Ultimate Guide to Education Loans for Indian Students Planning to Study Abroad in 2025

Anshul Pal
3 days ago
4 min read

Studying abroad opens doors to global opportunities, but the financial commitment can be overwhelming. Education loans provide a practical way for Indian students to pursue international degrees without immediate financial strain. This guide covers everything you need to know about study abroad loans in 2025, including interest rates, eligibility, required documents, and the best lenders to consider.

Types of Study Abroad Loans

Understanding the types of loans available helps you choose the right option for your needs:

Secured Loans

These loans require collateral such as property or fixed deposits. They usually offer lower interest rates because the risk for the lender is reduced.

Unsecured Loans

No collateral is needed, but interest rates tend to be higher. These loans are suitable for students who do not have assets to pledge but may face stricter eligibility criteria.

Study Abroad Loan Interest Rates in 2025

Interest rates vary depending on the lender type. Here’s a breakdown of typical rates you can expect:

Public Sector Banks

Examples: State Bank of India (SBI), Bank of Baroda (BOB), Punjab National Bank (PNB), Union Bank

Interest rates range from 9.7% to 11.75%

These banks offer the lowest rates but may have longer processing times.

Private Banks

Examples: ICICI Bank, HDFC Bank, Axis Bank

Interest rates range from 11.25% to 14.75%

Private banks often provide faster loan approvals and flexible repayment options.

Non-Banking Financial Companies (NBFCs)

Examples: Credila, InCred, Avanse

Interest rates range from 12% to 15%

NBFCs specialize in education loans and may offer customized plans for students with unique profiles.

International Lenders

Examples: Prodigy Finance, MPower Financing

Interest rates range from 11% to 16%

These lenders do not require collateral and focus on students studying in specific countries.

Eligibility Criteria for Study Abroad Loans

Lenders typically require the following to approve your loan:

Indian citizenship
Admission letter from a recognized foreign university
Strong academic record
Co-applicant with a steady income (usually a parent or guardian)
CIBIL score of 650 or above
Collateral documents for secured loans

Meeting these criteria improves your chances of approval and better interest rates.

Documents Required for Loan Application

Prepare these documents to avoid delays:

For the student:

Valid passport
Academic transcripts and certificates
English proficiency test scores (IELTS/TOEFL)
Admission letter from the foreign university
Statement of Purpose (SOP)

For the co-applicant:

Identity proof (Aadhaar, PAN card)
Bank statements for the last 6 months
Income tax returns (ITR) for the last 2-3 years
Salary slips or income proof

Collateral documents (if applicable) such as property papers or fixed deposit receipts.

Expenses Covered by Education Loans

Education loans cover more than just tuition fees. They can include:

Tuition fees
Living expenses (rent, food, utilities)
Books and study materials
Airfare and travel costs
Visa application fees
Laptop or study equipment
Accommodation costs
Health insurance

This comprehensive coverage helps students manage all major expenses related to studying abroad.

Best Banks for Study Abroad Loans in 2025

Choosing the right lender depends on your destination, loan amount, and personal circumstances:

SBI

Best for students going to the USA, UK, and Canada due to competitive interest rates and wide branch network.

Bank of Baroda (BOB)

Ideal for students targeting European universities with flexible repayment options.

Credila

Suitable for students with lower scores or gap years, offering customized loan products.

ICICI Bank and Axis Bank

Known for fast processing and convenient online application processes.

Prodigy Finance and MPower Financing

International lenders that do not require collateral, perfect for students without assets to pledge.

Tips for Faster Loan Approval

Speed up your loan process with these tips:

Maintain a good CIBIL score by paying existing debts on time.
Apply for the loan as soon as you receive your admission letter.
Choose reputed universities with strong placement records.
Keep all documents organized and ready before applying.
Write a clear and strong financial Statement of Purpose explaining your study plan and repayment ability.

Education Loan or Self-Funding: What to Choose?

Deciding between a loan and self-funding depends on your course and destination:

Take a loan if you are studying in countries with high return on investment (ROI) like the USA, UK, Canada, or Australia. The potential salary after graduation can help repay the loan comfortably.
Consider self-funding for low-cost courses or countries where living expenses are minimal, such as Germany or some Asian countries.

When to Apply for the Loan: Before or After Visa?

The timing of your loan application depends on the country:

For the USA, Canada, and Australia, apply for the loan before your visa application. The loan sanction letter is often required for visa approval.
For Germany, apply after your visa is granted because you need to show proof of blocked account funds instead of a loan.