Can I get an education loan for a non-traditional course, like culinary arts or filmmaking?

Yes, many lenders provide education loans for non-traditional courses such as culinary arts, filmmaking, aviation, or animation, especially if the course is from a recognized institution. However, the loan approval might depend on the course's job prospects and the reputation of the institute offering it.

Is it possible to get a loan for studying in a less popular country?

Yes, you can get an education loan to study in less popular destinations like Eastern European countries or Southeast Asia. However, lenders may scrutinize your application more closely to evaluate job prospects after graduation. Choosing a reputed university in that country can strengthen your case.

What happens if I can’t repay my education loan on time?

If you’re unable to repay your loan on time, the bank may give you options like restructuring the loan or extending the repayment period. However, in case of secured education loans, the bank can use the collateral to recover the loan amount. Missing payments can also affect your credit score, making it harder to get loans in the future.

Can I start repaying my loan while I’m still studying?

Yes, most lenders offer flexible repayment options. You can either start paying the interest immediately (known as simple interest during the moratorium period) or pay the full EMI after completing your studies. Some banks even allow partial EMI payments during the course.

Do lenders cover living expenses and travel under education loans?

Yes, many education loans cover not just tuition fees but also living expenses, travel costs, insurance, and even books or equipment required for your course. Make sure to check the loan terms carefully to understand what is included in the disbursed amount.

Secured vs Unsecured Education Loan: What is the Difference?

With rising education costs, India’s overseas education spending is projected to cross 70 billion USD by 2025. More than 1.33 million students went abroad to study.

That’s a massive number, and it’s only growing each year.

From tuition fees to housing, visa, travel, and living expenses, studying abroad comes with a big price tag.

This increase highlights the growing need for the right financial support. And for most families, paying this amount upfront isn’t possible.

So, with so many education loan options available, one big question comes up: Should you choose a secured loan or an unsecured loan?

Key Highlights:

Secured loans require collateral, such as property or fixed deposits, as a guarantee.
Unsecured loans do not require collateral and are based on academic and financial profiles.
Secured loans can come with lower interest rates and longer repayment periods.
Unsecured loans may carry higher interest rates and shorter tenures.
You might be eligible for a higher loan amount if you choose a secured option.
Secured loans take longer to process due to collateral evaluation, while unsecured loans are processed faster.

Each type has its own benefits, and the choice depends on your situation. This blog will explain what these loans are, how they work, and what you need to consider before applying.

Let’s make it simple and easy for you to understand.

What is a Secured Education Loan?

A secured education loan is a type of loan where you give the lender something valuable as a guarantee. This is called collateral. It can be your house, a piece of land, a fixed deposit, or even a life insurance policy. If you don’t repay the loan, the lender can recover the money by using this collateral.

Let’s break this down with an example for better understanding.

Let’s suppose you want to borrow money from someone to buy something important, like a laptop for college. The person lending you the money might say, “I need a guarantee that you’ll pay me back.” To make them feel secure, you offer something valuable you own, like a fancy watch or a favorite book. You promise them, “If I can’t pay you back, you can keep this.”

In the same way, when you apply for a secured education loan, the bank asks for something valuable as collateral. Once you repay the loan in full, the bank returns the collateral to you. If you don’t repay, they can sell the collateral to recover the money they lent you.

Key Features of Secured Loans

Collateral is a must: You need to pledge something valuable like a house, land, fixed deposit, or life insurance policy. This gives the lender a safety net.
Lower interest rates: Since the lender has security, interest rates are usually lower. They typically start around 8.5 to 9%.
Bigger loan amounts: You can borrow more money through secured loans. Some lenders offer up to INR 1.5 crore or even more, especially for high-cost degrees like an MBA or medical program.
Flexible repayment: These education loans usually come with longer tenures, sometimes up to 15 years. That means smaller EMIs and less pressure.
Broader eligibility: Even if your academic scores aren’t perfect, you can still qualify if your collateral has good value.
Covers most expenses: The loan can be used for tuition fees, travel, insurance, living costs, and even books or equipment.
Amount depends on the collateral value: The more your asset is worth, the more you can borrow. Banks will evaluate the asset carefully before deciding how much to give.

Secured loans are an excellent choice for students who have valuable assets and are looking for affordable financing options with flexible repayment terms.

What is an Unsecured Education Loan?

