Can I take a Second education loan if I already have one?

Sometimes the money from our education loan gets exhausted and it becomes difficult to manage tuition fees and other expenses. Other times, we might end up having more expenses than we initially calculated. Or you must be among those who have completed or are in the last semester of their graduation abroad with the support of an education loan and want to continue their postgraduate studies there. Usually, when students go abroad for their graduation, they are more likely to be offered postgraduate study opportunities from several reputable universities. Despite excellent chances, students do not enroll in master's or PG programs. They think they will be unable to obtain another education loan because they have already taken out one for their undergrad.

Do you also think you can not get another loan if the existing funds are exhausted? Or do you think you cannot get an education loan for your PG degree because you have an existing undergrad education loan? Don't worry, this article is written just to bust this misconception because banks do provide second education loans based on certain factors and eligibility (later discussed in the article).

Types of Education Loans in India

By now, you must be familiar with the two basic types of education loans. They are collateral and education loans without collateral which are mainly lent in the abroad student loan process. 

The entire abroad student loan process for both types of education loans has been described in great detail in previous blogs as well as LoanFlix episodes on YouTube. The WeMakeScholars team believes that no student who needs an education loan should be denied or unable to borrow one under any circumstances. To know more about how we help students with the abroad student loan process, do reach out to our financial officers at the earliest.

The answer is YES, you can get a second education loan provided you meet the requirements for the second education loan. You can opt to take this loan either from the same bank you had taken the loan from for your graduation or from a different lender. Opting for this loan from the same bank will reduce processing time and hassles as choosing a different lender requires transferring the existing loan to this new lender.

Moving on to our topic- How to get a second education loan, you need to understand that lenders do not just lend another loan to you just like that, some factors go into consideration before approving a second education loan. Those factors are:

1. Eligibility criteria- Now it is obvious that you were eligible which is why only you got your first education loan in the first place, so what gets checked? So, when you borrow a loan, your and your co-applicants' CIBIL score reduces or improves as your repayment period starts. It will depend on whether your repayment has started or not.
2. Type of loan- Which type of loan you have taken for your graduation?
3. Lender- The lender you had taken your loan from.
   All these factors are described below in great detail. We'll take different plausible scenarios.
4. Repayment status of the first loan: Timely repayments and having a good CIBIL score will leave more chances to get a second education loan.
5. Purpose of the second loan: There needs to be a strong reason why you want to take a second education loan.

Secured education loans especially from a Government bank are preferred by a lot of students for a second education loan. This is because you will not get Government bank education loan benefits like lower interest rates, a payment-free moratorium period, etc in any private lenders.

The value of the collateral being pledged is one of the most important factors when it comes to taking a second education loan. If your collateral was already pledged for the previous education loan, then you need to ensure that its total value is sufficient to cover the second education loan.

Read and find out - How are collateral valued?

The abroad student loan process to get another education loan on the same collateral can only be possible if its value is significantly high. However, here is the good news, government banks allow candidates to pledge a third-party’s (anyone other than the family members) assets as collateral for the second education loan. 

For example, if the collateral pledged for your previous education loan was valued at Rs.1 Cr. and you took a loan amount of Rs.50 Lakhs, then for a second education loan on the same collateral, the bank will estimate its cost to be around Rs.50 Lakhs. The final amount of your second loan and your loan margin will be estimated by the bank accordingly.

Read More: Education Loan Repayment Process

Let us take a look at two different scenarios in which candidates are likely to borrow a second education loan for their higher studies:

1. Second education loan from the same bank:
When candidates apply for an education loan from the same bank as the one from whom they had borrowed their previous education loan, they need to keep in mind a few things. While borrowing a secured education loan for the second time, two situations may arise.

a) Repayment of the previous education loan has not yet begun: For example, you have just finished your undergraduate course for which you had taken an education loan and wish to take another one for your postgraduate course which is due to begin immediately, within a month or so. In this scenario, it is recommended that you don’t begin the repayment process of the first education loan.

When you apply for a second loan immediately post your undergraduate course, six months of your moratorium period from the first loan is still applicable. By the time your second education loan from the same bank is sanctioned, the moratorium period of the second one becomes applicable and hence, you get up to 5 years of loan holiday in this way, depending on the total duration of both courses.

b) Repayment of the previous education loan has already started: In this scenario, if your loan repayment has already begun then you will be required to make the EMI payments regularly, according to the schedule.

2. Second education loan from a different lender
It is also possible for candidates to opt for a second education loan from a different lender. In order to borrow it from a different lender, candidates need to ensure that they have completely repaid their previous education loan and once they have received a NOC (No Objection Certificate) from their previous lender, the abroad student loan process for the second education loan can be started.

Read More: Education Loan transfer for a better rate of interest

An education loan without collateral is an excellent choice for candidates who do not possess assets whose value could cover a second education loan from government banks. Private banks and NBFCs often consider the financial records of co-applicants before processing an education loan. Hence, having a co-applicant with a sound financial record and the right documents is a mandatory requirement for unsecured education loans for abroad studies.

Another important point to note while applying for a second education loan from private lenders is that you need to ensure that your co-applicant’s financial capacity will be able to cover both education loans.

A lot of students who had previously taken an education loan often hesitate to borrow another education loan for abroad studies, due to a lot of constraints. One of the constraints is the widespread misconception that it is not possible to borrow a second education loan.

The WeMakeScholars team has helped many such students get their abroad education loans for a second time by trying to explore every possible way of making it possible for them to fund their dreams. Request a callback with us if you need assistance in borrowing a second education loan from both types of lenders.