How to Apply for No Collateral Student Loan

Education loans have made the pursuit of academic courses easier, without burdening parent or guardians with liabilities, that we should be bearing. Educational loans are great financial aid to students who want to pursue studies in India or abroad. It helps students pursue their dream of studying and achieving admission to a university. Educational loans are mainly of two types – secured and unsecured, i.e. educational loan with collateral and education loan without collateral respectively. It is important to understand what is collateral, why is it needed and the difference between the two before making your decision to avail an education loan. Beyond that, this video will also help in understanding education loan without collateral options.
What is collateral?
Collateral is an immovable property (House, Flat or Land) or any other asset, preferably liquid asset, such as FD, shares, bond etc. that a borrower offers to a financier to secure the loan.
Why do I have to pledge a collateral?
If the borrower (you) stops repaying the loan, the bank can seize the collateral to recover its losses. For a quick glance, you can go through the below video on Non-collateral education loans. It details the process, rate of interest, terms etc.
What if you don’t have any collateral/security?
You need not worry as there are plenty of options available for you. There are many financial lenders that provide education loan without collateral. There are 4 NBFCs in India that provide education loan without collateral and some foreign NBFCs as well.
Things you need to know about unsecured loans:
• You need not pledge collateral to any Govt. bank if you are availing a loan up to INR 4 lakhs.
• According to guidelines set by RBI, all banks have provision to provide education loan without collateral up to INR 7.5 lakhs when certain criteria are met.
• If you want to avail an education loan that is more than INR 7.5 lakhs, private and NBFCs (Non-Banking Finance Corporations) provide loans up to INR 50 lakhs without security.
Which banks can you approach for education loan without collateral? 1. HDFC Bank: Domestic Education – Up to Rs.15 lakhs Foreign Education – Up to Rs.20 lakhs For loans up to Rs.7.5 lakhs no collateral is required.
2. HSBC: Loan up to Rs.5 lakhs do not require collateral
3. State Bank of India (SBI): Domestic Education – Up to Rs.15 lakhs Foreign Education – Up to Rs.20 lakhs For loans up to Rs.4 lakhs no collateral is required
4. Punjab and Sind Bank: Domestic Education – Up to Rs.15 lakhs Foreign Education – Up to Rs.20 lakhs For loans up to Rs.4 lakhs no collateral is required
5. IDBI Bank: Domestic Education – Up to Rs.15 lakhs Foreign Education – Up to Rs.20 lakhs For loans up to Rs.4 lakhs no collateral is required
All of the above banks and other banks have almost similar financial aid criteria which is loan up to Rs.4-5 lakhs is without collateral and amount exceeding 4 lakhs up to Rs.7.5 lakhs is approved with collateral as third party guarantee and the amount exceeding that, is with collateral as property.
What is the loan procedure for education loan without collateral?
But before going with the procedure one must be clear about the Eligibility Criteria for getting an education loan in India:
• The student should be an Indian National.
• Age of the Student – 18 to 35 years
• Confirmed admission in a college/university in India by the UGC/Government/AICTE/Appropriate Authority
• Scored minimum 60% (50% for SC/STs) in the examination for admission to graduation courses.
• Now the application process may vary from bank to bank but there are some fundamental steps to get one:
• Step 1: Fill in the loan application form
• Like in case of every loan, the applicant has to fill in an application form which may ask for details such as contact details, details relating to academics etc. it is important to fill in accurate information.
• Step 2: Personal Discussion
• Once the applicant, i.e. the student fills in the form, there is a round of personal discussion wherein he/she may be asked various question relating to the academic performance, the course one has selected, probably the institute etc. At this stage, it is very important to be lucid and clear about one’s selection of course and its future potential of generating income. While some banks are known to hold the academic record important, some may give it a slightly lesser attention. This does not go to say that one needs an excellent academic record. But, make sure that there are answers to those mishaps that could have occurred during the academic life.
• Step 3: Provide validated supporting documents
• Unlike other loans where the talk of documents relating to say property, might come in at a later stage and may cause delay-documents are a must. In case of education loans, documents relating to admissions are mandatory even before the bank considers the loan application. The bank will verify the enrollment of the student from the concerned institute. One may also require collateral security such as papers relating to property to be mortgaged if the loan amount is above Rs. 4 lakhs.
• Step 4: Stage of loan approval or denial
• For an education loan, a guarantor is mandatory. The guarantor could be an applicant’s parents or guardians. The bank will run a thorough check of the guarantor and his/her credit history before sanctioning the loan. After completion of the process, the loan may be sanctioned or denied.
• Step 5: Borrower’s signature on a Promissory Note
• While the parents/guardians are guarantors, the student is the actual borrower of the loan. Once the loan is sanctioned, the student has to sign a promissory note to the bank.
• Step 6: Disbursal of the loan
• Once the formalities are completed (additional documents and signed post-dated cheques may be required), the bank will disburse the loan. The bank may disburse the college/in stitute fee directly to the concerned institute.
• Online Applications
• In the current times, availing an education loan has been made even easier. Now, one can apply for an education loan online. The loan will be sanctioned only in principal and the applicant will have to contact the bank for actual approval and disbursement of the education loan.
So that’s it from this segment. Hope we could cleared out all your doubts about how to opt for a student loan that would help shape up their future barring any sort of financial glitch. Thank you for reading.
See you soon in the our next blog.
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