An unsecured education loan is a loan you can get without pledging any collateral. You don’t need to offer your house, land, or fixed deposit as security. Instead, the lender looks at your academic record, the university you’ve been accepted into, and your co-applicant’s financial background.

Let’s say you’ve been admitted to a top university in the US, and your course fees are INR 30 lakhs. You don’t own property or other assets to use as collateral. Instead, you apply for an unsecured loan. The lender reviews your academic scores, your admission letter, and your co-applicant’s income details.

If they find everything satisfactory, they approve the loan without asking for any collateral.

Key Features of Unsecured Loans

No collateral needed: You don’t have to pledge any asset like a house or fixed deposit. This makes the loan more accessible for many students.
Higher interest rates: Since there’s no security involved, interest rates are usually higher. They typically start from 10 to 14%.
Limited loan amount: Most lenders offer up to 50 lakh INR. Some may stretch it for top-ranked universities, but there’s usually a cap.
Faster processing: With no collateral evaluation, loan approvals are quicker. Some lenders process unsecured education loans within 3 to 7 days.
Based on your profile, Lenders will check your academic scores, the university’s reputation, and your co-applicant’s creditworthiness before approving the loan.

Unsecured loans are a great option for students who don’t have assets to pledge but have strong academic profiles and admission to reputed institutions.

Note: However, it’s essential to note that unsecured education loans come with higher interest rates, so you should evaluate your repayment ability carefully before applying.

Secured vs Unsecured Education Loans

Choosing the right loan depends on what matters most to you: interest rate, speed, loan amount, or ease of access. Most secured education loans offered rates starting from 8.5 percent, while unsecured ones ranged between 10 to 14 percent. Unsecured education loans are often processed faster, but they also carry stricter credit checks and lower limits.

Here’s a quick comparison to help you decide what fits your needs better:

Feature	Secured Loan	Unsecured Loan
Collateral Required	Yes - house, land, FD, or life insurance	No collateral needed
Interest Rates	Lower - starts from 8.5 to 9% percent	Higher - starts from 10 to 14 percent
Loan Amount	Can go up to INR 1.5 crore or more for studying in India or abroad, depending on collateral value. For example, ICICI offers up to INR 3 crore with collateral for overseas education.	Can go up to INR 75 lakh to 1 crore for top universities abroad, based on the applicant’s profile and co-applicant strength. For example, IDFC FIRST offers up to INR 75 lakh unsecured.
Repayment Tenure	Longer - up to 15 years, depending on the lender's policies and loan amount.	Often capped at 10 years, including the moratorium period, varying by lender.
Processing Time	Slower - 7 to 15 days	Faster - 3 to 7 days
Risk to Borrower	Collateral may be taken if you default	No asset at risk
Approval Based On	Collateral value and academic profile	Academic profile and co-applicant’s finances
Moratorium Period	Generally more flexible - can include full deferment during the study period	May require simple interest payments during the study period
Documentation	Extensive - includes collateral paperwork, valuation reports, legal checks	Basic - admission letter, KYC, income proof of co-applicant
Embassy Acceptability	Accepted by most embassies for visa purposes	Some embassies may request proof of full financial coverage or prefer secured loans
Best For	Students with assets needing large loan amounts	Students without collateral but strong profile

What is a Collateral?

Collateral is something valuable that you or your family owns, like a house, a plot of land, a fixed deposit, or even a life insurance policy. You give this to the bank as security. If you repay the loan on time, the bank returns your collateral without any problem. But if you fail to repay, the bank has the right to sell the asset and recover the money.

You can think of it as a promise backed by an asset, like a house or a fixed deposit, that ensures the bank doesn’t lose their money.

Types of Acceptable Collateral

1. Tangible or Immovable Assets:
These are physical assets, such as:

Residential property (A house or flat you or your family owns).
Commercial property (A piece of land that is clearly marked and non-agricultural).

2. Intangible or Liquid Assets:
These are assets that don’t have a physical form but can be converted into cash, like:

Fixed Deposits (FDs) with the bank.
Life insurance policies with a cash surrender value.

When you pledge collateral, the bank carefully evaluates its value. They may send their own experts or valuators to assess the property or check the documents for assets like FDs. The bank ensures the collateral is worth enough to cover the loan amount.

How Are Education Loan Applications Evaluated?

