FROM INDIA · CHAPTER 2
Education loansfrom India, compared.
Indian students borrow for study abroad from four kinds of lender: public-sector banks (lowest rates, usually need collateral above ₹7.5 lakh), private banks, NBFCs (faster, often unsecured, higher rates) and international lenders that need no Indian co-applicant. Compare the total cost, not the headline rate: margin money, processing fees, moratorium interest and what the loan covers all change the real price. Interest you repay can be deducted from taxable income for eight years under the old tax regime.
Published by Althéa Consulting · Adviser: Harshita Kohli
Source review: · How to use our guides
- Collateral-free ceiling (banks)
- Up to ₹7.5 lakh
- Covered by the government credit guarantee scheme
- Margin money, abroad
- Usually 15%
- On loans above ₹4 lakh, IBA model scheme
- Moratorium
- Course + up to 1 year
- Tax deduction on interest
- 8 years
- Section 80E, now Section 129; old regime
The four kinds of lender
| Lender type | Examples | Typical amount | Collateral | Indicative rate (Oct 2026) |
|---|---|---|---|---|
| Public-sector banks | SBI, Bank of Baroda, PNB, Union Bank, Canara | ₹7.5 lakh to ₹1.5 crore+ | Property, FD or LIC policy above ₹7.5 lakh | About 8–11% floating |
| Private banks | HDFC Bank, ICICI Bank, Axis Bank | Up to ₹1 crore+ | Secured and some unsecured products | About 9.5–13% |
| NBFCs | HDFC Credila, Avanse, Auxilo, InCred, Tata Capital | Up to 100% of cost | Often unsecured for strong admits | About 10.5–14% |
| International lenders | Prodigy Finance, MPOWER Financing | Tuition (and some living costs) | None; no Indian co-applicant | Variable, in USD/EUR; often highest |
Secured or unsecured?
A secured loan is backed by collateral: a house or flat, a fixed deposit, or LIC policies. It costs less, can be larger and is the route most public banks prefer, but valuation and legal checks add two to four weeks.
An unsecured loan relies on your admission, course, university ranking and a co-applicant's income (usually a parent). It is faster and needs no property, but rates and processing fees are higher and the amount depends on the lender's list of approved universities.
Up to ₹7.5 lakh, banks following the Indian Banks' Association model scheme should lend without collateral or a third-party guarantee, because the Credit Guarantee Fund Scheme for Education Loans covers them. Above that, expect collateral at a public bank.
Apply in this order
- 01
Shortlist 3 lenders early
Start once you have your first admit or even a strong shortlist. Mix one public bank, one NBFC and, if you lack collateral, an international lender.
- 02
Get a written quote
Ask each for the rate, processing fee, margin, moratorium terms, insurance and prepayment charges in writing.
- 03
Submit documents
Admission letter, fee breakdown, academic records, test scores, KYC for you and your co-applicant, their income proof (ITR, salary slips, bank statements) and collateral papers if secured.
- 04
Receive the sanction letter
Use it as proof of funds for your visa. Check that it names your university, course and the amount for tuition and living costs.
- 05
Disbursement
Tuition usually goes directly to the university; living costs go to your account or forex card. Loan-funded remittances from a specified lender carry nil TCS.
How to compare offers
- Effective cost over the full term, not just the starting rate
- Processing fee (often 0.5–2% at NBFCs, low or nil at public banks)
- Margin money you must pay yourself (commonly 15% for study abroad)
- Whether living costs, travel and laptop are covered
- Moratorium length and whether interest compounds during it
- Prepayment or foreclosure charges
- Mandatory life or credit insurance bundled into the loan
- Whether the lender is notified for the Section 80E/129 deduction
IN DEPTH · TAP A TOPIC TO OPEN
Margin money and the moratorium
Margin money is the share of the cost you fund yourself. Under the IBA model scheme there is no margin up to ₹4 lakh and usually 15% above it for study abroad. Scholarships and university fee waivers can count towards the margin, so tell the bank about them.
The moratorium is the repayment holiday: the course period plus up to one year (some banks offer six months, and may extend if you are job-hunting). Interest still accrues, usually as simple interest, and is added to your principal when repayment starts. Paying just the interest during your course can save a large amount over a 10–15 year term.
Section 80E (Section 129 from April 2026)
Interest paid on a loan for higher education, taken from a bank, a notified financial institution or an approved charitable institution, is deductible from taxable income with no upper limit. The deduction runs for the year repayment of interest begins plus the seven following years. Only interest counts, not principal.
The person who took the loan claims it: the student, or a parent if the loan is in their name for a child. The Income-tax Act, 2025 carries the same deduction as Section 129 from tax year 2026–27. It is available only under the old tax regime, so the borrower should compare both regimes each year. Ask your lender for an annual interest certificate.
PM-Vidyalaxmi (Vidya Lakshmi) portal
The Ministry of Education's PM-Vidyalaxmi portal replaced the old Vidya Lakshmi site. It lets you fill one common application and send it to up to three banks, then track it. Its interest subvention applies only to students admitted to listed quality institutions in India, so for study abroad treat it as a convenient way to reach public banks, not as a subsidy.
Some central and state schemes offer interest subsidies on overseas study loans for specific categories (for example SC, ST, OBC, EWS or minority students). Ask your state's social welfare or minority affairs department; terms change often.
QUICK ANSWERS
Your questions, answered.
Yes. Banks lend up to ₹7.5 lakh without collateral under the credit guarantee scheme, NBFCs often lend larger unsecured amounts for admits to their approved universities, and international lenders such as Prodigy Finance and MPOWER need no collateral or Indian co-applicant. Expect higher rates for unsecured loans.
Usually on the rate, not always on total cost or speed. Public banks need collateral above ₹7.5 lakh and take longer. Compare processing fees, insurance and moratorium interest before deciding.
For the USA, the UK, France, Canada, Australia and Ireland, a sanction letter from a recognised lender stating the amount is generally accepted. Germany normally wants a blocked account, which the loan can fund. Some countries require the money to be disbursed or held for a set period, so read the visa chapter for your country.
The individual who took the loan, for their own, their spouse's or their children's higher education. It runs for eight years from the year interest repayment starts, under the old tax regime only.
If your family can, yes. Interest accrues during your course and is added to the principal at the end; paying it as you go keeps your EMI and total cost lower.
WHERE TO GO NEXT
Keep going: the pages that help next.
Each card says what you will find there. Looking for something else? See every page on the site.
FROM INDIA
Sending money abroad
Pay foreign university fees from India: LRS limit of USD 250,000, TCS from April 2026 (nil on loans, 2% above ₹10 lakh), Form A2, forex cards and TCS refunds.
FUNDING
Scholarships
Scholarships you can apply for, who qualifies and when to apply.
FRANCE GUIDE
Proof of funds & loans
France student visa proof of funds (€877.50/month), education loans from India, sponsor letters and TCS rules on sending fees abroad.
FROM INDIA
A guide for parents
Study abroad answers for Indian parents: true costs, loans and co-applicants, sending money, safety, health, visiting your child and checking an agent.
YOUR OWN PLAN
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