Canada has become one of the most favored choices for Indian students to study abroad as it offers world-renowned universities, numerous program options, and gainful international career opportunities. In terms of quality of education, there are none better than Canada’s, however, studying in Canada still comes with a hefty price. International graduate students can generally expect to pay education costs of around CAD 21,000 per year and accommodation, food, insurance, and travel costs could very well go beyond this and impact the overall budget.
This is where education loans for Canada come into play. They can help relieve some of the fiscal pressure students experience and have become accepted proof of funds for Canadian student visa applications. This leads to students—often their parents—asking: “Does Canada require collateral for an education loan?”
Before we discuss collateral and non-collateral loan options, you should understand the cost of living in Canada for an international student. Typically, your monthly expenses will range between CAD 1,200 – CAD 2,000 based on your city of choice, lifestyle and type of accommodation.
Why Students Prefer Canada for Higher Education?
Canada is now a favored study abroad destination for students from India. Thousands of students select Canada to further their study at Canadian Colleges and Universities every year. This isn’t only because Canada has an excellent education, but also because of the various opportunities it presents.
1. World-Class Universities & Education Quality
Canada has some of the highest-ranked Universities in the world, including University of Toronto, McGill University, University of British Columbia, and University of Alberta. Every year, these Universities rank towards the top for and continue to rank towards the top for their intensive research, higher education arrangements for students, modern facilities, and quality degrees, the best industries relevant/technical skills being taught.
2. Affordable Compared to Other Countries
Studying in Canada is considerably cheaper than the United States, United Kingdom, and Australia. International Graduate students spend an average of CAD 21,000 per year on tuition fees, making it one of the cheapest options available while at the same time providing a quality education for its students.
3. Multicultural Environment
Canada is known for being an open and diverse society. Students from different cultural and linguistic backgrounds feel a sense of safety and belonging, helping them to adapt easily while also enjoying the social aspect of a global learning experience.
4. Employment Opportunities During and After School:
While studying, international students are allowed to work 20 hours a week and full time during school breaks. Following the program, students can apply for the Post-Graduation Work Permit (PGWP) to gain valuable international experience.
5. Pathway to Permanent Residency (PR):
Canada has established pathways for students who desire to settle in Canada after studies. Express Entry and Provincial Nominee Programs are examples of facilitating the transition from objectives to a PR in Canada.
6. Safety and Quality of Life:
Year after year, Canada remains one of the safest and most liveable countries in the world, offering high-quality health care and infrastructure to university students.
Does Canada Require Collateral for Education Loan?
The need for collateral (i.e., pledging of asset like property, fixed deposit etc.) for education loans to Canada is not a mandatory requirement. It varies depending on the loan type, lender, loan size, and the borrower’s/co-applicants profile.
- In India, several banks and NBFCs offer education loans abroad with and without the pledge of collateral, lending ultimately depends on the size of the loan and risk assessments.
- Some lenders offer no-collateral or unsecured loans, but only to an amount a lender provides against assessed risk profiles of the borrowers with full disclosure, mainly personal assets need not be pledged.
- For example, SBI’s Global Ed-Vantage scheme is collateral-free to a limit of ₹50 lakhs against select premier institutions.
- HDFC Credila offers 100% finance for Canadian education, which suggests that some form of no-asset pledge is available, although the final terms depend on the borrower profiles.
When Collateral is Usually Required?
Collateral is more frequently required when:
High Loan Amounts.
- For very high loan amounts lenders will generally require collateral to hedge against an elevated risk profile. Indian banks all have a threshold for education loans above which they will ask for collateral.
Weak Risk Profile.
- If the person co-signing the loan (a parent/guardian) has a lower credit score, not a consistent job, or less of a financial background, lenders may ask for collateral.
Non-Premier or Less Recognized Institutions.
- Loans for university programs that are not on the “approved” list may require stricter terms, including collateral.
Local vs International Lenders
- In Canada itself, some private student loans (for international students) may require a co-signer or collateral, depending on credit assessments and institutional agreements.
