How to get an education loan without any collateral
However, you can get a student loan without pledging any collateral. The Credit Guarantee Fund for Education Loans (CGFEL) program provides a guarantee for education loans distributed by banks under the Association of Indian banks (IBA). Under this program, you can get unsecured loan amount up to Rs 7.5 lakh without providing any third party collateral.
There is no margin requirement if you apply for a loan within this limit from a regular commercial bank under the CGFSEL program. This means that the bank can finance up to 100 percent of the loan, if the loan is up to the limit of Rs 7.5 lakh. Under the CGFEL program, you can get a loan of up to Rs 10 lakh to study in India and up to Rs 20 lakh to study abroad. But, if you take out a loan of more than Rs 7.5 lakh, the bank may ask for collateral for the loan amount. The bank may also ask you to deposit money on margin and ask for a third party guarantee.
Gaurav Aggarwal, Director and Head of Secured Loans, Paisabazaar.com, said lenders normally require a third party guarantee or tangible collateral as collateral, depending on the loan amount. He said: “You do not have to provide collateral and present a third party guarantee for a loan of up to Rs 7.5 lakh under the CGFSEL program.”
Do all banks offer unsecured student loans?
IBA has formulated the “Model Education Loan Scheme” to financially support deserving students who wish to pursue higher education in India and abroad.
The guidelines issued by IBA for the CGFSEL education loan program are generally followed by banks. However, banks may vary in granting loans under the scheme according to their own internal rules.
Aggarwal said some banks offer an unsecured loan option for students wishing to pursue graduate studies at leading institutes. However, it is at the sole discretion of the bank to waive the third party guarantee or the tangible guarantee requirement. He further explains, for example, that for loans up to Rs 4 lakh, lenders only require parents / guardians as joint borrower (s). But, lenders can apply for appropriate third party collateral for loan amount between 4 lakh and 7.5 lakh Rs, besides having parents / guardians as joint borrower.
However, “you will have to provide a tangible material guarantee if the loan amount is more than Rs 7.5 lakh, as well as the allocation of the student’s future income for the payment of down payments,” he added.
Can you get unsecured loan over Rs 7.5 lakh?
However, if your student loan requirement is more than Rs 7.5 lakh or even more than Rs 10 lakh, you can contact other lenders for unsecured loan. Adhil Shetty, CEO of BankBazaar.com, said: “Non-bank financial corporations (NBFCs) and private lenders can provide you with unsecured loans for a higher amount, but these unsecured loans are sanctioned at a rate of. slightly higher interest than a student loan taken out with a guarantee. ”
Procedure for applying for a student loan
Before applying for an unsecured student loan, you should be aware that the student is the primary borrower of the student loan and that the parent, spouse or sibling may be the co-applicant.,
Banks usually ask for the co-applicant’s details when you apply for an unsecured loan. Not only that, banks also ask for the income documents such as payslips or income tax returns (ITRs) from the co-applicant before sanctioning the student loan.
As per the guidelines of the Reserve Bank of India (RBI), there are no restrictions on the upper age limit, but some banks may have it according to their own internal rules and regulations.
To apply for the loan, you must be an Indian citizen, have obtained admission to a college / university recognized by a competent authority (NAAC / NBA accredited institutions / programs or institutions of national importance or technical institutions funded by the center (CFTI) ) in India or abroad.
The lender will request the college / university admission letter with the fee structure for the course for which you have applied for the study loan. Apart from this, lenders may also require documents such as grade X, XII, and graduation grade sheets (if applicable).
When your loan application is accepted by the lender, the lender pays the amount directly to the college according to the given fee structure.
Points to remember
- All students receiving a student loan under the CGFSEL student loan program also benefit from a one-year moratorium on repayment after graduation. Basically, lenders can give around a year to start repaying the loan after you finish your studies.
- Shetty stated that the benefit of the tax deduction under Section 80E of the Income Tax Act for interest paid on education loans is only available when you have taken out the loan from A financial institution operating under the Banking Regulation Act 1949 or a prescribed trust / qualifying institution rule. “So when you apply for an unsecured loan of over Rs 7.5 lakh from unqualified institutions, you may miss out on the benefit of tax deduction under section 80E of the tax law. on income, ”he said.
- Usually, the loan repayment period is 15 years. However, you should try to repay the loan amount at the earliest, as the benefit of tax deduction is only available for a maximum of 8 years.