Education loan for MBBS abroad: Easy financing options

For many Indian students, pursuing an MBBS is a dream, which they see with open eyes. Where some students are after it for personal ambition while others want to do it as a legacy of hope passed down from their family. When it come to parents, they save, sacrifice, and make countless adjustments to ensure their child’s future education is secured. However, when it comes to funding an education in abroad, the financial burden can be overwhelming. Tuition fees, living costs, and travel expenses add up quickly, and most families find it hard to shoulder the full weight of these costs.

It is when education loan comes to the rescue. Many countries are providing quality education in medical sciences at pocket-friendly price, which makes Indian MBBS aspirants to apply for education loan. Securing a loan comes with its own challenges, including eligibility criteria, collateral requirements, and varying interest rates. In this article, we will take a comprehensive look at how Indian medical aspirants can take advantage of education loan for studying medicine courses abroad.

Why you should take an education loan

Parents do their best possible to ensure that their child receives quality education but sometimes they face financial crunch. In those times, a bank or financial institution serves as the best option. Education loan covers all your expenses and much more. Here's why it will work for you:

1. Covers multiple expenses:

   Educational loan not only covers tuition fees but also include travel expenses, examination fees, and others like books, so you can focus only on your studies without financial distress.

2. Loan Repayment flexibility:

   Many education loan schemes offer flexible repayment terms, including a moratorium period (usually the duration of the course plus an additional 6–12 months) during which you don’t have to repay the loan.

3. Tax benefits:

   This can help reduce your taxable income and lower your tax liability during the repayment period.

4. Reduced Financial Pressure on Family

   An education loan can relieve your family from the financial pressure of funding your education. It also provides an opportunity for students to manage their finances independently in the long term.

Types of education loans

• Secured education loans: This one is also all known as a collateralized loan, meaning where applicant pledges an asset, in the form of collateral as a security. It can be in the form of tangible or intangible which includes immovable property, fixed deposits, LIC insurance policy, etc. Although secured education loans take a longer time to approve, as the bank has to verify all the documents pledged, the advantages of this type of loan are many, especially for students. These loans usually come with a lower interest rate, longer repayment periods, and no repayment during during study period.

• Unsecured education loans: Here you don't have to pledge any security/collateral. Wondering why any financial institutions will give you an education loan without collateral? So instead of considering the borrower's asset security, bank focus on borrower's creditworthiness and student's employment scope.

  Which is better?

  Secured education loan: Ideal if you need a large amount of money and have valuable assets to pledge as collateral

  Unsecured education loan: Better if you prefer not to risk your assets or need a loan for a smaller amount and are confident in your ability to repay.

  At last, it's your call but remember to consider your financial goals, current assets and, repayment ability when making a decision.

What is the difference between tangible and intangible assets?

1. Tangible assets: These are types of collateral that include immovable properties such as houses, shops, land, flats, etc.

2. Intangible assets: These are types of collateral that include liquid assets such as fixed deposits, health insurance, and government bonds.

Top Indian banks for abroad MBBS education loans

The table below, is a list of Indian banks offering education loans for abroad studies with their respective interest rate, collateral demands, maximum repayment period, and loan amounts. You can visit each bank's website, particularly for more clarity and insights.

Interest rates for education loans

Interest rates refer to the percentage at which a lender (banks, in this case) charges a borrower for using their money over a specific period. It differs from bank to bank, the amount of loan amount applied for, and whether the loan is secured or unsecured. It also depends on factors like

A. Lender Type:

1. Public sector banks (PSBs): They offer more competitive interest rates, ranging from 7%-9.5% per annum.

2. Private sector banks: May charge higher interest rates, typically ranging from 9%-13%, due to higher operating costs.

B. Credit Score

1. Borrower's Credit Score: A higher credit score (750 and above) can help secure a lower interest rate, as it indicates a lower risk of default.

2. Co-Applicant’s Creditworthiness: If the loan requires a co-applicant (such as a parent or guardian), their creditworthiness will also impact the interest rate. A strong credit profile from the co-applicant can help lower the rate.

C. Type of Educational Institution

1. Top-tier Institutions: If you are pursuing education from a reputed institution (e.g., IITs, IIMs, foreign medical universities), many lenders offer concessional rates due to the lower perceived risk of loan default.

2. Other Institutions: Loans for education at less-known or local institutions may attract slightly higher interest rates, as they are considered higher risk by lenders.

Banks also offer a moratorium period (time before repayment starts) ranging from 6 months to 1 year, depending on the loan agreement.

Eligibility criteria

Each bank or financial institution has its own eligibility criteria when comes to granting an MBBS education loan in abroad but generally include the following:

• Indian citizenship: The student applying for an education loan must be a citizen of India.

• Confirmed admission: The aspirant must have secured admission to a recognized medical college or university abroad.

• Age limit: Applicant must be between the age of 16-35 years.

• Income proof: The bank may require income proof of the student’s parents or legal guardian to ensure the ability to repay the loan.

• Academic Performance: The student's academic record in previous qualification (12th grade or equivalent) can be considered for approval.

Special education loan schemes

1. Vidya Laxmi Portal

   This is an initiative of the Government of India to provide a single window system for students to apply loans for higher education, including study abroad.

