Pursuing a Master of Science (MS) in the USA has become a dream for many students, but the high tuition and living expenses can create a significant financial hurdle. Although education loans tend to be the solution, depending on assets to pledge isn’t always an option for all students. This is where collateral-free education loans come into play, which is a great option for students looking for college financing without offering property or other valuables to back the loan.
These loans can be used to cover tuition, living expenses, travel costs, and other related expenses while offering students additional loan repayment flexibility. Several banks and NBFCs in India (non-banking financial companies) have begun to offer heritage and non-asset specific loans for studying abroad in countries like the USA and other demand centers.
This blog outlines the best debt education loan options for MS in the USA without needing to pledge collateral. It offers comparisons based on interest rates, loan amounts, tenure, eligibility, and other factors. Whether you want a full or partial educational loan for your tuition, this will provide some insight to help you and the right bank, NBFC, or other lending company fund your studies overseas.
What Are Collateral-Free Education Loans?
Collateral-Free Education Loans are loans provided by banks or NBFCs that do not require the students to put up an asset, e.g., a property, fixed deposits, or gold, as collateral to obtain the loan. These loans are mainly designed for students who seek financial support for education but do not have collateral to guarantee the loan.
Such loans require a co-borrower, normally a parent or guardian, whose income and credit eligibility will be assessed to secure the loan approval. Collateral-free loans are normally for smaller dollar limits than a secured loan, but many banks and NBFCs offer higher education loans for significant limits for programs in India and abroad, especially for scholarship or ranked students and more at premier institutions.
The primary advantage of collateral-free loans is ease of acquiring funds without risking personal or family-held assets. The loans are mostly designed to cover tuition and living expenses in addition to other education-related costs, however, interest will typically be slightly above the secured interest rates, with limits again determined by the lender’s policy and collateral-free status.
Top Banks and NBFCs Offering Collateral-Free Education Loans for MS in USA
If you’re planning to pursue an MS in the USA and prefer a collateral-free education loan, several banks and NBFCs in India offer tailored solutions to meet your financial needs. Here’s an overview of the top lenders providing such loans:
| Lender | Loan Amount | Interest Rate | Key Highlights |
|---|---|---|---|
| Axis Bank | Up to Rs.80 Lakhs | 10.90% – 12.5% | Collateral-free loans up to Rs.7.5 Lakhs; 100% financing available; No pre-closure charges; Doorstep service. |
| ICICI Bank | Up to Rs.75 Lakhs | 10.50% – 12.50% | Collateral-free loans up to Rs.50 Lakhs for select institutions; Loans up to Rs.1 Crore available; Flexible repayment options. |
| IDFC FIRST Bank | Up to Rs.75 Lakhs | 10.75% – 12.25% | Collateral-free loans up to Rs.75 Lakhs; Up to 100% financing; Flexible tenure up to 15 years; Tax benefits under Section 80E. |
| HDFC Credila | Up to Rs.75 Lakhs | 10.50% – 12.50% | Unsecured loans up to Rs.50 Lakhs; Secured loans up to Rs.1.5 Crore; 100% cost coverage; Loans for studies in USA, UK, Canada, Australia, and more. |
| Auxilo | Up to Rs.1 Crore | 11.3% – 13% | No collateral required; 100% financing; Pre-admission and pre-visa disbursement; Quick loan sanctions with personalized support. |
| InCred | Up to Rs.1 Crore | 11% – 12.5% (USA) | Collateral-free loans up to Rs.1 Crore; Covers tuition fees, living expenses, travel, and other costs; Instant approval with minimal documentation. |
| Avanse | Up to Rs.1.25 Crore | 11% – 13% | Collateral-free loans up to Rs.1.25 Crore; EMI payment after course completion; Attractive interest rates. |
| MPOWER Financing | Up to $100,000 USD | 12.74% USD | No collateral or cosigner required; Fixed-rate loans; Available for international students attending eligible U.S. or Canadian universities. |
| Prodigy Finance | Up to $100,000 USD | 12% – 14% USD | No collateral or cosigner required; Loans based on future earning potential; Available for students from select countries attending top universities. |
Note: Interest rates and loan amounts are indicative and may vary based on individual profiles, course, and institution. It’s advisable to check with the respective lender for the most accurate and up-to-date information.