- Some Canadian private lenders allow loans without a cosigner (or collateral) if the student is enrolled in approved institutions.
- But many conventional banks require a co-signer or collateral because international students lack local credit history.
Collateral-Free Education Loans for Canada
Not all students have assets or properties that they can use as guarantees when they apply for education loans. On the bright side, there are several education loans available at private banks, Non-Banking Financial Companies (NBFCs), and international lenders that do not require property or assets as collateral (also referred to as unsecured loans).
- Private Banks & NBFCs: These loans typically require a co-applicant (the student’s parent/guardian), who has a minimum stable income. The advantage is that students will receive the loan funds quickly while enjoying relatively flexible repayment plans.
- International Lenders: Providers, such as MPOWER Financing and Prodigy Finance, offer loans without requiring either collateral or a co-applicant. Additionally, they disburse the loan in CAD, which saves students the currency conversions costs (if applicable). The interest rates, however, are relatively higher.
Each lender has its own advantages and disadvantages to provide, therefore students should consider carefully before applying. For example, banks tend to provide a lower interest rate than international lenders; however, international lenders tend to allow easier access for students who do not meet eligibility bonuses that are offered by domestic banks.
Below is a comparative table of unsecured education loan options for studying in Canada (as of January 2025).
| Lender Name | Maximum Loan Amount | Rate of Interest | Margin Money |
|---|---|---|---|
| Axis Bank | Up to INR 40 Lakhs | Starting at 11% | 5% of the loan amount |
| ICICI Bank | Up to INR 40 Lakhs | 10.85% – 15.5% | 0% – 15% |
| IDFC FIRST Bank | Up to INR 75 Lakhs | 11% – 12.25% | Nil |
| HDFC Credila | Up to INR 50 Lakhs | 10.25% – 12.75% | Nil |
| Auxilo | Up to INR 40 Lakhs | 10.5% – 13% | Nil |
| InCred | Up to INR 40 Lakhs | 11.65% – 13.5% | Nil |
| Avanse | Up to INR 40 Lakhs | 12% – 13.25% | Nil |
| MPOWER Financing | Up to USD 100,000 | 12.99% (Graduate) / 13.99% (Undergraduate) | Nil |
| Prodigy Finance | Up to USD 100,000 | 12% – 14% | 15% – 30% of overall expenses |
Eligibility Criteria for Non-Collateral Education Loans
These are the key criteria students usually must satisfy to qualify for a non-collateral education loan.
| Criteria | Details |
|---|---|
| Admission / Enrollment in Eligible Institution | You must have secured admission to a recognized university or institution abroad, and the program must be one supported by the lender. For example, Prodigy Finance requires that your university and program be on their supported list. |
| Program Type | Full-time (or partly full-time/hybrid in some cases) degree or postgraduate programs are typically accepted. Some lenders also allow master’s, MBA, doctoral programs. |
| Residency / Country of Citizenship | You must be an international student in many cases. Some lenders require you to reside in a supported country or region when you apply. Prodigy Finance, for instance, supports applicants based on region eligibility. |
| Age and Academic Performance | Minimum age (usually 18+). Also, you may need to show strong academic credentials—good grades, test scores. While not all lenders document specific cutoffs for grades uniformly, academic performance is a factor in assessing creditworthiness. |
| Co-Applicant / Co-Signer (in Some Cases) | Even if no collateral is required, many lenders require a co-applicant with stable income or good credit history. However, some international lenders allow loans without co-signer/co-applicant. Prodigy Finance states no co-signer or collateral is needed for many of its offerings. |
| Support Documents | Typical documents include: admission offer letter; academic transcripts/certificates; identification (passport, etc.); proof of residence; sometimes test scores (GRE/GMAT, TOEFL/IELTS) especially for abroad studies; bank statements or income proof for co-applicant. |
| Credit or Financial History | For non-collateral loans, lenders often evaluate credit score/history of co-applicant (if applicable) or assess financial stability. Some lenders have “affordability checks” rather than traditional collateral. For example, Prodigy Finance uses future earning potential and ability to repay rather than collateral. |
| Program Duration / Completion Status | Some lenders specify that if you have already finished part of a program, you may need to show GPA or performance for the semesters completed. MPOWER Financing, for example, requires a GPA if applying after the first semester. |
| Supporting Visa / Immigration Status | Lenders often expect you to have or will apply for a student visa or meet immigration/permit requirements for studying in the target country. This helps assure lenders of intent and legitimacy. |
Disclaimer
The information provided in this article is for general guidance and educational purposes only. Loan eligibility criteria, interest rates, terms, and conditions may vary across banks, NBFCs, and international lenders and are subject to change without prior notice. Students and parents are strongly advised to verify details directly with the respective financial institution before making any decision. This article does not constitute financial advice or a guarantee of loan approval.
