Thinking of studying abroad? Here's how foreign education loans & EMIs work

Experts explain approval rules, repayment maths, hidden overseas lenders may impose

For many Indians, studying abroad is a chance to learn in a global environment and find opportunities for international careers. Education loans are a common method to finance this dream and understanding what banks look for, how repayment works, and overseas costs can make the journey smoother, experts say.

 

What banks check before approving a loan

Banks place strong weight on a student’s academic record, course quality and earning prospects. An Axis Bank spokesperson said the “most crucial factors” include academic strength, the institution’s quality and “projected employability after graduation”, which help banks assess repayment ability. The bank offers unsecured loans of up to Rs 1.5 crore under its partial interest scheme, where students can pay as little as Rs 3,000 a month during study years.

 

Professor Babli Dhiman, who is head of finance at Lovely Professional University, said lenders examine “programme details, employability aspects, salary packages, the institution’s reputation, past academic record, parent income and repayment history, and collateral if any.”

 

Adhil Shetty, chief executive officer of BankBazaar.com, said most lenders follow the RBI’s model education loan scheme, where admission to a “recognised, job-oriented course” improves approval chances even without collateral.

 

How repayment actually works

Loan repayment begins after a moratorium, usually the course period plus up to one year. Banks offer options ranging from immediate EMI to full moratorium.

 

Using the example of a Rs 15 lakh loan at 10 per cent interest rate, tenure of 180 months and a moratorium of 30 months, Axis Bank illustrated how total repayment changes sharply across structures. With immediate EMI, the total outflow was Rs 31.6 lakh; under simple interest, it dropped to Rs 30.08 lakh; but under a full moratorium, it rose to Rs 32.91 lakh due to accumulated interest.

 

Shetty offered another example, on a Rs 8 lakh loan at 10 per cent for a two-year course plus a six-month moratorium, the interest added up to Rs 2 lakh. Paying interest during the moratorium reduced EMI from Rs 13,215 to Rs 10,572 and cut interest outflow by Rs 1.2 lakh.

 

Common mistakes to avoid

A common error, according to Axis Bank’s spokesperson, is waiting until admission is confirmed. The bank advises exploring loans early through pre-admission sanction options. Dhiman said families often ignore expenses beyond tuition, such as lodging, food and exam fees, leading to a funding gap later.

 

Shetty added that applicants should also check whether the bank funds 100 per cent of costs or only 80–85 per cent.

 

Hidden costs for studying abroad

Overseas students frequently underestimate expenses such as visa charges, insurance, laptop costs, rental deposits and foreign exchange fluctuations, the Axis Bank spokesperson said. Dhiman listed additional costs like visa-interview travel, health-insurance requirements and high living deposits.

 

Shetty warned that currency swings could raise total costs, especially when repayments are made from a weaker currency.

 

Current foreign education loan rates

• State Bank of India: 9.15 per cent
• Union Bank of India: 8.25 per cent
• Punjab National Bank: 8.35 per cent
• ICICI Bank: 10.25 per cent
• IDFC First Bank: 9.50 per cent

 

Rates are indicative as of 18 November 2025 and vary by profile and loan terms.

 

*The above rates are according to data provided by Bankbazaar.com