   Features: Interest rate: 8.40%. As many as 45 banks are registered with the portal offering 139 schemes of student loan. Indian medical students who want to study abroad can borrow INR 1.5 Cr as a loans.

   How to apply: Visit the official website to first check the eligibility, then register yourself, upload documents, and have a track of your application status.

2. Gujrat Government education loan for studying abroad

   This scheme is brought to you by the Gujrat government for students willing to pursue higher education abroad. Here, economically weaker section students can get a 100% subsidy on the interest of the loan amount.

   Features: Applicants should be resident of Gujrat state, and on approval can get up to INR 15 lakh at a 4% interest rate as a student loan to study abroad. Check the website to know more about specific eligibility.

3. Bank-Specific Schemes

   Overview: Many public sector banks (like SBI, Bank of Baroda, and Canara Bank) offer their own education loan schemes for students going abroad for higher education, including MBBS. Some of these schemes are partly subsidized or come with government backing.

   Eligibility: Varies by bank, but typically for students admitted to recognized foreign institutions.

   Loan Features: Loans cover tutoring fees, living costs, and other associated costs, with competitive interest rates and flexible repayment terms.

    

Considerations for securing an education loan

Let's start with knowing what makes securing an education loan an uphill task:

1. High loan amount

Since MBBS is a 5-6 years long course and involves significantly higher tuition fees, living expenses as well as travel costs, requiring a large amount of loan that a bank might hesitate to offer.

2. Collateral security

After applying for an education loan, banks usually ask for collateral like property or fixed deposit to mitigate risk, which becomes barrier for many families.

3. Limited bank offering abroad education loan

In India, we have less number of banks who are willing to offer secured education loan for medicine abroad, most of them are public sector banks with limited loan amounts or stringent terms.

4. Foreign exchange issues

The loan amount could fluctuate on the basis of factors like exchange rates, inflation in the country, and geopolitical stability.

5. Cibil score assessment

Banks scrutinize the applicant's credit history and financial stability as a part of a loan application, which can be challenging for young students without a substantial income source.

6. Repayment concerns

The lengthy duration of MBBS course followed by the preparation for post-graduation or concerns like finding a well-paying job immediately after graduation makes it hard for lenders to provide MBBS education loans.

7. Strict eligibility criteria

Banks typically demand excellent academic records, a strong co-signer with a stable income, and sometimes even proof of admission to highly ranked medical colleges abroad, making it difficult for many medical students to qualify.

Required documents

Following is the list of basic documents required to apply for an educational loan

• Recent passport-sized photographs

• Proof of identity: It can be PAN card, driving license, Voter ID card, Passport, or Aadhar card.

• Address proof: Anyone from the mentioned options can work (Passport, Driving License, Aadhaar Card, Voter's ID Card)

• Proof of admission/ Admission letter

• Academic documents of student: Marksheet/Certificate of 12th Exam, Marksheet of Any Entrance Exam Taken e.g. AIIMS, NEET, etc. (If applicable), Scholarship Documents (if applicable).

• Last 8 Months Bank Statements of Co-Applicant

• Collateral documents (if applicable)

How to apply for an education loan

1. Research and Shortlist Lenders: Start by researching banks that offer MBBS education loans abroad. Some popular Indian banks with their detailed information are mentioned above in this blog.

2. Loan amount: Decide how much education loan you need. The requested loan amount can cover tuition fees, living costs, travel, and other education-related costs.

3. Eligibility Criteria: Check the eligibility requirements of each lender such as academic qualifications, age limit, and co-applicant.

4. Collect all the documents: Gather all the required documents mentioned above.

5. Submit loan application: Many banks provide an online application process. You can apply directly through the bank’s website or visit the nearest branch for in-person applications.

6. Approval and Sanction: This stage involves evaluation of your loan application by bank and granting approval for the requested loan amount.

7. Disbursement of Loan: Here the actual transfer of the approved loan amount goes to the borrower, and borrower receives the disbursement details, including amount, start date for EMI payments, and the payment schedule.

Countries providing MBBS abroad

The best countries to study abroad include the United States, the United Kingdom, Europe, Canada, and Germany. Europe has become home to some of the world’s most prestigious medical universities, such as Charles University, Pilsen, University of Nicosia, and Medical University of Poznan. These universities are famous for their research excellence and medical training. Europe offers a high standard of medical education on par with global expectations, making it an ideal choice for students who want to be at the forefront of medical advancements. In the following table, we have incorporated a list of countries offering MBBS courses at budget-friendly cost with quality education.

Read our full article here, to know more about these countries.

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Conclusion

Pursuing an MBBS from foreign countries is undoubtedly a dream for many Indian students, but the financial burden it brings can often overshadow the excitement. Education loans serve as a beacon of hope for families struggling with the cost of tuition, living expenditure, and travel. However, securing an education loan for studying medicine abroad presents several challenges, such as high loan amounts, collateral requirements, and the limited number of banks offering such loans. While these hurdles may seem daunting, they are not insurmountable. With proper research, planning, and financial counseling, aspiring medical students can still find ways to fund their education and fulfill their dreams of becoming doctors. It is essential for students and their families to explore various financial options, understand the loan terms thoroughly, and make informed decisions that align with their long-term goals.