Studying at a leading foreign university is a once-in-a-lifetime opportunity that opens numerous doors for a successful future. But this experience comes with a significant investment. Keeping in mind the necessary expenses required for studying abroad, aspirants often look out for the right funding choices. Among the many options, education loans have always been a top choice.
Recognizing the rising demand for studying abroad among Indian students, the Government introduced the Credit Guarantee Fund Scheme for Education Loans (CGFSEL). From its inception in 2015 till today, this exclusive loan scheme has provided the much-needed financial support to deserving and eligible students. The main objective of this scheme is to offer education loans to students who lack sufficient collateral but still need financial assistance. While this scheme applies to both India and Abroad, we will keep our focus on the abroad aspect.
Stay with us till the end of this article and understand how you can pursue your academic goals without worrying about financial constraints.
The Credit Guarantee Fund Scheme for Education Loans (CGFSEL) is exclusively for Indian citizens belonging to the economically weaker sections under the Model Education Loan Scheme of the Indian Banks’ Association (IBA). This scheme has several features, and the most significant aspects are given below:
Maximum Loan Amount
Under the CGFSEL scheme, students can avail loans up to a maximum limit of INR 7.5 lakhs. While this limit may seem modest when compared to the total cost of overseas education, it provides substantial assistance to students without any need for collateral.
Guarantee Coverage
The scheme offers up to 75% guarantee coverage on loans sanctioned by banks and financial institutions. This guarantee eliminates the risk for banks as the government acts as a guarantor.
Loan Margin
Under the CGFSEL scheme, no margin is required for loans up to INR 4 lakhs. For loans exceeding INR 4 lakhs and going up to INR 7.5 lakhs, the student is expected to contribute 15% of the total cost of studying abroad.
Interest Rates
Banks can charge an interest of 2% per annum above the base rate. Furthermore, this scheme also provides interest rate subsidies under the Central Sector Interest Subsidy Scheme or CSIS education loans. This gives interest subsidy during the entire moratorium period.
Moratorium Period
One of the most student-friendly aspects of the scheme is the moratorium period, during which repayment of the loan is not required. This period extends up to 12 months after the completion of the course.
Annual Guarantee Fee (AGF)
To avail of the CGFSEL coverage, banks must pay an Annual Guarantee Fee (AGF) to the Credit Guarantee Fund Trust for Educational Loans (CGFTEL). This fee is generally 0.5% of the outstanding loan amount.
Having checked the key features of this CGFSEL scheme, you might be anticipating more information. So, without any further ado let’s proceed to the next section.
The CGFSEL scheme is available for students pursuing a wide range of courses abroad, including:
Undergraduate and Postgraduate Degrees: Degree programs in various disciplines such as Engineering, Medicine, Management, Law, and Science are accepted.
Doctoral Programs: PhD and other research-oriented programs in recognized foreign institutions.
Vocational Courses: Technical and vocational courses that have been approved by recognized bodies and institutions.
These courses must be from reputed institutions that meet the eligibility criteria outlined by the lending bank. Going further, let’s check the loan applicant’s eligibility criteria for this education loan for abroad studies by the Indian Government.
Students wishing to apply for the CGFSEL loan for studying abroad must meet the following eligibility criteria:
Indian Citizenship: The applicant must be an Indian national.
Admission to Recognized Foreign Institutions: The student must have secured admission to a recognized institution abroad through merit-based or entrance tests.
Income Criteria: The family’s annual income should not exceed INR 4.5 lakhs as this scheme benefits students from economically weaker sections (EWS).
Beyond these eligibility criteria, applicants must meet the required age limit as per the bank's policies and have a strong academic background.
Considering that you have all the required information in line by now, going ahead with this article is the most important part. Yes, you guessed it right, it’s the application process.
Applying for the CGFSEL Education Loan Scheme involves a few steps which can be completed online by following the process given below:
Research and Identify the Bank: Find banks or financial institutions that participate in the CGFSEL scheme. Research and evaluate their education loan offering for abroad studies.
Put in Order the Essential Documents: Gather all the required documents like proof of admission, academic records, identity and address proofs, income certificates, and bank statements.
Visit the Vidya Lakshmi Portal & Apply Online: Go to this portal and sign up as a new user. Then fill out the online application form for the Credit Guarantee Fund Scheme. Select your shortlisted bank and submit the completed application.
Loan Assessment: The bank will assess your loan application, academic credentials, and financial background to determine your eligibility.
Loan Sanction: If approved, the education loan is sanctioned, and the agreement needs to be signed for disbursement. The loan amount will be directly disbursed as instalments to the institution.
The loan repayment will begin once your course is completed. Till then you have a buffer period to enjoy the education loan subsidy regarding the interest rates.
In conclusion, the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) is an excellent option for students planning to pursue higher education abroad but lacking sufficient collateral for collateral-based loans. This scheme is one of the best choices for students who require this modest loan amount to fulfil the financial requirements of studying abroad.
If you too are planning to take this loan, then reach out to us at Elan Overseas Education Loans. Our Expert Loan advisors will guide you through the entire process and help you select the right bank as well. However, that’s not all. At Elan we want you to have an error-free loan application process, so your Vidhya Lakshmi Portal form is also taken care of. Connect with us today!
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