Most Indian students who study abroad borrow part of the cost. The right loan can save you several lakh rupees over the repayment period, and the wrong one can delay your visa or leave you with an EMI you cannot manage. This guide explains which lenders to compare, what interest rates look like in 2026, when you can borrow without collateral, and how tax rules affect your fee transfers.
Short answer: You can borrow for study abroad from public banks like SBI, Bank of Baroda and Union Bank, from NBFCs like HDFC Credila and Avanse, or from international lenders. Bank rates are roughly 9% to 11% and NBFC rates roughly 10% to 13%. Collateral-free limits are about Rs 40 to 50 lakh at banks and up to roughly Rs 50 to 80 lakh at NBFCs. Almost every Indian lender asks for a co-applicant, usually a parent.
Who Gives Education Loans for Study Abroad?
- Public sector banks (SBI Global Ed-Vantage, Bank of Baroda, Union Bank): usually the lowest rates and longest repayment, but more paperwork and slower approval. Collateral is normally needed above Rs 7.5 lakh unless you join an institution on the bank’s list.
- NBFCs (HDFC Credila, Avanse, InCred): faster approval, sometimes in three to seven working days, and higher unsecured limits. You pay for the speed with a higher rate.
- International lenders (Prodigy Finance, MPOWER): no Indian collateral or co-applicant, but reported rates are around 13% to 18%. Use them only if other routes fail.
Interest Rates and Collateral-Free Limits Compared
Rates are floating and change with benchmark rates, your profile and your university. The sources I checked differed by more than a percentage point depending on date, gender concessions and university tier, so treat this table as a range and confirm on the lender’s own website before you apply.
| Lender | Typical rate | Collateral-free limit | Maximum loan | Good for |
|---|---|---|---|---|
| SBI Global Ed-Vantage | About 9% to 11% (one August 2026 source lists 9.15%, with 0.50% off for eligible female students) | Up to Rs 50 lakh for select institutions | Rs 1.5 crore, up to Rs 3 crore in some cases | Lowest rate and up to 15 years to repay |
| Bank of Baroda, Union Bank | Varies by profile, check with the bank | Up to about Rs 40 lakh for premier institutions | Up to Rs 1.5 crore | Families with an existing bank relationship |
| HDFC Credila | From about 9.95% | Often Rs 50 to 80 lakh, depending on country and profile | No fixed upper limit with collateral | Speed and higher unsecured amounts |
| Avanse | From about 10.25% | Based on profile and course | Based on profile | A second NBFC quote |
| Prodigy, MPOWER | About 13% to 18% | No Indian collateral needed | Varies | Last resort when you have no co-applicant |
Unsecured NBFC loans usually cost 2% to 3% more than secured loans, so collateral-free does not mean cheaper.
What a Loan Really Costs
This example shows a Rs 40 lakh loan repaid over 10 years, calculated at a flat rate and ignoring the moratorium. Real EMIs will differ because rates float.
| Interest rate | Monthly EMI | Total interest paid |
|---|---|---|
| 9% | About Rs 50,700 | About Rs 20.8 lakh |
| 10% | About Rs 52,900 | About Rs 23.4 lakh |
| 12% | About Rs 57,400 | About Rs 28.9 lakh |
The gap between 9% and 12% is about Rs 8 lakh over 10 years, so compare rates, processing fees and prepayment charges together.
Most lenders give a moratorium equal to your course length plus six to twelve months. Interest still builds during that time. If you can pay simple interest while you study, your principal does not grow. On a fully disbursed Rs 40 lakh loan at 10%, two years of unpaid interest can add up to about Rs 8 lakh, although disbursement happens in stages so the real figure is usually lower.
How Much Should You Borrow?
Borrow for what you actually need, not for the maximum you are offered. Start from the real cost of your destination. See our guides to the cost of studying in the UK, studying in Canada from India, studying in Germany from India and MBBS abroad for Indian students. If the total looks too high, compare affordable countries to study abroad and apply for scholarships for Indian students abroad to reduce the loan.
