Planning to study abroad but confused between collateral and non collateral loans? You’re not alone. Many Indian students face this exact question while arranging funds for their international education. At Spoctree, we help you compare both options side by side—so you can choose what’s right for your goals, finances, and study destination. In this blog, you’ll understand the difference between collateral and non collateral loans, what they mean, and how to decide which one works best for you.
What is a Collateral Abroad Education Loan?
A collateral education loan is a loan where you (or your parents) need to give a security—like a property, fixed deposit, or any valuable asset—to the lender. This asset acts as a guarantee. As a result, lenders typically offer lower interest rates and higher loan amounts. These loans are a good option if your family owns assets and you're applying for high-cost courses abroad.
What is a Non-Collateral Abroad Education Loan?
- You don’t need to offer any property or asset.
- The loan is given based on your academic background, test scores, course, and university.
- Often requires a co-applicant who has a regular income.
- Interest rates may be slightly higher than those for collateral loans.
- Usually easier and faster to apply for—great for students who don’t have assets to pledge.
Also Read: How to Get an Education Loan for Abroad Studies Without Collateral?
Key Difference Between Collateral And Non Collateral Loan Abroad Education Loans
Understanding the key differences between collateral and non-collateral abroad education loans is essential to choosing the right financing option for your international studies.
- Collateral loans require you to pledge an asset like property or a fixed deposit; non-collateral loans don’t.
- Collateral loans usually offer lower interest rates and higher loan amounts.
- Non-collateral loans are based on academic merit, university reputation, and co-applicant income.
- Processing time for non-collateral loans is generally faster.
- Collateral loans may be a better option for students pursuing expensive courses or those applying to Tier-2 universities.
- Non-collateral loans are ideal for students who lack family assets but have strong academic profiles.
By understanding these distinctions, you can more effectively assess which loan type aligns with your financial situation and academic plans.
Pros and Cons of Collateral Abroad Education Loans
Collateral abroad education loans offer distinct advantages and drawbacks that can impact your borrowing experience and repayment journey.
Pros:
- Lower interest rates (compared to unsecured loans).
- Higher chances of getting 100% financing.
- Longer repayment periods (up to 15 years).
- Eligible for Section 80E tax benefits.
Cons:
- Requires property or asset documentation.
- Involves legal and valuation checks, resulting in a longer processing time.
- Family assets are at risk if repayment is delayed or defaulted.
Evaluating these pros and cons will help you decide if pledging an asset is the right choice for financing your overseas education.
Pros and Cons of Non-Collateral Abroad Education Loans
Non-collateral abroad education loans offer a convenient alternative that does not require security, but they also come with their own set of benefits and limitations.
Pros:
- No assets or properties are required to apply.
- Faster loan approval and disbursal.
- Based on academic merit and future earning potential.
- Often preferred for quick applications to top universities.
Cons:
- Slightly higher interest rates than secured loans.
- The loan amount may be capped depending on the country or course.
- A strong co-applicant profile is usually mandatory.
- Some lenders may require additional documentation or restrict funding to Tier 1 institutions only.
Understanding these factors will enable you to weigh the convenience against potential costs and eligibility criteria.
Which Type of Abroad Education Loan Is Right for You?
Choosing between collateral and non-collateral education loans depends on your financial profile, loan amount needs, and risk appetite.
- Consider a collateral loan if you have a property to pledge, prefer a lower interest rate, and require a larger loan amount.
- Consider a non-collateral loan if you don’t have assets or need quick approval.
- If you're applying to a top-ranked university, many lenders are open to offering non-collateral loans.
- Working professionals with a strong credit history may be eligible for special terms on both types.
Careful consideration of your personal circumstances will guide you to the loan option best suited to support your study abroad goals.
Also Read: Types of Abroad Education Loans for Abroad Studies
Top Banks/NBFCs for Collateral & Non-Collateral Abroad Education Loan
Several leading banks and NBFCs in India specialise in offering both collateral and non-collateral education loans tailored for overseas studies.
- SBI – Offers collateral loans with competitive rates and long tenure.
- Bank of Baroda – Great for secured loans with 100% funding.
- Axis Bank – Offers both types based on profile strength.
- ICICI Bank – Fast processing, especially for non-collateral loans to top universities.
- HDFC Credila – Popular for customised collateral and non collateral loans.
- InCred, Avanse, and Auxilo – NBFCs offering flexible non-collateral loans for top courses.
Use Spoctree to compare interest rates, eligibility, and benefits across all of these in one place.
Steps to Apply for Abroad Education Loan
When you apply for an Abroad Education Loan, it involves a clear set of steps to ensure timely approval and disbursal.
- Check your eligibility – Based on course, university, and co-applicant details.
- Choose loan type – Decide between collateral and non collateral loans based on your situation.
- Compare lenders on Spoctree – Get the best interest rates and loan terms.
- Submit application – With KYC documents, admission letter, income proofs, and property papers (if needed).
- Get a loan sanctioned – Post verification and lender approval.
- Loan disbursement – Funds are released according to the university's fee schedule.
Following these steps diligently will streamline your loan application process and help you secure the funds needed for your international education.
Conclusion
Choosing between collateral and non collateral loans is a big decision, but it doesn’t have to be confusing. At Spoctree, we help you compare the best lenders, interest rates, and offers all in one place. Whether you have assets or not, there's a study abroad loan that fits your journey. Let Spoctree make the process faster, simpler, and 100% tailored to your goals.
