At an Ivy League university, studying abroad carries a hefty price tag that can reach millions of dollars. Even with grants, scholarships, and other forms of aid, many worthy Indian students still cannot afford the net cost. They are left with no choice except to apply for an education loan.

“Universities abroad only offer grants and scholarships to a relatively modest number of students.” Because of the continually growing number of aspirational students, higher education may become prohibitively expensive for a sizeable portion of this population. Taking out a student loan significantly boosts their chances of being accepted to their top-choice university “, says HDFC Credila MD and CEO Arijit Sanyal.

There are two types of student loans: secured and unsecured. Few students are able to readily obtain an unsecured school loan due to having good parental income and a strong ability to repay the loan. Students with wealthy parents also receive larger loans after pledging their possessions as security. It has been difficult for some students to obtain the appropriate loan amount because their parents do not have strong financial backgrounds.

“In the secured one, the assets of the parents are crucial since they serve as security (collateral) in the event that either the child or the parent is unable to repay the loan. “Academic records of the student don’t matter much because the financial institution is confident,” explains Eela Dubey, co-founder and CEO of EduFund. Students with less stable financial backgrounds frequently have to give up on their goals.

Despite the fact that some of these students used to receive a modest unsecured loan, lenders normally offer substantially smaller loan amounts as compared to secured school loans. But now, circumstances have shifted. A larger unsecured loan is now available as a new alternative to help with the cost. Numerous new funding possibilities have emerged in the field of education finance, particularly for students who lack any assets to use as security.

“There are modern FinTech companies that offer uncollateralized student loans.” As the primary factors for loan eligibility, these lenders look at the student’s past academic success and potential for future earnings, “says GyanDhan CEO and Co-Founder Ankit Mehra. Funding may not be a major obstacle if you have the qualifications and have been admitted to some of the most prestigious institutions.

According to Mayank Sharma, Country Head for Prodigy Finance, “Merit-based collateral and co-signer free loans, like those offered by Prodigy Finance, are a popular alternative or complement of grants and scholarships today. Students need not rely on traditional alternatives that can burden them and their families, ensuring the only thing students need to be concerned about is their studies.

Many of these new lenders are willing to accept greater risk and provide more worthy students with collateral-free loans. There isn’t any supplied collateral for the unsecured loan. Based on the child’s chances and potential for repaying the proposed loan, the bank or financial institution assumes a calculated risk. The bank evaluates a wide range of materials in this case, including the candidate’s prior academic performance and the caliber of the student.

Depending on the subject and college of choice, aspirants can obtain up to Rs. 40 lakhs in an unsecured loan, “Eela adds.” Some lenders provide even larger sums as collateral-free loans, but again, these are only made available to a small number of students who will be attending the most reputable institutions to study.

According to Sanyal, “Depending on the strength of an application, we provide unsecured loans up to Rs 75 lakh.” How do lenders select borrowers for larger unsecured loans? These lenders are taking a major risk by issuing larger college loans, but they only do so after carefully weighing a variety of variables. We carefully evaluate the student’s profile as part of our strategy.

About 50–60 parameters are assessed to determine a student’s employability potential score. These criteria include past academic performance; educational continuity; entrance test scores; the reputation of the university or institution; the choice of courses in relation to prior knowledge; and more, “states Rajesh Kachave, Avanse Financial Services’ chief business officer for education loans.” Your chance of receiving the required unsecured loan depends heavily on your past placement and the compensation given to prior students who took the same course at the same institution.

“No collateral or co-signer is needed from the student in order to apply.” The student profile and their background are taken into consideration when offering collateral- and co-signer-free loans. “Since the credit risk is determined based on students’ anticipated future earnings, we consider the course and school the applicant desires to attend,” Sharma explains.

“The parents’ work or ability to repay is not taken into consideration when deciding the same.” As a result, the student can pay for their education without burdening their parents financially, “Sharma furthers. closing the final mile of a gap. If, despite your best efforts, you are still unable to pay for your education, you can address the issue once you begin your international studies.

“There are alternative options, such as financial institutions, that provide loans in foreign currencies without a cosigner or any kind of security. There are no prepayment penalties, and the payback can be done in any currency. During the course of the loan, only interest must be paid. “After passing the course, the principal amount and accrued interest can be paid, “Eela explains.