When you apply for an education loan, the bank doesn’t approve it right away. They take time to look at different aspects of your application to ensure you’ll be able to repay the loan. This process is called loan evaluation, and it’s the same for both secured and unsecured loans.

However, the criteria can vary slightly depending on the type of loan.

Here’s how it works:

Academic Performance: Banks looks at your grades to see if you’ve been consistent in your studies. Good scores show commitment and increase your chances of approval.
Entrance Exam Scores: If your course requires exams like GRE, GMAT, SAT, or IELTS, your performance matters. High scores improve your chances of admission to reputed universities and make lenders more confident in your repayment ability.
University and Course Reputation: Lenders prefer courses and universities with strong job prospects. For example, getting into a top US engineering program makes your application stronger than choosing an unknown institution.
Co-Applicant’s Profile: For unsecured loans, your co-applicant’s income and credit score are key. A stable job and good financial history make your application more likely to succeed.
Collateral Value (For Secured Loans): In secured loans, the value of your collateral—like property or fixed deposits—must match or exceed the loan amount. Banks evaluate these assets carefully before approval.
Study Destination: Popular destinations like the US, UK, Canada, and Germany carry more weight due to their strong job markets. Banks see them as safer investments compared to lesser-known countries.
Consistency in Performance: Banks value steady academic progress. If you’ve maintained good grades over the years, it shows reliability and boosts your chances.

Key Factors Affecting Collateral Requirements for Education Loans

Not every student needs to pledge collateral when applying for an education loan. But when they do, it depends on a mix of factors.

Banks and lenders don’t just look at your course or country. They go deeper to assess how risky or safe your profile is. Based on this, they decide whether collateral is needed and how much.

A quick tip: Want to avoid pledging property or assets? Aim for a strong profile and top-tier universities. Lenders feel more confident when you’re headed to a place with better job prospects after graduation.

Here are the key things that affect collateral requirements:

Loan Amount Needed: The higher the amount, the more likely the lender will ask for collateral. Anything above INR 7.5 lakh usually triggers a secured loan requirement from public banks.
Country of Study: For high-cost countries like the US, UK, or Australia, collateral is often required. For countries like Germany or Italy with low or no tuition fees, lenders may relax the requirement.
University and Course Reputation: If you’ve got an admit from a top university or highly ranked programme, some lenders may skip the collateral, even for higher amounts.
Academic Profile: A Strong academic records show you’re serious about your studies. It can reduce the need for collateral in unsecured loans.
Co-Applicant’s Financial Strength: If your parent or guardian has a good credit history and stable income, some lenders might offer unsecured options with minimal or no collateral.
Type of Lender: Government banks are stricter with collateral rules. Private lenders and NBFCs offer more flexible, collateral-free loans, but usually at higher interest rates.

Top Lenders for Secured and Unsecured Education Loans to Study Abroad

When it comes to education loans for studying abroad, lenders like SBI, ICICI Bank, and HDFC Credila stand out for different reasons.

Let’s say, for example, SBI offers loans up to INR 1.5 crore with collateral and up to INR 7.5 lakh without it, making it ideal for students with strong security but limited income proof. ICICI Bank allows up to INR 1 crore without collateral for top universities, and its processing is often faster than public banks. HDFC Credila, on the other hand, provides customised loans with repayment flexibility of up to 14 years, especially useful for high-cost programs abroad.

Here’s a list of top banks and NBFCs in India that offer secured and unsecured education loans for studying abroad:

Lender	Loan Type	Maximum Loan Amount	Interest Rates	Repayment Tenure	Processing Fees	Moratorium Period	Embassy Acceptability
State Bank of India (SBI)	Secured	Up to INR 1.5 crore	Starting at 11.15%	Up to 15 years	INR 10,000 per application	Course duration + 6 months	Widely accepted
Bank of Baroda	Secured	Up to INR 1.5 crore	Starting at 8.15%	Up to 15 years	1% of loan amount (max INR 10,000)	Course duration + 1 year	Widely accepted
ICICI Bank	Secured	Up to INR 3 crore	10.25%	8 to 12 years	1.5% of loan amount	Course duration + 6 months	Widely accepted
Axis Bank	Secured	Up to INR 1 crore	13.70%	Up to 15 years	2% of loan amount	Flexible	Widely accepted
HDFC Credila	Both	Customized	10.50% to 12.25%	Up to 14 years	1% of loan amount	Course duration + 1 year	Widely accepted
Avanse Financial Services	Both	No maximum cap	10% to 16.5%	Up to 10 years	1% to 2% of loan amount	Course duration + 6 months	Widely accepted
InCred	Both	Up to INR 1.5 crore	11% to 18%	Up to 15 years	Varies	Course duration + 6 months	Widely accepted
Auxilo Finserve	Both	Up to INR 1 crore	11.3% to 13%	Up to 10 years	1% to 2% of loan amount	Course duration + 1 year	Widely accepted

How to Choose Between a Secured and Unsecured Education Loan?