Eligibility Criteria for Collateral-Free Loans for MS in USA
Education loans that do not require collateral are simply a way for students to facilitate their studies abroad without the need to pledge some kind of property, fixed deposit or asset. However, the lenders will always set certain eligibility conditions to ensure the borrower has the capacity to repay it. Below, you will find standalone education loand eligibility that most banks and NBFCs typically follow when offering education loans for MS in the US:
- Citizenship – The borrower must be an Indian citizen with a valid passport.
- Admission Confirmation – The borrower must have confirmed (or conditional confirmation) of acceptance into an accredited school in the US. Lenders will typically prefer universities that are in the top rankings or recognized as premier programs available.
- Academic Performance – The borrower should have a good academic history to improve chances of loan approval. A good academic performance record on the 10th, the 12th, and or graduation is a plus on the application. Lenders may also look at standardized test results (GRE/GMAT) as well as language Proficiency (IELTS/TOEFL).
- Course Qualification – The loan is towards a full-time post-graduate program (MS) in an area of study such as engineering, technology, and data science to name a few or any other program offered at a reputable university.
- Co-Applicant – A parent or guardian needs to act as a co-applicant. The co-applicant’s income, stability of employment, and creditworthiness will all be checked by the lender prior to loan issues to ensure repayment capability is possible.
- Loan Amount Limit – Collateral-free loans usually have an upper cap, typically ranging between Rs.40–75 lakhs from Indian lenders and up to USD 100,000 from international NBFCs.
- Creditworthiness – Both the student’s and co-applicant’s credit profile are evaluated. A good CIBIL score of the co-applicant improves the chances of higher loan approval.
- Repayment Capacity – Lenders may evaluate the expected future income of the student post-MS. For international NBFCs like MPOWER Financing and Prodigy Finance, the earning potential after graduation is a key factor.
Application Process for Collateral-Free Education Loans for USA
Applying for a collateral-free education loan to pursue an MS in the USA is pretty simple, students should be fully prepared with documentation and eligibility proofs ahead of time. Follow these steps:
1. Check Eligibility
- Ensure you have received an admission letter/offer letter from a recognised US university.
- Confirm that you have met the minimum academic performance and entrance exam (supplementary entrance exams such as the GRE, IELTS, TOEFL if applicable).
- The co-applicant (normally a parent or guardian) will need to meet the lending institution’s credit score requirements, and provide documentation to prove this.
2. Compare Lenders
- Investigate which banks and NBFCs will provide you with a loan without collateral.
- Review and compare between the loan amount, interest rate, processing fee, tenure for repayment, and margin money.
3. Prepare Required Documents
- The reports needed from academic organisations such as 10th, 12th, graduation mark sheets, and any GRE/IELTS/TOEFL scores, if needed.
- Admission/offer letter from the US university..
- Fee structure from the university.
- KYC documents of student and co-applicant (Aadhaar, PAN, passport, etc.).
- Co-applicants income (i.e. ITR, salary slips, and financial statements as evidence of income documentation) will be also needed.
4. Submit Loan Application
- Either fill out the education loan application form online, or in your local branch.
- Attach all required documents.
- For NBFCs, many applications can be completed digitally.
5. Loan Sanction & Verification
- The lender validates all documents, admission details, and the credit history of co-applicants.
- If approved, a loan sanction letter is issued. This letter is necessary for university confirmation and visa processing.
6. Loan Disbursement
- Funds are disbursed in installments (semester basis or annual basis) directly to the US university.
- Depending on the lender’s policy, living expenses may be credited to the student account.
