Should I be taking unsecured or secured education loan for my study abroad? This is a common question students face when they are choosing a loan. Let us deep dive into the same.

Education loans without collateral, often referred to as unsecured education loans in financial institutions’ terminology, offer several advantages and disadvantages. Understanding these can help you make an informed decision about your education financing. Let’s delve into the details:

Advantages of Unsecured Education Loans:

1. Faster Processing Time: Unsecured education loans typically boast a quicker processing time, usually around 2-3 weeks.

2. Lower Processing Fees: Compared to secured loans, unsecured education loans generally come with lower processing fees.

3. Inclusive Processing Fees: Some NBFCs incorporate processing fees into the loan amount itself, making the upfront costs more manageable.

Disadvantages of Unsecured Education Loans:

1. Lower Loan Limits: Unsecured education loans often come with lower loan limits, potentially limiting your funding options.

2. Government Bank Restrictions: Government banks like State Bank of India and Bank of Baroda typically do not offer unsecured education loans exceeding 7.5 lakhs. An exception is Union Bank of India, providing up to 40 lakhs in unsecured loans at a 9.8% interest rate for the top 150 universities globally.

3. Higher Interest Rates: Generally, unsecured education loans entail higher interest rates, with a typical difference of about 1%. While top-quality private banks like IDFC First, Axis Bank, and ICICI Bank offer lower interest rates than secured loans from leading government banks, loans from NBFCs such as HDFC Credila, Avanse, and InCred tend to be more expensive than secured loans.

Requirements for Obtaining a Favourable Unsecured Loan:

1. Admission to Top-Tier University and Course: Securing admission to a renowned university and course is a crucial prerequisite.

2. **Strong Academic Background:** Excellent academic performance in 10th, 12th, Graduation, and GRE/IELTS/TOEFL scores enhances your eligibility.

3. Co-Borrower with Healthy Income: A co-borrower with a higher monthly income and minimal or no existing EMIs strengthens your loan application.

4. High CIBIL Score: A robust CIBIL score for the co-borrower is essential to secure a favourable unsecured loan.

Unsecured Loan Amounts We’ve Secured for Our Students:

1. ICICI Bank: 75 lakhs – 1 crore at 10.85% interest rate, with no loan insurance and a processing fee of 30,000 INR + GST.

2. Union Bank of India: Up to 40 lakhs at a 9.8% interest rate, without loan insurance or processing fees.

3. IDFC First Bank: 50 lakhs – 75 lakhs at 10.5% interest rate, with a 1% processing fee and 1-1.5% loan insurance coverage.

4. HDFC Credila: 50 lakhs at 11.5%-12% interest rate, with 0.75%-1% processing fees and 0.5-1% loan insurance.

5. InCred: 62 lakhs at 12-12.7% interest rate, with a 1% processing fee and 1-1.5% loan insurance.

6. Avanse: 25 lakhs at 12% interest rate, accompanied by a 1% processing fee and 1.5% loan insurance.

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