Education loan pays a crucial role in making study abroad aspirants' dream come true, especially for those who aspire to study overseas but lack the required financial resources. Flexible repayment terms, competitive interest rates, and several other such factors enable the students to pursue their higher education abroad. In India, several banks and financial institutions provide financial help to students aiming for higher education abroad.
The range of options available in the market has also created a sense of confusion among the students and parents about choosing the right education loan. It requires extensive research and deep analysis of the loan products of different banks and NBFCs (non-banking financial companies) and comparing them to choose the best.

In this article, we will explore the factors a student must compare to choose the right abroad education loan for him/her.
Annual Interest Rate
Interest rate is undoubtedly the most critical factor to consider while comparing the banks for abroad education loans. Even a difference of 1% can help you save lakhs in terms of total repayment. Compare the annual interest rates offered by different financial lenders and opt for the most cost-effective one.
Fixed Vs Floating Rate of Interest
The interest rate on education loans does not always remain the same throughout the loan tenure and thus it becomes essential to look at whether the interest rate you are getting is fixed or floating. The interest rate of SBI abroad education loan is fixed and thus have high benefits for the students. The RBI guidelines regarding interest rates do not bound NBFCs, and thus, the rate of interest offered by them are free from the parameters such as MCLR. They charge floating interest rates that can change significantly during the loan tenure.
Moratorium Period
The moratorium period is the grace period during which the student doesn't need to make any principal amount repayment. Basically, it's the waiting period after which the repayment starts. In general, the lenders give a moratorium period of 6 months to 1 year. However, according to the type of loan, a student might have to pay a simple or partial interest rate that can be either beneficial or detrimental to the student depending upon his/her financial situation.
Processing Fee
Besides the loan amount, lenders also levy some other charges that have to be paid by the borrower and one of these charges is the processing fee. The processing fees can vary from 0-2% of the loan amount depending upon the lender. It is vital to know about the processing at the beginning of the loan process so that the borrower can take this expense into consideration as well while selecting the education loan.
Pre-payment Penalty
A pre-payment penalty is charged by the bank when the borrower pays off the loan before the pre-decided loan tenure in order to compensate for the interest amount which he/she would have to pay otherwise. This penalty varies depending on the time at which the foreclosure is done. It can range from 2-4% of the remaining principal amount. It is necessary to plan for such an occurrence in prior, especially for the students of premier colleges who have great chances of getting a high paying job and might want to consider pre-payment of the loan in the future.
Loan Tenure
The loan tenure is the repayment period committed by the borrower while applying for the education loan. This period can be up to 15 years depending upon the lender. Terms and conditions of the loan are applicable to the borrower during that period. The interest rate usually varies as per the tenure of repayment. Depending upon the expected income after the studies, the student can choose to repay the loan and interest rate in a duration that he/she deems suitable.
Secured Vs Unsecured Loan
Most of the terms and conditions of an abroad education loan depends upon the fact that whether a student is going for a secured or an unsecured loan. The rate of interest is significantly less in the case of loans with collateral. Unsecured loans, as they don't require any financial asset to be pledged, involve a higher rate of interest that can range between 11-15%. There are a host of lenders available in the market that can provide students with excellent deals on both secured and unsecured loans, and if a student is looking for an abroad education loan he/she must evaluate the available assets and then choose whether he/she wants to go for a loan with or without collateral.
All the above factors might sound quite cumbersome for you to compare as they involve a profound understanding of financial jargon. Thanks to GyanDhan, you can now put all the hassles of comparing the various education loan products available in the market. It is an abroad education financing marketplace that assists abroad study aspirants in getting education loans from public sector banks, private banks, and NBFCs. What’s more? Their loan assistance is completely free of cost!
All you need to do is to check your loan eligibility with GyanDhan and if you qualify, their counselor will get in touch with you, understand all the details, and will suggest the best loan options for you! If you apply for an abroad education loan via GyanDhan, you will get expert assistance throughout the loan process. You can relax at your home and GyanDhan will run from pillar to post to make sure that you get an education loan and fulfill your study abroad dreams!