Documents Required for Non-Collateral Education Loans for Canada
When applying for an unsecured education loan to study in Canada, lenders (banks, NBFCs, and international providers) ask for documents under three main categories: student, academic, and co-applicant/financial documents.
1. Student Documents
- Valid Passport
- Recent Passport-size Photographs
- Admission Letter / Offer Letter from Canadian University or College
- Student Visa (if already issued)
- Statement of Cost of Study (fees + living expenses as per I-20/college letter)
2. Academic Documents
- Class 10th & 12th Mark Sheets and Certificates
- Undergraduate Degree Certificates & Transcripts (if applying for PG/Masters/MBA)
- Entrance Exam Scores (GMAT/GRE/IELTS/TOEFL, as applicable)
- Resume / CV (sometimes required for MBA or PG applicants)
3. Co-applicant / Financial Documents (for Indian Banks & NBFCs)
- KYC Documents of Co-applicant (PAN, Aadhaar, Passport, etc.)
- Income Proof (Latest Salary Slips for salaried; ITR, Balance Sheet, and P&L for self-employed)
- Latest 6–12 months Bank Statements
- Form 16 / Income Tax Returns (last 2–3 years)
- Proof of Relationship with Student (if co-applicant is parent, guardian, or spouse)
4. Additional Documents (Lender-specific)
- Loan Application Form (duly filled and signed)
- University Fee Structure Document
- Gap Certificates (if applicable)
- Credit Report of Co-applicant (CIBIL Score for Indian lenders)
Note: International lenders like MPOWER Financing and Prodigy Finance generally do not require co-applicants or income documents. Instead, they assess eligibility based on admission to a recognized Canadian institution and future earning potential.
Expenses Covered by Canadian Education Loans
When you apply for an education loan to study in Canada, lenders provide coverage not only for your tuition fees but also for other academic, living, and personal expenses. Depending on the lender, you can either take the entire sanctioned loan amount at once or request periodical disbursements. Periodical disbursement is often a better choice, as interest is charged only on the disbursed amount, not on the entire sanctioned loan. This helps reduce the overall cost of borrowing.
1. Tuition & Fees
- Tuition charged by the university or college
- Admission and registration fees
- Examinations and Lab fees
- Books, studying materials, or a laptop/tablet (if required for the program)
- Study tour, project, and research work costs,
2. Living Expenses
- Accommodation costs (on-campus or off-campus)
- Hostel and boarding fee
- Daily living expenses, food
3. Other Expenses
- A caution deposit and security refundable fees
- Travel expenses, including flight ticket to Canada
- Health insurance/medical, which is required for all international students who study in Canada
- Other personal expenses or costs, such as local transportation, utilities, and the internet
Most lenders, disburse these costs directly to the university for tuition, while living and other costs may be distributed directly to the student or co-applicant account in a periodic (monthly) schedule.
Guaranteed Investment Certificate (GIC) – A Mandatory Step for Canada Student Visa
If you’re preparing to study in Canada, establishing a Guaranteed Investment Certificate (GIC) account is a compulsory part of the Student Direct Stream (SDS) process. A GIC is a form of evidence of funds for living expenses for the first year in Canada.
