How to Get an Education Loan in India For NRI Applicants

Education is one significant aspect that plays an immense part in the modern, industrialized world. People need a quality education to survive in this overwhelmingly competitive world. Present-day society is based on people with high living standards and knowledge, allowing them to implement sounder solutions to their quandaries.

Indian students already residing abroad after their graduation in pursuit of this knowledge often choose a university from the same country for their higher education. And it’s no secret that the cost of quality education abroad can burn a hole in the pocket of students and a lack of funds should not come in the way of attaining this knowledge. Unfortunately for NRI students, there are stringent government regulations when it comes to extending student loans for international students like in the U.S., where NRIs do not qualify for federal education loans. 

This article will give you an account of how an NRI student can get a study abroad education loan in India. Yes, NRI students can apply for an education loan in India provided a co-signer resides within the country and is a citizen of India.

There are two types of education loans an NRI student can go for

• Collateral /secured loan - Collateral/Secured loans require students to pledge collateral in order to avail of an education loan. Collateral could be-

• Immovable property like a house, flat, non-agricultural land, and
• Liquid security like Fixed deposits, Insurance policies (Term Insurance), and govt bonds.

• Non-collateral / unsecured loans - An unsecured loan does not require pledging of any collateral to avail of an education loan. A student's co-applicant income is an important deciding factor for an unsecured loan. 

Nowadays, overseas Indians or Non-Resident Indians (NRI) who basically reside outside India can avail of an education loan from Indian lenders. There are several cases where Indian citizens who reside abroad opt to finance their higher education by seeking an education loan from Indian banks.

A few primary reasons behind this are 

1. Education loan policies of Indian lenders are feasible as compared to those of international lenders

2. If the co-applicant is residing in India, as being an Indian, they can avail of other tax benefits like Section 80E

3. Student loan policies of most international lenders are implemented by keeping international practices in mind

4. And, the value of the currencies of the countries abroad and India differs to a great extent

Because of these above-mentioned reasons, students take an NRI loan in India from Indian lenders over international lenders.

It is of utmost importance for students to have an Indian resident co-applicant and an NRI student to hold an Indian Passport for a student loan for international students.

• Public banks - Public banks like SBI, BOB, etc provide education loans to an NRI for their studies abroad. Public banks do not grant an unsecured loan of more than 7.5 lakhs. For an amount of more than 7.5 lakhs pledging collateral is needed. And depending upon the value of the collateral and the total loan requirement of a student, he/she can get up to 1.5 crores.
• Private banks - Private banks like ICICI, Axis, etc can grant up to 40 lakhs of unsecured education loans. The maximum amount for a secured student loan for international students varies from bank to bank.
• NBFCs - NBFcs are a Non-Banking Financial Company that also offers unsecured education loans. There are four NBFCs in India that provide education loans and those are Credila, Avanse, InCred, and Auxilo. They can grant up to 60 lakhs of unsecured foreign education loans.
• Foreign lenders - Foreign lenders like MPower Financing, Prodigy Finance, Leap Finance, etc can fund up to 80 % of a student's cost depending on case to case. These foreign lenders do not need any collateral or a co-applicant to grant an education loan. 

A lot of Indian lenders have education loan schemes for international students of Indian origin to cover their education expenses abroad. 

Though the eligibility criteria for education loans and the scheme under which an NRI student avails an education loan are the same as the Indian students who aspire to study abroad, there is some additional process involved in the case of NRIs. 

Transferring the power of attorney

Power of attorney (POA) is a legal document giving one person the power to act for another person. The POA holder can have either full authority or limited authority and can take all legal and financial decisions on behalf of the owner.

Therefore, in the absence of the student or the co-applicant for the NRI education loan, the person who holds the power of attorney can sign the necessary legal documents for financial transactions.

There could be three scenarios of such a case of NRIs where a power of attorney is needed

• The student is NRI and the parents are in India - Here students can hand over their signatory rights to their parents/siblings in India through power of attorney.

Once declared power of attorney, the individual who has been given the signatory rights is responsible to execute all the necessary documents to the bank, as and when required. The person who holds the power of attorney has the authority to sign on behalf of the student.

• Both parents and students are NRI - Here students can give a power of attorney to any of their extended family members.

In the case of a secured loan, they are required to pledge collateral to the bank, and for an unsecured student loan for international students, the POA holder should have a good income source for he/she has to pay the incurred interest/EMIs to the bank. 

Private banks accept only your parents/ parents-in-law, siblings, and spouse as your co-applicant. Whereas NBFCs can also accept parents' siblings and first cousins for education loans for international students.

• Parents are NRI and the student is in India - Here if a student is applying for an unsecured loan then a student can add any of their immediate family members as a co-applicant.

In the case of secured loans, if one of the parents has collateral in their name then they can hand over the POA to the other parent or close relatives living in India.

Yes, they can! However, earlier you couldn't name an NRI as a co-applicant, due to which students faced multiple issues while applying for an education loan. When our team at WeMakeScholars came across this issue, we made headway with our associate banks and NBFCs as we understand students' plight. After various discussions, it was concluded that NRIs could be named as education loan co-applicants for a student loans for international students in India. 

Sometimes it’s unmanageable for NRI students to go through this entire POA process and then the loan process alone, so to overcome this impediment you can definitely approach us. Our team at WeMakeScholars pioneered a provision for an NRI to become a co-applicant. We've handled multiple NRI cases. So if you're looking for an education loan in India, reach out to our team at WeMakeScholars without any hesitation.