Ankit Mehra, founder and CEO, GyanDhan, an education financing marketplace, tells you how to apply for an education loan in the pandemic.
The COVID-19 pandemic has changed the world, bringing in the 'new normal'.
The effects of the pandemic are also visible on the number of people seeking education loan segment for abroad studies.
With the introduction of hybrid and online classes, the process of studying abroad and the way students finance their education has changed.
To make it easy for the students to manage and maneuver the education loan process during the pandemic, here are 10 tips to help:
1. Who is eligible for a study abroad loan?
The criteria to apply for an international education loan dictates that the student should be an Indian citizen, who has secured admission to a recognized university through merit or entrance test.
Further, they should have secured at least 50% in the last qualifying examination.
These are the general criteria for a loan process.
The same could vary depending on the type of loan -- Secured or Unsecured -- the student has applied for.
There is no specific change in the criteria due to the pandemic. However, there is a definite impact on the approval rate as banks and other lending institutes are being cautious with sanctions.
Therefore, it is advisable to be certain that the student fulfills the eligibility criteria.
Other aspects of the loan application, such as the credit history, student profile, collateral details, etc., should also be vetted thoroughly before it is submitted.
2. What documents are required to apply for an education loan?
The abroad education loan process requires a long list of documents to be submitted along with the loan application, which vary depending on the type of loan.
To make it easy for the students, we are listing some general documents that are needed in every case.
- Loan application form
- Class 10, 12, and other academic records and mark sheets
- KYC: Pan card, Aadhaar card, current, and permanent address proof
- Entrance test scorecards -- GRE (Graduate Record Examinations) and GMAT (Graduate Management Admission Test)
- English proficiency test scores - PTE (Pearson Test of English), (The International English Language Testing System) and TOEFL (Test of English as a Foreign Language), Duolingo
- Proof of admission - conditional offer of admission can be submitted.
- Statement of expenses - the entire cost of education
If the student has applied for a loan with collateral, the list of documents will also include a few additional collateral documents, such as -
- Registered sale deed
- Chain of documents, evidencing ownership of the property for the last 30 years.
- Occupancy proof
- Latest Property tax receipt
For an unsecured education loan, the list of documents will include financial documents of the co-applicant, such as the salary slips/ITR (Income Tax Return).
The documents for the same will differ depending on the type of employment, such as self-employed or salaried.
There are specific documents that have to be submitted to the bank physically.
Since it is not wise to step out of the house currently, opt for a channel that allows you to upload documents online and complete the loan process from your home.
3. How to apply for an education loan?
The pandemic has changed the way banks work. With limited capacity, staff, and frequent lockdowns, the loan application process is no longer an in-person experience.
Though some lenders have started online operations, the process is quite inefficient.
While you can approach your nearest bank, you can also look for organisations that are simplifying the education loan process making it largely online with personalised services.
You may check with multiple lenders and decide on the best possible lender based on your eligibility and requirements.
You will be provided with a document checklist and an option to either upload documents on the portal or doorstep document pick-up.
4. When to apply for an abroad education loan?
It is advisable to get in touch with a bank representative as soon as you secure admission to a university.
Start with checking loan eligibility while exploring and applying to universities to get an idea about the loan amount and documents required.
With the pandemic in play, the loan process has further slowed down. Therefore, students should start their loan application process at the earliest.
5. What is the processing time for an education loan?
On approaching the lender directly, it can take anywhere from two weeks to a month or more for loan approval.
The processing time for a secured education loan is currently impacted due to several stakeholders, like property evaluator, lawyer, etc.
Lenders and marketplaces are working to figure out an alternative to minimise inconvenience. However, you can still expect loan approval within 2-3 weeks (for a secured education loan), and 3-4 days (for an unsecured education loan).
6. What are the processing charges for an education loan?
A processing fee is charged by the lender to cover the cost of processing the loan application (includes other operational costs).
This fee charged by nationalized banks is fixed and ranges up to INR 10,000, plus GST.
On the other hand, private lenders, such as Non-Banking Finance Companies (NBFCs), charge up to 1.5% of the loan amount.
The processing fee should be taken into account before starting the loan process. Explore and compare the cost of different loan products to save some money.
7. What to do if the loan application is rejected?
Loan rejection is a real possibility in this pandemic as the banks are sifting through loan applications more carefully.
The lender generally communicates the reason for loan application rejection. The borrower can rectify those errors and apply for the loan from a different lender.
It may help if you are in constant touch with the bank official or representative, to help you rectify the error or guide you to apply for the loan from elsewhere.
8. Can I get loan disbursement from two lenders?
Students can submit loan applications to various lenders as is advised to increase loan approval chances in this pandemic.
Legally, students can also get disbursements from both lenders. However, after the first disbursement from Lender A, Lender B might deny the disbursement.
9. Do I need collateral or a co-applicant to apply for a loan?
A good way to ensure loan sanction is to pledge collateral as it will give assurance to the lender in these uncertain times.
If the borrower cannot arrange for collateral, an unsecured education loan is the best option available. However, make sure the co-applicant and the student’s profile are spotless to get loan approval.
If the borrower has neither collateral to offer nor are they willing to have a co-applicant, they can apply for an education loan from an international lender.
10. Which is the best lender for an education loan in an uncertain time?
The best lender for an education loan depends on various factors and is case-specific.
However, a lender that is most cost-effective is the best even in uncertain times like the pandemic.
Students should look out for factors like the interest rate offered, the processing fee, and loan tenure of various loan products.