Education loans provide many aspiring students with the necessary funds to pursue a foreign degree. However, some common mistakes, such as a lack of research on ideal lenders and loans, late applications, incomplete documentation, etc., can jeopardise your dreams of an overseas education. All it takes is one of these to derail your dream, which is why awareness and preparedness are essential.
Read this blog to learn more about the top six mistakes to avoid while applying for an Education Loan to study abroad and make a smart, informed decision.
6 Common Mistakes to Avoid When Applying for an Education Loan
1. Not Researching Multiple Lenders
Neglecting in-depth research about Education Loan products and lenders can lead to a mismatch between your financial needs and what you finally receive. Begin by deciding whether you need a secured or unsecured loan; the first offers easier approvals due to a collateral requirement from your end, and the latter has stricter eligibility but offers collateral-free peace of mind.
Then, follow these steps to find an ideal lender:
- Identify reputed NBFCs and lending institutions that specialise in student loan offerings for overseas education.
- Go through reviews, student forums, and testimonials for genuine user experiences and recommendations.
- Cross-check approved universities and course lists specific to each lender.
- Compare not just the interest rate, but also charges such as processing fees, loan margin requirements, late payment penalties, and conditions for top-up loans.
- Look into whether they offer features like flexible repayment schedules, moratorium periods, support during emergencies, and secured or unsecured options.
2. Overlooking The Importance of a Co-Applicant
A co-applicant or cosigner is a common requirement for an Education Loan to study abroad, especially for students or applicants with a low credit score or no credit history. In the event that you (the primary borrower) fail to pay off the loan, the cosigner becomes immediately responsible for the loan payment. Because they act as additional security for the lender, cosigners make approvals easier.
It’s important to pick an ideal cosigner since it could affect your application’s approval chances. Your cosigner should have a high credit score and a low debt-to-income ratio, demonstrating good financial behaviour. Having stable income from reputable government or private sector employment is an additional plus.
Also Read: Understanding How Education Loan Works: Types, Benefits, and Process
3. Starting Your Education Loan Application Too Late
Delaying your application for an Education Loan until the last minute is a common and costly mistake; it may not impact your loan eligibility but could affect your admissions. Universities and immigration authorities often insist on timely proof of funds for tuition and living expenses, without which your admission may be at stake.
Waiting too long can lead to missed university deadlines, failed visa interviews, or even higher loan interest due to rushed decisions. Instead, shortlist vendors as soon as you start applying to universities, keeping your documentation prepared alongside. Finally, apply for your loan at least 5 months before your course begins. This also helps you secure a sanction letter that can be submitted as proof of funds for your visa.
4. Submitting Incomplete Documentation or Missing Eligibility Criteria
Documentation gaps or failing to meet lender eligibility are among the most common reasons for Education Loan delays or rejections. Each NBFC or lender specifies a list of mandatory documents and baseline requirements. Prepare your paperwork meticulously and cross-check requirements with your lender before you apply for a student loan for overseas education.
Required documentation typically includes:
- University admission letter and complete fee structure
- Identity and address proof (PAN card or Aadhaar card)
- Academic records (marksheets, certificates)
- Co-applicant’s KYC and income proof
- Collateral documents (if the loan amount requires security)
Eligibility criteria often involve:
- Indian citizenship and a minimum age of 18 years
- Proof of confirmed admission to a recognised overseas course
- A co-applicant (parent or guardian) with a steady income and good credit history
- Minimum CIBIL score cutoff for both applicant and co-applicant
5. Not Understanding All the Loan Terms and Charges
Incorrect assumptions about what your Education Loan covers and how funds are disbursed can cause undue stress and financial gaps while you’re abroad. This normally begins with what the loan covers; while they’re extensive, education loans don’t cover charges like day-to-day expenses, certain insurance premiums, and study-related purchases like a laptop.
Then, focus on the repayment terms, whether it’s simple or compound interest or having a fixed vs floating loan. Double-check the terms around your moratorium period and confirm whether interest will continue to accumulate or if you can make interest-only payments.
Finally, ensure you know what the additional and hidden costs are, like administrative charges, processing fees, prepayment penalties and late payment charges. Left unchecked, they can add up, increasing your financial stresses.
6. Poor Financial Planning for Repayment
Focusing exclusively on securing the loan without considering factors such as fluctuating foreign exchange rates, interest accrual during the moratorium, and a possible job search period post-course can all affect your finances. Similarly, once you have the loan, having a repayment plan is crucial.
Effective planning means:
- Calculating the total repayable amount, including accumulated moratorium interest
- Accounting for likely currency exchange variations if your income post-study will be in a foreign currency
- Building an emergency fund to manage payments during job searches or unforeseen delays in employment
To Conclude
Avoiding mistakes like a lack of research and not planning repayment are critical for your study plan to go smoothly. Unnecessary and avoidable financial stress shouldn’t spoil your once-in-a-lifetime academic experience.
Doing your diligence and choosing a lender like Poonawalla Fincorp will help you find the best loans tailored to your needs. Apply for an Education Loan with us today!
Frequently Asked Questions
What is the eligibility for an Education Loan for abroad studies in India?
Most NBFCs require you to be an Indian citizen, aged at least 18, with confirmed admission to a recognised overseas course. A co-applicant with a stable income and a good credit score is usually necessary.
How much loan amount can I get for studying abroad?
The approved loan amount varies based on the course, university, collateral provided, and the co-applicant’s financial background. With Poonawalla Fincorp, you can secure up to ₹1 Crore Education Loan without any collateral.
What expenses are typically covered by an Education Loan for abroad?
Most loans cover tuition fees, accommodation, travel expenses, examination fees, books, and equipment. Daily living costs, insurance, and some private accommodation may not be included.
Do I need to provide collateral for an Education Loan?
Collateral is generally required for higher loan amounts, and accepted forms usually include residential property or fixed deposits. Many NBFCs offer unsecured loans up to a certain limit.
When should I apply for an Education Loan for abroad?
It’s best to start your loan application three to four months before your course begins. This timing ensures you meet university and visa deadlines without last-minute stress.
What documents are needed to apply for an Education Loan?
Commonly required documents are your admission letter, academic records, fee structure, you and your co-applicant’s KYC proofs, income statements, and property documents if collateral is needed.
What factors affect Education Loan approval?
Approval depends on your university’s recognition, the course, your academic history, the co-applicant’s financial standing and credit score, and complete documentation.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply