1. Repo Rates set by RBI ( Reserve Bank of India )

2. Past academic record

3. Reputation of Country, University and Country that student is going to.

4. Income and credit history ( cibil score ) of co-applicant and student (if work experience exceeds 2 years)

5. Loan type collateral / non-collateral.

You only repay what you use.

In an education loan, you are only liable to repay the principal amount disbursed (+ interest accrued on the same) through equated monthly installment or EMI. You are not forced to avail the entire sanctioned amount.

TCS: Tax Collected at Source.

TCS is Tax Collection at Source. TCS is applied by Govt of India to track the money being sent out of India under the Liberalised Remittance Scheme (LRS).

It usually is 20%, for example for sending INR. 1,00,000 abroad, you actually pay INR. 1,20,000

But for education loan the TCS applicable is 0.5%. For example for sending INR. 1,00,000 you actually pay only INR. 1,00,500

Income Tax Deduction under Article 80E.

The interest component of your loan is fully tax deductible for 8 years without any maximum limit for the person repaying the loan.

No prepayment penalty:

Education loan as a product has a special no prepayment penalty due to govt regulations in favor of the students. This enables students to pay back the loan faster if they wish to do so.

As soon as you finalise your country of destination, the course that you are going for you should start your application process.

This will help you with the following:

1. Understanding the loan limit and choosing university accordingly.

2. No last minute hassle and stress of looking for a loan.

3. Opportunity to make an informed decision, by comparing all the available options.

You can start your application process with us by clicking here and booking your free consultation call.

Interest on an education loan starts from your first disbursement. Interest is levied on disbursed amount and not on the sanctioned amount.

The moratorium period is usually the course duration plus 6 months or 1 year where the lender allows a student to take adequate time to sort out their finances and prepare for loan repayment accordingly. Banks generally charge interest for the moratorium period, which is later added to the principal.

Moratorium period for most Bachelors courses abroad is zero. That means the EMI starts from the very next month.

Moratorium period for most masters courses is 6 months to one year.

1. If you have secured funding proof required for i20 yourself, then you can apply for loan post receiving i20. But our recommendation would be to start the loan process as soon as you receive your first admit letter from the university.

2. If you do not have funding to prove funds needed for i20, then you should immediately apply for the loan.

1. The university gets the tuition fees.
2. Students get living expenses and other additional amounts for expenses.

1. United States of America (USA)
2. United Kingdom (UK)
3. Canada ( Lately a bit tricky due to too many changes happening on policies.)
4. Australia
5. New Zealand
6. Germany
7. Ireland
8. France

1. STEM - Science, technology, engineering and mathematics

2. Management - MBA, MIM

This doesn't mean the other courses do not get education loans. We can help you get an education loan for them as well.

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Overview

At Peaceful-Loan.com, we have frequent conversations with students who have secured admissions in prestigious universities abroad. They are searching for the most affordable education loan to make their dreams come true. When they mention "cheapest," they are referring to the interest rate. Despite our efforts to educate and guide them to consider other loan aspects, it seems that many overlook these factors.

What will this article help with?

Most education loans operate on floating interest rates.

But what exactly is a floating interest rate?

How does it fluctuate?

What indicators influence potential increases or decreases in the loan's interest rate?

Lending Institutions in India:

1. Public sector banks like SBI, BOB, and UBI.

2. Private sector banks such as ICICI, Axis, Yes, and IDFC First.

3. Non-Banking Financial Companies (NBFCs) like HDFC Credila, Avanse, and InCred

ROI: Rate of Interest

Interest rate, often referred to as ROI (Rate on Interest), is a vanity metric in its raw form. Although I have reservations about this narrow focus, I will attempt to help them understand the importance of interest rates.

What are Interest Rates linked with?

Additionally, these interest rates are linked to the repo rate set by the Reserve Bank of India (RBI), broadly speaking.

Now, does that mean if the repo rate were to decrease by 50 basis points (0.5%) next quarter, my loan interest rate would immediately reduce by the same amount? The simple answer to this complex question is no. It might, but there are no guarantees.

Let us learn with example

SBI typically offers education loans with floating interest rates linked to the Marginal Cost of Funds Based Lending Rate (MCLR). If the repo rate decreases by 50 basis points, SBI MAY consider revising its MCLR, which would consequently affect the floating interest rate on their education loans.

What determines this MAY?

State Bank of India (SBI) periodically reviews and adjusts its Marginal Cost of Funds Based Lending Rate (MCLR). The frequency of these revisions can vary depending on market conditions, the prevailing interest rate environment, and the monetary policy established by the Reserve Bank of India (RBI). Historically, SBI has revised its MCLR on a monthly basis. However, it's important to note that the actual frequency of MCLR revisions may change based on the bank's internal policies and external factors. To obtain the most accurate and up-to-date information regarding SBI's MCLR revision schedule, it is recommended to visit their official website or contact the bank directly.

For historical MCLR data, you can refer to: https://sbi.co.in/web/interest-rates/interest-rates/mclr-historical-data

Allow us to help you understand this better:

If you find this complexity challenging to grasp and desire expert guidance, feel free to reach out to us at www.Peaceful-Loan.com #studyabroad #educationloan

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Introduction:

There seems to be a growing pattern among the people I speak to regarding who needs an education loan for studying abroad. Many individuals I interact with believe that wealthy families, who have ample resources, do not seek education loans.

However, my own experience with several clients have debunked this myth and offered me a different perspective. Do wealthy families consider education loans as an option?

Absolutely. Let me outline the reasons why they do:

Wealthy families are mindful of how their money works for them. They evaluate decisions by weighing the cost of capital against funding it entirely by themselves.

7 Reasons why wealthy families opt for education loan:

1. Income tax benefits for eight financial years, with no upper limit on tax breaks under the Income Tax 80E rule. This effectively reduces the interest rates to around 7-8%, even in the current high-interest rate macro environment.

2. Income tax opportunity cost: No wealthy family keeps 1-2 crores sitting in their bank accounts to fund their child's education. Liquidating assets in such cases would attract short-term or long-term capital gains tax. This increases the cost of education to 1.15X to 1.2X, without considering any other aspect at all.

3. Opportunity cost of capital invested in equity or real estate: Both these asset classes are typically viewed with a long-term perspective, offering an expected return on investment of 12-15%. Withdrawing from these investments means missing out on potential earnings at 12-15%, compared to obtaining a loan at 7-8% (after tax benefits).

4. Cash flow: We have observed that wealthy customers often have lower liquidity. They prefer to fund education through loans rather than facing the hassle of liquidating investments every few months due to stock market or real estate fluctuations and the associated tax impact.

5. TCS (Tax Collected at Source): Currently, there is a 5% TCS applicable to money remitted outside India, which will increase to 20% from 1st July '23. However, if an education loan is availed, the TCS rate is only 0.5% instead of 20%. Although this only affects cash flow, who would want to block the extra money?

6. Accountability of the children: Wealthy families aim to instill a sense of accountability in their children. Taking a loan for education in the child's name promotes more responsible behavior, ensuring that they don't take this opportunity for granted. Paying back the loan on their own gives them a sense of accomplishment.

7. No foreclosure charges: In case parents wish to pay off their children's education loan in one lump sum later on, education loans do not incur any foreclosure charges in India.

Conclusion:

If a family is considering funding education costs worth 1 crore for their child, opting for an education loan is undoubtedly a financially savvy option.

Scenario 1: Self-Funding

Effective Cost: 2.33 crores = 1 crore + 20 lakhs (TCS) + 17.6 lakhs (minimum capital gain tax for liquidating 1.17 crores worth of assets) + 96 lakhs (loss of 12% income for 8 years)

Scenario 2: Funding through Education Loan

Effective Cost: 1.36 crores = 1 crore + 0.5 lakh (TCS) + 35.71 lakhs (8% interest for 8 years)

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1. Interest Rate:

Most international education loan have floating interest rates. Understanding the concept of floating interest rates is crucial.

Financial institutions may mislead borrowers by stating that the interest rate is simple interest when, in reality, it is a compounding interest rate after the moratorium period and simple interest during the moratorium period.

It's important to inquire about the compounding frequency, whether it is daily or monthly, as higher compounding frequencies make the loan more expensive.

2. Moratorium Period:

The moratorium period is defined as an EMI-free period starting from the loan sanction date, plus an additional grace period after graduation.

The intention behind this period is to allow students to settle down, find employment, and start earning before beginning repayment.

However, it's essential to note that most bachelor's degree students do not receive a moratorium period and must start repaying the loan immediately. The EMI is typically applicable only to the disbursed amount until the last calculation cycle, which tends to favor financial institutions.

For popular master's courses in countries like the USA, the moratorium period ranges from 6 to 12 months. During this time, banks charge interest on the disbursed amount, which is added to the principal if the borrower fails to pay the full or partial interest amount. It's crucial to understand that partial simple interest during the moratorium period does not waive the remaining interest—it accrues.

3. Loan Tenure:

Based on our experience at Peaceful-Loan, international education loan tenures usually range from 8 to 15 years. In our opinion, longer tenures are preferable, provided there are no foreclosure or part payment charges.

4. Prepayment and Foreclosure Charges:

According to RBI guidelines, there are no foreclosure charges for partial or full prepayment of international education loan. However, it's important to note that these guidelines do not apply to Non-Banking Financial Companies (NBFCs). Therefore, it's essential to check whether your lender is an NBFC or a bank. One commonly misunderstood entity is HDFC Credila, which is not part of HDFC Bank but is an NBFC.

5. Maximum Loan Limit:

The maximum loan amount can vary based on factors such as the student's destination country, university, course category, and the financial strength of the co-borrower. Many students compare their loan limits with those of their friends and become disappointed. At Peaceful-Loan.com, we actively educate students and help them set realistic expectations. It's important to note that offering collateral does not necessarily guarantee a higher loan limit. If your financials inherently support higher limits, it is possible, but having low or no income with significant collateral will not secure a large loan. It's crucial to have a clean financial record and a good income on paper to obtain a sizeable education loan.

6. Disbursement Frequency:

Does the loan disbursement align with your term-wise requirements, or is it a one-time disbursement? Some students who are unable to secure an education loan opt for Loan Against Property (LAP) or Loan Against Security (LAS), which provide 100% disbursement on the first day. These loans are renewed annually with processing fees paid at each renewal.

7. Disbursement Recipient:

Different types of disbursements include direct disbursement to the university, disbursement to the co-borrower's account, and disbursement to the student's account. Disbursement to the university may attract additional charges like Forex fees, which are usually disclosed by banks at a later stage.

9. Tax and TCS Advantages (80E):

Does your loan cover the 80E tax advantage and TCS advantage? It is important to ensure that these aspects are covered. While all banks legally provide these advantages, most NBFCs claim that none of their past students have encountered issues with claiming them. However, it remains a gray area with NBFCs.

Conclusion:

Understanding the terms and conditions of education loans for study abroad is crucial to avoid unexpected financial burdens. By considering factors such as interest rates, moratorium periods, loan tenure, prepayment and foreclosure charges, maximum loan limits, disbursement frequency and recipient, covering past dated payments, and tax advantages, students can make informed decisions. At Peaceful-Loan.com, we are dedicated to educating and assisting students in obtaining suitable education loans.

There are 20 plus such parameters to consider.

Reach us in case you want to know more. www.Peaceful-Loan.com or Mangesh@Peaceful-Loan.com

You can book a free consultation call by clicking here.

Introduction:

TCS is Tax Collection at Source. TCS is applied by Govt of India to track the money being sent out of India under the Liberalised Remittance Scheme (LRS).

Is TCS 20%? Does that mean I have to incur 1.2X of the cost of studying abroad?

Till 7 lakh INR of foreign remittance [i.e. sending money to foreign countries from India] per year is 0% TCS. Above 7 lakh INR of foreign remittance TCS rate is applicable based on the following conditions.

1. Rate of TCS:

TCS is 20% for all categories except education and medical treatments from 1st Oct 2023. Earlier it used to be 5%.

TCS on education funded by a study abroad education loan from approved financial institutions is 0.5% from 1st Oct 2023. Earlier it used to be 5%.

2. Cost of Education: TCS

So your cost of education will not be 1.2X due to changes in TCS rules.

e.g. A student's tuition fees + living cost is 50 lakh INR per year for studying abroad.

Student's parents fund it themselves: The first 7 lakh will attract 0 TCS. and the next 43 lakh INR will attract 5% TCS. That makes the total TCS amount to 2.15 lakh INR over and above 50 lakh payment. 52.15 lakh INR of total liquidity needed.

The student's parents have intelligently decided to fund it through an education loan: The first 7 lakh will attract 0 TCS. and the next 43 lakh INR will attract 0.5% TCS. That makes the total TCS amount to 21.5 thousand INR over and above 50 lakh payment. 50.21 lakh INR of total liquidity needed.

Education loans saved the parents or students 1.935 lakh INR in TCS per year on 50 lakh INR of fees.

3. Is TCS a cost?:

No, TCS is not a cost. TCS is an advance tax paid. So TCS paid will be shown in your year-end income tax filing as advance tax deposited in your account and can be adjusted against the total income tax due. But it becomes liquidity stuck almost for a year before you can adjust it against your income tax due to the govt.

4. References:

Income Tax India: https://incometaxindia.gov.in/communications/circular/circular-10-2023.pdf

Calclub India:

https://www.caclubindia.com/articles/understanding-impact-of-new-tcs-rule-on-educational-expenses-for-students-studying-abroad-49812.asp

Conclusion:

We at Peaceful-Loan.com are experts at secured and unsecured education loans for all study abroad programs and MBBS programs in India.

We have partnered with 15+ financial institutions including SBI, BOB, UBI, ICICI Bank, Axis Bank, IDFC First Bank, Yes Bank, Axis Bank, HDFC Credila, Avanse, InCred, Auxilo, MPOWER and Prodigy.

Save time and money by applying through us.

You can Reach us in case you want to know more. www.Peaceful-Loan.com or Mangesh@Peaceful-Loan.com

You can book a free consultation call by clicking here.

Introduction:

Macro trends on enablers of Study Abroad Dreams:

We often engage with students seeking loans to support their dreams of studying abroad.

Due to various factors listed below gaining admission to foreign universities has become easier than it was a decade ago.

1. New-age career counselling startups

2. Increasing awareness about possible options

3. The rising cost of education in India

1. Banks and NBFCs contribute over 90% of education loans in India. They have seen limited innovation in study abroad loans except the advent of HDFC Credila.

2. Education Inflation: The cost of education is growing at twice the rate of normal inflation for study abroad programs. This education inflation is making self-funded or family-funded education challenging for aspiring families.

The disparity in demand and supply can only be plugged by preparing well in advance for your education loan. Despite counsellors addressing this matter early in the application process, there is still a significant rejection rate of approx. 50%-60% in the education loan segment.

Reach us in case you want to know more. www.Peaceful-Loan.com or Mangesh@Peaceful-Loan.com

You can book a free consultation call by clicking here.

Securing funds to study abroad, still remains a challenge

Lets Understand why banks and NBFCs reject education loan application:

1. Non-availability of Co-borrower:

Many students and parents are unprepared to have a financial co-borrower.

Ideally, close family members such as parents, siblings, or uncles are acceptable co-borrowers.

Unrelated parties like friends, friends' parents, or distant relatives are not accepted as co-borrowers.

2. Low Income of Co-borrower:

A co-borrower should ideally have an annual income of at least INR 5 lakhs.

Annual income must be proven with salary slips, Form 16, and / or ITR filings.

Lack of this documentation can lead to rejection of the application.

A poor CIBIL score for both the co-borrower and the student is a significant obstacle.

This can be mitigated by adding collateral against the loan or introducing another co-borrower with a higher CIBIL score and good income.

Existing default by any of the parties as part of the application would likely lead to rejection.

3. Poor CIBIL Score:

Repayment capacity per month is calculated for the co-borrower or co-borrower of the loan.

Repayment capacity per month = Per month in hand post-tax income - EMIs paid - household expense per month.

This is also called the FOIR score by financial institutions.

FOIR - Fixed Obligation to Income ratio. The lower the FOIR, the higher is the repayment capacity.

Banks provide loans to customers with consistent cash flow and not high net worth but no cash flow.

4. Low Repaying Capacity:

5. Incomplete or Fake Documents:

The list of required documents for an education loan application is extensive but non-negotiable.

For the list of documents you can reach out to us at Peaceful-Loan.com

Countries like the USA, UK, Australia, Germany, New Zealand, Canada, Ireland, and France are easier to get education loan approvals for.

While banks often consider countries like Russia, China, Afghanistan and Uzbekistan as high-risk loans.

6. Country of Destination:

STEM (Science, Technology, Engineering and Mathematics) courses are easier to get education loans for.

Other courses like MBBS, arts, and fashion are difficult to get an education loan for.

7. Type of Course:

Poor academic performance in the past, such as below 60% in 10th, 12th, and graduation, is considered a risk factor by the financial institutions. So increases the chances of rejection of the education loan application.

A drop year, a KT or a backlog are not perceived as healthy signs for education loans.

8. Students' Past Academics:

9. Unrecognised Institution for Future Studies:

If the University, where admission is secured, is not a top-ranked and / or a recognised university by the financial institution, loan approval becomes a tricky task.