The key between a secured and unsecured education loan is to understand your situation and needs before making a decision. Each type of loan has its own benefits, and the right choice depends on factors like your financial background, the course you’re pursuing, and your urgency for funds.

Here’s a checklist that can help you decide:

Do You Have a Collateral to Pledge?

The first question to ask yourself is: Do I or my family own any assets that can be pledged as collateral? If you have a house, land, or fixed deposit, a secured loan could be a great option. It offers lower interest rates and higher loan amounts, making it ideal for expensive programs like MBAs or medical degrees.

On the other hand, if you don’t have assets to pledge, you’ll need to explore unsecured loans.

What Is Your Loan Amount Requirement?

The cost of your education plays a big role in deciding the loan type. Secured loans are better if you need a large amount, as they often cover expenses up to INR 1.5 crore or more. This makes them suitable for high-cost courses or study destinations like the US or UK.

Unsecured loans usually come with a cap of INR 50 lakh. If your course fees are within this limit, an unsecured loan could work just fine.

Can You Afford Higher Interest Rates?

Interest rates can make a big difference in the total amount you’ll repay. Secured loans have lower interest rates (starting at 8-9%), which means you’ll pay less over time.

Unsecured loans come with higher rates (10-14%), so the repayment amount will be higher.

If you can afford the extra cost, an unsecured loan might be more convenient. However, if keeping your repayment amount low is a priority, a secured loan is the better choice.

How Quickly Do You Need the Loan?

Timing matters, especially if you’re close to your university’s fee payment deadline.

Secured loans take longer to process because the bank has to evaluate your collateral, which can take 7-15 days.

Unsecured loans are faster, with approvals in as little as 3-7 days, since there’s no collateral verification involved.

What Are Your Repayment Preferences?

Consider how long you’ll need to repay the loan comfortably. Secured loans usually offer longer repayment tenures, up to 15 years, giving you more breathing room.

Unsecured study abroad loans often come with shorter tenures, up to 10 years, which means higher monthly payments.

If you prefer smaller EMIs over a longer period, a secured loan is a better choice.

How Strong Is Your Co-Applicant’s Financial Profile?

For unsecured loans, the lender looks closely at your co-applicant's income and credit score. If your co-applicant has a stable job and a good financial history, an unsecured loan is easier to get.

However, if your co-applicant doesn’t have a strong financial background, a secured loan might be more suitable since the collateral reduces the lender’s risk.

How to Apply for an Education Loan?

Whether you’re applying for a secured loan or an unsecured loan, the process is similar, with a few differences.

Here’s how you can do it:

Steps to Apply for a Secured Loan:

Research lenders offering competitive rates and terms.
Gather collateral-related documents (property papers, FD certificates, etc.).
Submit your application online or at a bank branch.
Wait for the collateral evaluation process.
Receive loan approval and disbursement.

Steps to Apply for an Unsecured Loan:

Compare lenders based on interest rates and repayment flexibility.
Fill out the application form online or offline.
Provide documents like your academic records, admission letter, and co-applicant details.
Once approved, the loan amount is disbursed.

Final Thoughts: Secured or Unsecured Loan?

Both secured and unsecured education loans have their advantages, and the right choice depends on your financial background and academic goals. Secured loans offer cost-effective financing for students with collateral, while unsecured loans provide flexibility and quick access to funds for those without assets.

Do your research, compare lenders, and ensure you’re fully informed before making a decision. Need help understanding your options? At Yocket Finance, we understand how overwhelming this decision can feel. That’s why we offer expert guidance and loan options to help you navigate this process with ease. Whether you need help comparing lenders, understanding interest rates, or exploring funding options, we’re here to support you at every step of your study-abroad journey.

No matter which loan you choose, remember that this is an investment in your future.