Eligibility and Documents
- Admission or conditional offer letter from a recognised foreign university
- A co-applicant, usually a parent, with income proof and a healthy credit score (700 or above is commonly asked)
- KYC documents: Aadhaar, PAN and passport
- Class 10, Class 12 and graduation marksheets
- Test scores such as IELTS, GRE or GMAT where the course needs them
- Fee structure and cost of study from the university
- Co-applicant bank statements and income tax returns for the last two to three years
- Property documents for secured loans
Each lender has its own checklist, so ask for it before you collect papers.
Collateral or Collateral-Free: Which Should You Pick?
Choose a collateral-free loan if your total need sits inside the lender’s limit and your university is on its list. It avoids property valuation and legal checks, and it is usually faster.
Choose a secured bank loan if you need a larger amount or want a lower rate and longer repayment. It takes more time, so start early.
If you are not sure which route fits your profile, our profile evaluation page explains how we assess options before you apply.
How to Get an Education Loan: Step by Step
- Shortlist universities and check each lender’s approved list. Listed institutions often get higher collateral-free limits.
- Ask two or three lenders for an in-principle approval so you can compare real offers, not advertised rates.
- Accept your admission offer and pay the deposit if the university asks for one.
- Submit documents and collect the sanction letter. Keep copies, because you may need them for your visa file.
- Apply for your visa with the sanction letter where the country accepts it as proof of funds. Our visa process page explains the usual stages.
- Plan disbursement. Tuition is usually paid directly to the university in stages. Send living funds through authorised channels, and see our forex service for transfers.
Education Loan and Visa Proof of Funds
Rules differ by country. For Canada, a loan sanction letter is one of the accepted ways to show funds, as covered in our Canada study permit guide. For the UK, check the funds rules in our UK student visa guide. Germany works differently: most students need a funded blocked account, so ask your lender whether it can disburse into one before you commit. Read our blocked account page for details.
Tax: TCS and Interest Deduction
TCS on fee transfers. Most 2026 summaries say that education remittances funded by a loan from a notified bank or financial institution attract no TCS. For self-funded education payments, TCS is nil up to Rs 10 lakh and 2% above that from 1 April 2026, down from 5%. One report said 2% also applies to loan-funded amounts above Rs 10 lakh, so confirm with your bank before you remit. TCS can be adjusted against your tax when you file your return.
Interest deduction. Interest paid on an education loan for higher studies can be deducted for up to eight years, with no upper limit, but only under the old tax regime. It is not available under the new regime. Check with a chartered accountant, since tax rules and section numbers have changed with the new Income-tax Act.
Common Mistakes to Avoid
- Comparing only the starting rate and ignoring processing fees, floating rates and prepayment charges
- Not checking whether your university is on the lender’s list
- Applying too close to the visa deadline, since sanction can take two to three weeks at banks
- Choosing a weak co-applicant profile and then being surprised by a rejection
- Borrowing the full amount offered instead of what you need
- Ignoring interest that builds during the moratorium
Frequently Asked Questions
What is the interest rate on an education loan for study abroad in 2026?
Roughly 9% to 11% at banks and 10% to 13% at NBFCs. Rates are floating and vary by lender, university and your co-applicant’s profile.
Can I get an education loan for abroad without collateral?
Yes. SBI offers collateral-free loans up to about Rs 50 lakh for select institutions, and NBFCs like HDFC Credila offer unsecured loans of roughly Rs 50 to 80 lakh depending on country and profile.
Is a co-applicant compulsory for an education loan abroad?
Mostly yes. Only international lenders like Prodigy Finance and MPOWER skip it, usually at higher interest rates.
How long does education loan approval take?
NBFCs can approve in about three to seven working days. Banks usually take two to three weeks, so apply well before your visa deadline.
Is there TCS on an education loan remittance?
Most 2026 summaries say loan-funded education remittances from notified lenders attract no TCS. Confirm with your bank, because one report suggested a 2% rate above Rs 10 lakh.
Can I claim a tax benefit on an education loan?
Yes. Interest on an education loan can be deducted for up to eight years under the old tax regime. It is not available under the new regime.
Plan Your Funding With AbroadUp
Don’t wait for your offer letter to start the loan process. Learn how our education loan support works, book study abroad counselling, or read our guide to student visa consultants in India to plan your funds, visa and timeline together.
