The short answer
- Secured loans are backed by collateral such as property or a fixed deposit. Unsecured loans rely on the co-applicant’s income and the student’s admission. Both banks and RBI-registered NBFCs lend for study abroad.
- Expect to need an admission letter, the university’s cost estimate, KYC documents, academic records and a co-applicant, usually a parent, with proof of income.
- Interest on a loan from a bank or a government-notified financial institution can be deducted from taxable income for up to eight years, with no upper limit. You can only claim it outside the default tax regime. Since 1 April 2026, this is section 129 of the Income-tax Act, 2025 (formerly section 80E).
- Fees sent abroad using a loan from such an institution attract no TCS.
- The UK, Canada and the US all let a loan form part of your proof of funds, but the letter must meet each country’s rules.
Secured or unsecured?
| Secured loan | Unsecured loan | |
|---|---|---|
| Backed by | Collateral: property, fixed deposits or similar assets | The co-applicant’s income and credit history, and the student’s admission |
| Loan size | Linked to the value of the collateral and the cost of the course | Set by the lender’s assessment of the university, course and co-applicant |
| Extra paperwork | Property documents, valuation and legal checks | Detailed income and credit checks on the co-applicant |
| Main risk | The pledged asset is at stake if repayments stop | The co-applicant is fully liable, and terms can be stricter |
For smaller amounts, the government’s Credit Guarantee Fund Scheme for Education Loans (CGFSEL), run by NCGTC, covers eligible bank loans of up to ₹7.5 lakh given without collateral or a third-party guarantee. Larger bank loans commonly need collateral. Some lenders offer larger unsecured loans, depending on the university, course and co-applicant.
Rates and fees vary by lender, loan size, collateral and the co-applicant’s credit profile, so we don’t quote them here. Compare written offers side by side.
Banks or NBFCs?
Public and private sector banks lend for study abroad. So do non-banking financial companies (NBFCs), some of which focus on education loans. An NBFC must hold a certificate of registration from the Reserve Bank of India, and you can check a lender’s registration with the RBI.
There’s one difference that’s easy to miss. Both the tax deduction on interest and the TCS exemption on fee payments apply to loans from a “financial institution”. The Income-tax Act defines that as a bank, or another institution the Central Government has notified. If your lender is an NBFC, ask it to confirm in writing whether it is notified for this purpose.
What lenders usually ask for
Lists vary, but most lenders ask for:
- Admission proof: your offer or admission letter and the university’s estimate of tuition and living costs
- Student KYC: passport, PAN and address proof
- Academic records: mark sheets, degree certificates and test scores
- Co-applicant documents: usually a parent’s KYC, income tax returns, salary slips or business accounts, and bank statements
- Collateral papers for a secured loan: title deeds, valuation, or deposit certificates
The usual sequence runs from application, to a sanction letter confirming approval and the amount, to disbursement. Tuition is typically paid straight to the university when it’s due. Visa authorities look at these documents differently, as the next section shows.
Using your loan as proof of funds for a visa
| Country | What the official rules say (October 2026) |
|---|---|
| UK | A loan from a lender regulated in your home country is acceptable. The letter must be dated no more than 6 months before you apply and confirm it’s a student loan. It must state the amount, be addressed to you, and have no conditions other than a successful visa application. It must also confirm the money will be available before you travel or paid to your university. The 28-day rule for holding money doesn’t apply to student loans. |
| Canada | IRCC lists “proof of a student or education loan from a bank” as acceptable. If you apply on or after 1 September 2026, a single student outside Quebec must show CAD 23,448 for living costs, on top of tuition and travel costs. |
| USA | Your university must see evidence of funding before issuing the I-20, and you bring that evidence to the visa interview. The official list “includes but is not limited to” bank statements, sponsor documents and financial aid letters. Ask your university what it accepts. |
For the UK, the money you show is any unpaid tuition plus living costs of £1,529 a month in London or £1,171 a month elsewhere, for up to nine months. More on the numbers in what a UK Master’s really costs and our Canada study permit guide.
Tax relief on interest: section 129 (formerly 80E)
India’s Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The old section 80E deduction continues as section 129. Per the Act:
- Who can claim: the individual who took the loan, for the higher education of themselves, their spouse or children, or a student they are legal guardian of. The interest must be paid out of income taxable in India.
- Which lenders count: a bank, another financial institution notified by the Central Government, or an approved charitable institution.
- What’s deductible: the interest only, not the principal, with no upper limit. Any course after Class 12 counts, including study abroad.
- For how long: the tax year you start paying interest plus the next seven, or until the interest is fully paid, whichever comes first.
- The catch: the deduction isn’t available under the default tax regime in section 202. The borrower has to opt out of that regime to claim it.
If the loan is in the student’s name and they’ll be earning abroad, the deduction may not help, because it needs income taxable in India. Talk to a chartered accountant about whose name the loan should be in.
Questions to ask every lender
- Is the rate fixed or floating, and what is it linked to?
- What are the processing fee and other charges?
- How much do we fund ourselves (the margin)?
- How long is the moratorium, does interest build up during it, and do we pay anything while the student studies?
- Will you pay tuition directly to the university, and in which currency?
- Are there charges for paying off early?
- Is any insurance required?
- Are you a bank or a notified financial institution for TCS and section 129?
A loan is one part of the plan. Look at scholarships first. Then read our guide to sending fees abroad, TCS and banking to see how the money actually gets to your university.
Sources
- Income Tax Department, Income-tax Act, 2025, section 129 (checked Oct 2026)
- Income Tax Department, Income-tax Act, 2025, section 202 (checked Oct 2026)
- Income Tax Department, Income-tax Act, 2025, section 394 (TCS) (checked Oct 2026)
- Income Tax Department, Income-tax Act, 2025, section 1 (commencement) (checked Oct 2026)
- NCGTC, Credit Guarantee Fund Scheme for Education Loans FAQs (PDF) (checked Oct 2026)
- Reserve Bank of India, FAQs on NBFCs (checked Oct 2026)
- PIB, PM-Vidyalaxmi scheme approved (6 November 2024) (checked Oct 2026)
- PM-Vidyalaxmi portal (checked Oct 2026)
- GOV.UK, Immigration Rules: Appendix Finance (checked Oct 2026)
- GOV.UK, Immigration Rules: Appendix Student (checked Oct 2026)
- GOV.UK, Student visa: money (checked Oct 2026)
- IRCC, Study permit: proof of financial support (checked Oct 2026)
- Study in the States (DHS), Financial ability (checked Oct 2026)
