers are not required to pledge assets like property, jewellery, or fixed deposits, making these loans accessible to a wider range of students.
- Available for Domestic and International Studies: These loans are offered to students pursuing education both in India and abroad, making quality education more accessible, regardless of the country.
- Comprehensive Coverage: Depending on the lender, the loan can cover a substantial portion or even the entire cost of tuition, accommodation, books, equipment, and other essential expenses related to education.
- Competitive Interest Rates: Although interest rates for unsecured loans may be slightly higher than for secured loans, they are often still competitive, offering reasonable repayment terms.
- Flexible Repayment Terms: Education loans without collateral typically come with student-friendly repayment options, including moratorium periods where repayments may be deferred until after course completion or employment.
Documents Required for Education Loans Without Collateral
When applying for an education loan without collateral, you’ll need to provide several documents to complete the application process. These documents help banks assess your eligibility and determine the loan amount you can receive. Here is a list of the essential documents:
- KYC Documents: Proof of identity and address for both the applicant and co-applicant.
- Photographs: Two passport-size photos of the applicant and co-applicant.
- Admission Proof: A copy of the admission letter from the university or institution, including the fee structure.
- Bank Statements: Last six months of bank statements from the applicant’s or co-applicant’s bank account.
- Academic Documents: Mark sheets and certificates from S.S.C., H.S.C., degree courses, and admission exams (e.g., IELTS, TOEFL).
- Income Proof: Salary slips, Form 16, or other documents proving the income of the applicant’s co-applicant or guarantor (if applicable).
Also Read: The majority of applicants are unaware of the reasons behind their education loan rejection. Read this blog to find out about the same.
Eligibility Criteria for Collateral-Free Education Loans
While these loans do not require collateral, banks have specific eligibility criteria that need to be met:
- Age: The applicant must typically be between 18-35 years of age.
- Academic Performance: A strong academic track record is often required. Banks generally prefer students who have secured admission to top-tier colleges or universities.
- Co-Applicant: A co-applicant, usually a parent or guardian, is needed. Their income and credit score play a significant role in determining the loan amount.
- Admission Proof: You must provide proof of admission to a recognized educational institution (either in India or abroad).
- Income: Some banks have income requirements for the co-applicant. The income of the co-applicant must typically be sufficient to repay the loan.
While collateral-free education loans can be a bit more challenging to secure due to the higher risks for lenders, they provide a valuable opportunity for students who don’t have the assets to pledge. By ensuring that you meet the eligibility criteria, maintaining a strong credit score, and choosing the right lender, you can finance your education without the burden of collateral. Always compare different options and consult with financial advisors to make an informed decision.
To learn more about education loans, the best bank accounts for students, forex, banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your experience with studying abroad.
FAQs
An education loan without collateral is an unsecured loan that helps students fund their education without requiring assets like property or savings as security.
Indian students pursuing higher education in India or abroad, with a strong academic record, are typically eligible. Eligibility criteria vary across lenders, but income and academic performance play a key role.
The loan amount varies by lender, but it typically ranges from INR 4 lakh to INR 40 lakh for domestic education, and up to INR 1 crore for higher studies abroad.
Interest rates on unsecured loans range from 10% to 15%, depending on the lender, loan amount, and the borrower’s profile. The rates are high due to increased risk with the lender.
These loans can cover tuition fees, accommodation, books, travel, and other related expenses like laboratory charges or course-specific equipment.
Required documents include KYC details, academic transcripts, admission letters, bank statements, co-applicant income proof, and sometimes a guarantor’s form.
Yes, a co-applicant, usually a parent or guardian, is required to apply for most unsecured education loans. Their financial background helps lenders assess the risk.
Yes, unsecured loans are available for studying abroad. However, the loan amount, interest rates, and eligibility requirements may differ based on the country of study and the university.
Repayment terms typically range from 5 to 15 years. The borrower usually gets a moratorium period of 6 months to 1 year after course completion to start repayment.
If you default on an unsecured loan, the bank may take legal action on the overdue amount in the education loan. This will ultimately impact your credit score. However, recovery procedures are usually less aggressive compared to secured loans.
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