- Deposit Amount: CAD 10,000 (plus a CAD 200 processing fee)
- Nature: Short-term liquid investment with guaranteed returns for a duration of 1 year
- Purpose: Evidence of funds and a way to ensure you will be able to meet living expenses
How Does A GIC Work?
- Open a GIC Account online with a participating bank, which can include Scotiabank, ICICI Bank Canada, HSBC, SBI Canada Bank or CIBC.
- Deposit CAD 10,000 + CAD 200 processing fee. After the deposit is secure, you will receive an Investment Balance Confirmation, which you will require for your visa application
- After you arrive in Canada, open a personal bank account in the same bank you have opened your GIC with
- You will receive CAD 2000 as a lump sum into your personal account
- The remaining CAD 8000 will remain in your GIC and release monthly (CAD 666) to support living expenses
How to Get an Education Loan for Canada?
Securing an education loan for Canada requires careful planning. Since the process may take 4–6 months, students are advised to start early.
Steps to Apply:
- Verify Loan Eligibility – Submit an education loan eligibility form directly with a bank/NBFC.
- Get Expert Advice – A loan officer will advise you about lenders, interest rates, and documentation as necessary.
- Custom Document Checklist – Based on the lender, you will receive an approved document checklist that specifies what to provide (and what alternatives are available).
- Verification – Upon receiving the documents, this process will take about 7–15 days.
- Approval & Loan – Upon approval, you will receive a loan agreement. Be sure to read this carefully before signing.
- Disbursement –
- Private Banks/NBFCs: Disbursement might be made into either your account or your co-applicant’s account.
- International Lenders: Funds are generally sent directly to the university.
Loan Sanction & Pre-Visa Disbursement
After sanction, the lender issues a loan agreement outlining all terms and conditions. For Canadian student visas, a pre-visa disbursement is often mandatory. This ensures that you can show proof of funds, covering tuition fees + GIC requirement, as required by IRCC (Immigration, Refugees and Citizenship Canada) guidelines.
FAQs: Does Canada Require Collateral for Education Loan?
Q. Do I need to provide collateral to get an education loan for Canada?
A. A number of private banks, NBFCs and global lenders can extend you an education loan to study in Canada without requiring any collateral. There can however be cases where collateral is required, such as if you are taking a high loan amount, or if the lender’s policy calls for collateral on a loan.
Q. What is the typical margin money required for collateral-free loans?
A. An unsecured loan may require lenders to ask for 5% – 15% margin money, depending on the bank and loan amount. Some international lenders, like Prodigy Finance and MPOWER Financing, provide loans with no margin or collateral.
Q. Can I get a education loan without a co-applicant?
A. Some lenders, outside of India, may provide loans without a co-applicant, but nearly every Indian bank or NBFC consider a co-applicant (usually parent) as a condition for collateral-free loans that assits the lender about repayment assurance.
Q. What are the maximum education loan amounts available without collateral?
A. Indian banks/NBFCs: They can lend you anywhere from INR 40 lakh – INR 75 lakh. International lenders: Up to USD 100,000 (approx. INR 80 lakh), depending on the program.
Q. Which lenders provide collateral-free education loans for Canada?
A. Large options include Indian Banks/NBFCs: Axis Bank, ICICI Bank, HDFC Credila, IDFC FIRST Bank, Auxilo, Avanse, Incred. International Lenders are Prodigy Finance, MPOWER Financing.
Q. Are the interest rates higher for collateral-free loans?
A. Collateral-free loans typically have slightly higher interest rates compared to secured loans. The reason is the higher risk to the lenders. The interest rates for Indian lenders typically fall between 10%-14% and for international lenders between 12%-14%.
Q. Do scholarships or assistantships reduce margin money?
A. Most lenders will allow you to offset the scholarships or assistants against your margin money, therefore reducing the amount you need to fund from your own personal funds.
Q. Is collateral required for all courses in Canada?
A. The requirement for collateral depends on the amount of loan, lender guidelines, and your credit rating. For programs such as the MBA, MS, or undergraduate courses, collateral-free loans are more often available for good merit students.