India now has 1,000 universities and 40,000 colleges, and the country’s higher education system is about to undergo a major transformation. In addition, the new National Education Policy (NEP) will significantly impact the overall system.
With changing times, the education system has come a long way in making our country progressive. At the same time, with this continuous evolution, the cost of education is also increasing at a sharp pace.
Given the cost of expenses, funding education becomes very challenging but thankfully there’s an easy option for students called an unsecured education loan through which they can afford to finance education and pursue their dream of higher studies.
Education loans have emerged as a panacea that addresses the concerns of both students and parents. With the help of unsecured education loans, no student would be denied funds to finance their dream of studying in India.
Banks, non-banking financial companies (NBFCs) and other financial institutes also provide unsecured education loans in India. This article will provide information on non collateral education loans in India.
Types of education loan
There are two types of education loans:
1. Secured education loan – A secured loan is one where the student must mortgage collateral to avail the loan. Both tangible (flat, house, non-agricultural land, etc) and intangible assets (insurance policy, fixed deposits, etc) are accepted as collateral.
2. Unsecured education loan – Unsecured loans are those where the borrower is not required to put up any type of security or collateral.
Unsecured education loan in India
In a non collateral education loan, the lender does not request collateral from the student in order to avail an education loan, saving time in the loan processing and simplifying the documentation process. This is the biggest advantage of an unsecured education loan.
Students have to meet certain eligibility criteria set by the lending institution like course, university etc to avail the loan. However, the interest rates are higher for education loans without collateral because the financial institution is taking on higher risks.
A student cannot take an unsecured education loan in India without a co borrower as the education loan without collateral is sanctioned on the basis of the income and CIBIL score of the co borrower or the guardian.
There are other factors also which students and co-borrowers have to meet in order to avail an education loan without collateral.
Purpose of unsecured education loan
Attending university may be the best decision for a student’s career, but funding the education can be difficult to come by. If they don’t have enough financial aid to pay for tuition and other costs, they should think about getting an education loan.
However, before signing anything, you should look for the best education loan rates and additional benefits.
How to apply for unsecured education loan
Aspirants can apply for education loan either online or in-person at a branch. The online process is very easy. Follow the steps to apply today:
- Visit the chosen financial company’s website and fill out the application form
- Enter your personal information and property details
- Fill out your/co-borrower’s income details to access a personalised offer
- After the submission of the required information, an authorised person will contact the student to provide additional loan processing instructions.
Unsecured education loan- Eligibility criteria for students
To approve educational loans, the lender will typically look at the following criteria. The applicant should:
- Be an Indian national
- Be 18-35 year-old
- Be looking to pursue skill development courses in India or full time regular courses at Indian colleges/universities
- Have a good academic record
- Have secured admission in select premier institutions through entrance test/selection process
Eligibility criteria for Co-borrowers
- Parent(s) must participate as a co-applicant.
- In case of a married person, co-applicant can be spouse/parent(s)/parent(s)-in-law.
- In cases where both parents are not alive, a close relative or guardian will be considered a co-applicant.
- Co-applicant must be an Indian national.
Traditionally, unsecured education loans in India cover the total tuition fee and some of the additional costs. Here are broad categories:
- 100% College tuition fees payable
- Accommodation charges
- Exam and library fees
- Books and equipment including a computer
- Traveling expenses abroad if any
- Other reasonable expenses required to complete the course
Documents required to avail unsecured education loan
Basic KYC documents, financial documents of the borrower and co-borrower are required. The loan assistant will give the student detailed and specific requirements at the time of application.
How can unsecured education loans help students?
The biggest benefit of an unsecured education loan is that the funds are easily available to students from any background.
1. Continue education without financial stress
A post-graduate degree from a prestigious institution can serve as a solid foundation for a thriving career and life but given the high costs and rising expenses, it may be difficult for students to fund their own higher education.
This is where an unsecured education loan can help. Students with less fortune can use it to achieve their goals without having financial stress. Not only are education loans available for higher education, but they are also available for graduate-level studies.
2. Education loan covers almost everything
Covers varied needs: Unsecured education loans cover both academic and non-academic fees such as tuition fees and living expenses including hostel fees, exam fees, library charges, lab fees etc. The loan also covers the cost of books and travel.
3. It is Cost-effective
Unsecured education loans with the best interest rates make repayment easier. To make loan repayment as simple as possible, lenders provide a variety of collateral and co-borrower options.
4. Get a loan easily
Usually, collateral is not required for a loan up to Rs 5 lakh. Lenders typically charge for the transaction processing and the loan can take up to two weeks to process. Depending on the fee structure and requirements, lenders may disburse the loan amount at once or in installments, either to the borrower or directly to the institution.
5. Achieve the dream of studying at a premier University
People of all classes can get an unsecured education loan irrespective of their source of income. If students are seeking admission to a prestigious university, they will probably need to take out a loan. While the score is essential for admission to any reputed university, it can also help them when applying for an education loan.
6. Helps build financial discipline
An unsecured education loan can help students build financial discipline. Timely and regular repayment of the loan is also a way of building a good credit score, which can help them or their parents get a better deal if they need to take out formal credit later on in life, such as a credit card, auto loan, home loan, etc.
Education can aid students in landing a position at a reputable company, and even the university they choose to attend can affect their capacity to entice major corporations to review their applications.
Unsecured education loans are available from a variety of lenders but finding the best loan providers in India is a challenging task. Varthana is driven to help students like you with financial aid to make the journey as smooth as possible.