Overseas Education Loan Insurance for Unsecured Loans

Abroad education loans are one of the most popular options for students to pay for their international degrees abroad. However, taking out a loan to pay for higher education may seem like a huge financial risk to many students because they wonder who would repay the loan in case of an emergency. An overseas education loan insurance! Yes.

In this blog post, we will discuss everything about education loan insurance, including its importance, process, benefits, fees, and other important details. Let us first understand Education Loan Insurance.

Education Loan Insurance: Education Loan insurance is a type of scheme specifically designed to lend financial protection to loan borrowers. It is often called a safety net in case the borrower fails to repay the education loan due to unfortunate circumstances. An overseas education loan insurance covers the outstanding loan amount. It ensures that the borrower's family or the co-applicant is not burdened.

Benefits of Education Loan Insurance

Education loan insurance can offer several benefits to both the borrower and their family. Here are a few of them:

Financial Protection: The first and foremost is providing financial protection. Education loan insurance provides financial protection to the borrower and their family in case of unexpected events like the borrower's death or disability. In such unfortunate circumstances, insurance coverage can help repay the outstanding loan amount, relieving the family from the burden of repayment.

No Impact on Credit Score: The education loan insurance coverage ensures that the outstanding loan amount is paid off in case of any unforeseen circumstances, preventing any negative impact on the borrower's credit score or financial history.

Flexible Repayment Options: Some selected education loan insurance policies offer flexible repayment options, such as a grace period or reduced payments, during times of financial difficulty. This can provide breathing room to the borrower or their family during challenging times.

Affordable Premiums: The insurance premiums for overseas education loans are generally affordable and can be added to the education loan amount or paid upfront. The premiums are calculated based on the loan amount and duration, making it easier for borrowers to budget and manage their finances.

Peace of Mind: Knowing that the education loan is insured can provide peace of mind to both the borrower and their family. It ensures that even in challenging situations, such as the loss of the borrower's ability to earn due to disability, the financial future remains secure, and the educational aspirations of the student are not compromised.

With all such benefits, who wouldn't want to take an education loan insurance? Let us now understand the coverage under education loan insurance.

Education Loan Insurance Coverage

Depending on the lender that one chooses, education loan insurance typically provides coverage for various aspects of student loans for studying abroad. Listed below are some common elements that will be covered in an education loan insurance:

Tuition Fees: The tuition fees of international universities are on the higher side which causes hole in one’s pocket. So, if any unforeseen situations occur it can be quite burdening for the borrower and their family. But, if the borrower purchases the insurance policy for the education loan, it covers the outstanding tuition fees.

Living Expenses: Studying abroad frequently requires housing, meals, and other expenditures, and an education loan insurance covers all these expenses, protecting the borrower from any unexpected financial crisis.

Loan Repayment Protection: Education debt repayment protection is one of the important coverings of overseas education loan insurance. The insurance covers debt repayment in case of incapacity, death, or serious illness, relieving the borrower's family or the co-applicant of the financial burden of repayment of the education loan.

Pre-Existing Medical Conditions: Selected education loan insurance also covers pre-existing medical issues, protecting the borrowers from health discrimination.

Now, let us understand if it's mandatory to apply for overseas education loan insurance. Taking advantage of overseas education loan insurance totally depends on the borrower, as it is not compulsory. When it comes to an education loan availed from a government bank, it is not necessary to get one; however, in the case of some private banks or organizations, borrowers are required to opt for education loan insurance as it is mandatory. Thus, it is essential for borrowers to carefully review the terms and conditions of their loan agreement to determine whether education loan insurance is mandatory or recommended by the lender. Even if it's not mandatory, borrowers should consider taking education loan insurance.

Process to Purchase Education Loan Insurance

When taking an overseas education loan, the banks will give the borrowers an option to buy loan insurance. If the borrowers decide to buy the insurance, the premium amount is automatically deducted from the overall education loan amount. Let us now understand the charges involved in the student loan insurance:

Government Banks: At the time of loan disbursement, the government bank will offer the borrower an insurance scheme for the education loan. On average, the government bank charges 0.5% to 1% of the entire loan amount as a premium amount.

Private Banks/NBFCs: Many Private Banks and NBFCs have made it compulsory to buy an insurance policy for an education loan without collateral. Private banks and NBFCs charge between 1.5% to 2% of the total loan amount as a premium.

Conclusion

In conclusion, opting for education loan insurance can be a prudent decision for students pursuing international degrees. This insurance acts as a safety net, offering financial protection to borrowers and their families in the face of unforeseen circumstances such as disability, illness, or death of the borrower.

The benefits are many, including the assurance of no impact on the borrower's credit score, flexible repayment options during financial hardships, and affordable premiums that can be integrated into the loan amount.

Moreover, education loan insurance provides peace of mind, ensuring that educational aspirations remain secure even in challenging situations. While not mandatory in all cases, borrowers should consider the option of education loan insurance, especially when dealing with private banks or organizations where it might be compulsory.

Understanding the coverage and charges involved in the process is crucial, and borrowers should carefully review the terms and conditions of their loan agreements to make an informed decision. Overall, education loan insurance offers a layer of financial security, alleviating the burden of repayment in times of crisis and safeguarding the pursuit of higher education.