Do you wonder if you can get an education loan to study abroad without pledging collateral or a financial co-applicant? The answer is yes! In this comprehensive guide, you will be taken through the types of education loans, conditions of eligibility, and some scenarios you can get an education loan without collateral and a financial co-applicant.

Understanding Secured and Unsecured Education Loans

  1. Secured (Collateral) Loans: These loans have collateral, immovable property (house, land), or liquid assets (fixed deposit, insurance policies). The rates of such loans are lower and eligibility is less restrictive.
  2. Unsecured (Non-Collateral) Loans: There is no collateral required in an unsecured loan. However, a financial co-applicant is most commonly required. These loans are usually required to have a strong financial co-applicant person with a steady income, who files income tax returns (ITRs).

So, what if you don’t have collateral or a financial co-applicant? these are the 3 scenarios where you may still be eligible for an education loan. 

Scenario 1: Education Loan for Students with Work Experience

If you have three or more years of work experience, you might be eligible for a loan without collateral or a financial co-applicant, provided you meet the following criteria:

  • Minimum Salary: 35,000 INR as the last drawn monthly salary.
  • University Requirement: The university should be one of the top 300 in the world.
  • Loan Amount: Interest rates between 10.5 and 11%, up to 40 lakh INR.
  • Programs Covered: It includes MS and MBA programs.
  • Non-Financial Co-Applicant: A financial co-applicant is not required, but a non-financial co-applicant (e.g. a parent or sibling) is required for contact purposes and must have a CIBIL score of at least 685.

This is perfect for students with good work experience but who don’t possess enough collateral or a co-applicant.

Scenario 2: Loans for Top Global Universities Outside the U.S.

WeMakeScholars provides unsecured loans with no financial co-applicant or collateral requirement and can help students take up a master's degree at leading institutions in Canada, UK, and Germany. Here are the details:

  • Loan Amount: Interest rates are approximately 12% and go up to 30–40 lakh INR.
  • University Ranking: It must rank in the top 100–200 worldwide and have a good employability record.
  • Programs Covered: Different master’s programs.
  • Non-Financial Co-Applicant: An additional co-applicant needs to be non-financial and the CIBIL score should not be below 685.

It is a good option for students with a solid academic background and who are accepted into reputed universities in the U.S.

Scenario 3: Loans from Foreign Lenders (Primarily for U.S. Education)

Foreign lenders provide an attractive alternative to Indian lenders for students planning to study in the U.S. who do not qualify for loans from Indian lenders. These loans are made in U.S. dollars, without collateral or co-applicant.

  • Loan Amount: Foreign lenders can give up to 80% of the total education cost in USD with 9 to 10.5% interest rates.
  • Currency Exchange Impact: As these loans are in U.S. dollars, exchange rates are volatile and a 9% USD loan rate is about a
  • 14% rate in Indian currency. This can increase currency exchange fluctuations which increases the repayment burden.
  • Tax Considerations: Under India Section 80E, loans from foreign lenders do not provide tax benefits.

While this option can be more expensive, this is a useful backup for students who don’t meet the criteria for the other three scenarios.

Few drawbacks of the USD loan

  • Currency fluctuation with INR depreciation (Ex: 1$ was 64 in Jan 2018 and today 1$ is above 70) ultimately you repay way higher than what you borrowed today
  • No income tax benefits under section 80E

So if your profile suits any of the above 3 cases, you are eligible to get a study abroad education loan without collateral and without a financial co-applicant.

Key Considerations for All Scenarios

  • CIBIL Score: If a non-financial co-applicant is needed then the CIBIL score of the co-applicant has to be better than 685. Loan rejection may be due to a low CIBIL score.
  • University and Program Requirements: These loans are meant for students in reputable institutions. Lenders favor universities with high employability rates.

It can be hectic for students alone to go through the loan process as we try our best to get students the best deal they can get. So do reach out to our financial officers by requesting a callback.

Our team of financial officers assists you with the entire education loan process until sanction, disbursement, and beyond. All the services offered by WeMakeScholars are free of cost as this initiative is supported by the IT Ministry, Govt. of India.

Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it's free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others.

FAQ

Can I get an education loan without collateral and a financial co-applicant for studying abroad?

Yes, you can get an education loan without any collateral or a financial co-applicant. Indian Government WeMakeScholars has come up with loan programs for students who lack these resources. The eligibility criteria are based on academic background, chosen university ranking, work experience, program type, and so on. For instance, students who attend top universities around the world or have significant work experience will qualify. Furthermore, some USD U.S. lenders lend to top USA universities but these loans come with higher interest rates and need no collateral or co-applicant.

What are the eligibility criteria for a loan without collateral and co-applicant based on work experience?

Students should meet specific criteria to be eligible for an education loan without collateral or financial co-applicant based on work experience. Applicants need at least three years of work experience with a last-drawn salary of at least 35,000 INR per month. The program has to be either an MS or MBA, and the chosen university has to be in the top 300 globally. Also, a co-applicant (not financially assessed) is required for contact purposes only, with a minimum CIBIL score of 685. Interest rates of around 10.5–11% and up to 40 lakh INR in loan amounts are available to eligible students.

Can students going to the U.S. for master’s programs get a loan without collateral and co-applicant?

Yes, students going to the U.S. for master’s programs can get an education loan without the need for collateral or a financial co-applicant. Besides the GPA and GRE score, many lenders offer loans based on the student's chosen university and academic record. Unsecured loans for students accepted to top-ranked U.S. universities could be offered by Indian financial institutions for amounts up to 65 lakh INR at interest rates between 11% and 11.5%. In addition, a non-financial co-applicant like a parent or sibling is required to be a part of the documentation, but the income or financial standing of the co-applicant is not taken into account.

Do foreign lenders offer loans without a co-applicant?

Yes, foreign lenders provide loans without a co-applicant for students studying for master’s in the U.S. These loans, funded in USD, require no co-applicant or collateral. They cover about 80% of education costs, and interest rates range from 9% to 10.5% in USD (about 14% in INR on account of currency exchange). However, such loans can come at higher repayment costs because of currency fluctuations and do not qualify for India’s Section 80E tax benefits. Indian loans are usually preferred when available, but they can be an option for students who may otherwise have no other resources.