What are the types of Education Loans for Abroad Studies?

The cost of education has been increasing for the last few years. One of the factors behind this is the rise in the number of students who are opting for their higher studies abroad. This rise in the cost discourages many students from applying for higher studies abroad. However, financial institutions such as banks and NBFCs have been offering education loans to students at affordable interest rates so that their dream of pursuing higher studies abroad does not get hampered.

With a simple search of ‘education loan abroad’, you can select the option as per your requirement. If you want to apply for an education loan, you should be aware that there are two types of loans that you can opt for your higher studies abroad.

What are these types? We have listed them below:

Types of Education loans

As mentioned above, there are two types of education loans. The first type is secured education loan, and the second type is unsecured education loan. You can apply for either type of education loan at any financial institution as per your choice. However, you should keep in mind that different financial institutions have different terms and conditions for both secured and unsecured loans.

1) Secured Loans

A secured loan is where you are required to give some kind of collateral for a higher amount of your education loan abroad. Banks are the main financial institutions that provide secured loans. The main benefit of a secured loan is that you will be able to apply for a higher loan amount at a lower interest rate. This is especially beneficial if you apply for secured loan at a public sector bank (PSB). However, if you are to provide some type of collateral to the bank, keep in mind that the amount of the collateral that you provide has to match the amount of the loan that you are applying for.

For example, if you are applying for a loan of Rs.50 lakhs, the amount of the collateral has to match the loan amount. The collateral that you provide could be some kind of property like a house or a plot, a fixed deposit, or a life insurance. Apply for a secured loan only if you can provide the necessary collateral.

2) Unsecured Loans

An unsecured loan is where you do not have to provide any kind of collateral at all for a loan of higher amount. You can go for an unsecured loan at any of the financial institution. However, PSBs tend to give only a limited amount of unsecured loan which might not be sufficient. Private banks and NBFCs provide a higher amount for an education loan abroad. When you apply for an unsecured loan at an NBFC or a private bank, then ROI that will be charged to you will be a little higher as a loan of higher amount is provided to you without some collateral. Unsecured loans have a greater moratorium period compared to secured loans. They also help in covering almost 100% of your expenses abroad.

Which type of loan is better?

Both the type of loans are better, however, each loan suits an individual requirement. If you are able to provide collateral for an increased amount of education loan abroad, and are looking for a lower ROI, you should go for a secured loan. However, if you do not have the collateral necessary for the loan, yet you require a higher education loan amount, you should apply for unsecured loan.

These are the types of education loan abroad that you can apply for. Be sure to discuss everything related to the type of education loan you want to apply for with your financial institution. This will help you in making an educated choice, and you will be able to get the loan as per your requirements.