Tips to Secure a Collateral-Free Loan for MS Abroad
Obtaining an unsecured education loan for MS in the US or abroad is competitive. Here are some helpful tips to help you improve your chances:
1. Maintain Strong Academic Records
- Good scores in class 10, class 12, graduation, and entrance exams (GRE, IELTS or TOEFL) represent good academic consistency.
- Higher scores improve lender confidence in your repayment ability.
2. Secure Admission in a Recognized University
- Loans are more easily approved if your university is on the lender’s prime list (like top 200–300 global universities).
- Admission to reputed institutions can also fetch better interest rates.
3. Ensure Co-Applicant’s Strong Financial Profile
- In the event of shortfall in Student Loan EMI payment, banks prefer to see a parent/guardian as a co-signer for a loan with a sustainable job and a reasonable CIBIL score (can go anywhere from 650-750).
- The lender will start their underwriting process to ensure the co-signer is capable of paying off the loan.
4. Apply Early
- Once you get your admission/offer letter, get your loan application completed early.
- Starting the loan process early helps with your visa application and avoids last-minute loan refusals.
5. Compare Banks & NBFCs
- Don’t let yourself feel rushed into a loan from the first lender you talk to.
- Find out the interest rates, loan limits, and repayment flexibility available from banks or non-banking financial companies (NBFC).
- Non-Banking Financial Companies may offer loans quickly, in larger amounts and with less collateral.
6. Show Scholarships or Assistantship (if any)
- Any scholarship reduces the financial burden, which lenders treat positively.
- It also reduces the required loan margin.
7. Keep Documents Ready & Error-Free
- Ensure KYC, income proofs, and academic records are updated and error-free.
- Missing or mismatched documents often delay approvals.
FAQs: Best Education Loan Options for MS in USA?
Q. How much loan amount can I get without collateral for MS in the USA?
A. Banks typically sanction Rs.40–50 lakhs, and NBFCs may offer up to Rs.75 lakhs. International lenders, such as Prodigy Finance and MPOWER Financing, typically provide loans of USD 100,000 with no security.
Q. What is the interest rate for unsecured loans for MS abroad?
A. The interest rate charged by Indian banks/NBFCs for unsecured education loans ranges from 10.5-14% per annum; International lenders typically charge interest rates of 12-14% in USD. The interest rates depend on the lenders, co-applicant profile, and university.
Q. Who can apply for a collateral-free loan for MS in the USA?
A. Indian students who have secured admissions in recognized universities abroad are eligible for collateral free loans, especially from lenders providers. A co-applicant with stable income is required along with a good CIBIL score ( 650+).
Q. What expenses are covered under these loans?
A. Collateral free loans can typically cover tuition fees, living expenses, hostel/mess charges, travel expense, book expenses, laptop, insurance, and other academic outlays like project work or study tours.
Q. Which is better for MS in the USA, banks or NBFCs for unsecured loans?
A. Banks typically provide lower interest rates, but usually have stricter eligibility requirements along with lower maximum amounts. Non-bank financial institutions (NBFCs) tend to provide higher loan amounts and more flexible terms, but a slightly higher interest rate. Students should compare both before making an application.
Q. Do I need a co-applicant for unsecured loans?
A. Most banks and NBFCs require students to apply with a co-applicant (such as their parent or guardian, spouse, etc.) who has a stable or recurring income with an acceptable credit history/situation. International lenders such as MPOWER Financing, Prodigy Finance, and others generally do not require a co-applicant.
Q. Can I get tax benefits on unsecured education loans?
A. Tax benefits may be available under Section 80E of the Income Tax Act, which allows for tax education to be deducted for education loans (can be unsecured or secured) limited for up to 8 years excluding repayment. Principal payments (PC) are not tax deductible.
Q. When do I start repaying the loan?
A. Repayment usually starts about 6–12 months after the course has concluded (although in some cases the time may be longer). In addition, while you are studying, repayment may be required at the lender’s discretion, such as servicing simple interest, partial interest etc.