Each financial institution maintains its list of recognised universities and courses allowed for loan sanction.

Multiple loan inquiries at various financial institutions can lower the CIBIL score, affecting the chances of getting a loan.

10. Numerous Loan Inquiries:

A student's age beyond 35 or a co-borrower's age beyond 60 can be a hurdle in getting an education loan approved.

While the co-borrower's age can be mitigated by adding a younger co-borrower, the student's age remains a non-solvable issue.

11. Age of the Student:

Understanding how to prepare for education loan is a crucial step in achieving your dream of studying abroad.

Peaceful-Loan is here to help you understand how you can be ready and get the optimal possible loan from the right financial institution.

Reach us in case you want to know more. www.Peaceful-Loan.com or Mangesh@Peaceful-Loan.com

You can book a free consultation call by clicking here.

Introduction:

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.

Education loans without collateral / non-collateral loan, often referred to as unsecured education loans in financial institutions' terminology,

They 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 / non-collateral education loan typically boast a quicker processing time, usually around 2-3 weeks.

2. Lower Processing Fees:

Compared to secured / collateral based loan, unsecured / non-collateral education loan 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 / non-collateral education 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 Rate:

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.

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.

Seeking Guidance on Education Loan Options?

There are 20+ parameters we assess before advising you on the optimal loan term offer.

We have attempted to simplify the understanding of non-collateral education loan / unsecured education loan for you.

If you're a student who has secured admission to a foreign university and is in search of education loan guidance, feel free to reach out to us in case you want to know more. www.Peaceful-Loan.com or Mangesh@Peaceful-Loan.com

You can also book a free consultation call by clicking here.

You should plan on avg salary out of campus, avg expenditure during job to understand how much EMI you can afford. Take loan amount only upto the EMI which you can afford.

For an education loan, you repay only the amount that you disburse + interest accrued on the same..

For example: If you get a sanction for 40L and use only 10L you will only have to repay 10L + the interest component.

Repayment of the loan is done as per your loan terms.

If you get a moratorium period then you start repaying the loan in instalments post that.

If you are compelled to pay simple or partial simple interest during moratorium, You might have to start paying interest component from month 1 of disbursement and then pay the overall emi post your moratorium period is completed.

You can also work part time during your education and start repaying early.

There are no foreclosure charges for education loans: so you can repay the loan earlier than tenure without worrying about additional charges.

Lending institutions in India are divided into 4 main categories: Public Sector banks, Private Sector banks, Non Banking Financial Institutions (NBFCs) and Non INR lenders.

Public Sector banks:

Public banks are great if you are going for a collateral based loan

They do not allow for non-collateral loans above INR. 7.5L

They are highly trusted by Indians to keep their collateral safe.

Key education loan schemes from Public Sector Banks

SBI State Bank of India education loan for abroad studies - https://sbi.co.in/web/student-platform/sbi-global-ed-vantage-scheme

Bank of Baroda BOB education loan

Punjab National Bank PNB education loan

UBI Union Bank of India education loan

Private banks

Private banks are better if you want a non-collateral loan

They don’t have a limit on the loan amount they can provide as a non collateral loan.

The interest rates are good and in many cases similar to public banks.

ICICI Bank ranks high in trust factor and is the largest private bank in India that provides education loans.

NBFCs

NBFCs in India provide collateral as well as non-collateral loan.

HDFC Credila is the highly trusted and the largest student loan NBFC in India. It is trusted due to being the first education loan NBFC as well as their association with HDFC Bank.

NBFC in general are preferred when students are short on time as the processing time generally is the lowest.

The interest rate may be higher than public and private as NBFCs aren't restricted under repo rates decided by RBI Reserve Bank of India

Loan amount that you can get is dependant on many factors, some of them include:

Country, University / College, Course that you are applying for.

Applicants’ current income (if your work experience exceeds 2 years)

Applicants’ past academic records.

Co-applicants financials and credit history.

Property / FD Valuation (If its a collateral based loan)

This is a gimmicky line used by influencers and aggregators to attract students and their parents looking for education loans.

No bank / NBFC / scheme can on paper give an interest free loan.

That being said, you can manage your finances in a way where the returns you get on your investment can be more than the interest component of the loan.

So prima facie your loan does become interest free, but that is due to your smart investments, smart tax saving mechanisms and not some official offer or scheme.