Appropriate Loan Amount – Education Loan

All About Education Loan

Loan for Studies in India – Education Loan

Most of the public sector banks have categorized the Education Loan in two categories:

1) Students can borrow a loan amount of Rs 4 lakhs without providing any asset as collateral to the bank.

2) Students can borrow a loan amount ranging between Rs 4 lakhs to Rs 7.5 lakhs can be availed against a third-party guarantee.

A third-party guarantee can be in the form of an uncle, neighbor, or friend.

Apply For Education Loan

Overseas study loans:

  1. Amounts worth Rs 7 lakhs and above can be easily sanctioned against NSC certificates, fixed deposits.
  2. You can get a margin loan amount of 15 %.
  3. If a loan below of Rs 4 lakhs comes at X rate of Interest, the loan of over rs 4 lakhs is usually charged a 1 % interest rate.
  4. RBI specifies the loan amount, interest rate on student loans and govt provide a 2 % subsidy to the banks on these loans.

An important point to Note:

Indian Bank Association has recently formed a working group to address the issues of education finance and the rising rate of the interest rate.

  1. The group has submitted its searches to the RBI and its suggestions to make it mandatory for parents, guardian,s and students to act as co-borrowers making them liable for repayments.

Repayment: Course period + 1 year or 6 months after getting the job, whichever is earlier.

Leading Education Loan Providers

  1. SBI Education Loan
  2. HDFC Education Loan
  3. CREDILA Education Loan
  4. AXIS Bank Education Loan
  5. Appropriate Loan Amount ICICI Bank Education Loan
  6. Bank Of India Star Education Loan

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Education Loan @ 6.90%

education loanAn education loan is a loan that is offered by banks and NBFCs to help students afford their post-secondary education as well as related expenses such as tuition, study material, etc. In today’s world, paying for higher education through your own pocket can become a burden on your finances, and so it is avoided by many people, and this is exactly where an education loan helps you.

Education is something that not only helps you be financially independent but also helps you live your life with dignity, and we here at Dialabank understand its importance, and so we are here to help you avail the best education loan offers.

Education Loan Interest Rate

The education loan interest rates vary from bank to bank. While some banks have a fixed interest rate, for others, it depends on the Marginal Cost of Funds-based Lending Rates. The rates vary from 7.95% to as high as 16.5%.

Education Loan Schemes Interest Rate Loan Amount Processing Fees
HDFC Up to 13.25%  Up to 30 Lakh Up to 1.5% 
SBI up to 8.65% p.a Above Rs. 1.5 Crore Rs.10,000 + tax
Axis 13.70% to 15.20% Up to 1 Crore Nil to Rs.15,000 + tax (Refundable)
Bank of Baroda 7.85% to 9.85% Up to 30 Lakh 1% of the loan amount up to Rs.10,000
PNB 6.90% to 9.95% Up to 30 Lakh 1% of the loan amount
IDBI Bank 6.90% to 8.90%  Up to 30 Lakh Up to 1% of the loan amount 

Education Loan: Features

The main feature of an education loan is as follows:

  1. Offers loan amounts up to 1 crore.
  2. No margin money is required for loans up to 20 lakhs, i.e., you don’t need to pay anything from your own pocket.
  3. If you’re planning to study overseas, banks have an option of pre-visa disbursal.
  4. Travel Expenses, Hostel Charges, and Study Equipment, etc., are covered in Education loans. 
  5. Interest rates start from as low as 6.90%, but these are subject to variations from bank to bank.
  6. You can choose the loan tenure.
  7. Some banks even offer pre-admission sanctions.
  8. Most banks offer an attractive moratorium period for education loans
  9. Avail the tax rebate offered under section 80-E of the Income Tax Act 1961 for the entire interest amount paid towards your education loan.

Courses Covered Under an Education Loan

In India

  • Education loan for students from Nursery to class 12.
  • Graduation and Post-Graduation courses (technical/professional/diploma) approved universities or colleges under UGC/AICTE/government.
  • Professional/technical courses for Graduation/Post Graduation/Diploma such as MBA/MCA/MS offered by recognized educational institutions or any course offered by the Chartered Institute of Management Accountants.
  • Loans for any skill development.
  • Diploma courses administered by autonomous institutions.
  • Diploma professional courses such as pilot training, shipping, and more approved by the Director-General of Civil Aviation/Shipping/or any other respective regulatory authority.

In Abroad

  • Professional or technical courses for Graduation/Post Graduation/Diploma such as MBA/MCA/MS, etc., offered by recognized institutions.
  • Courses conducted by CIMA and CPA.

Expenses Covered Under Education Loan

An education loan covers the following expenses:

  • Entire academic fees
  • Hostel fees
  • Examination/laboratory/library fees, however applicable
  • Cost of a computer/laptop if required for course completion
  • Any expense required to complete the course, such as study tours/thesis/project work
  • Travel expenses for students studying abroad
  • Insurance expenses
  • Cost of books/equipment/instruments/uniform or any other essential requirement for the course completion

Types of Education Loan

There are many types of education loans such as:

Loans based on Courses

There are three types of loans on the basis of courses:

  1. Undergraduate education loans – are given for undergraduate courses, which are usually for 3 to 4 years. However, the applicants should be pursuing or have completed secondary education to avail of this loan.  
  2. Graduate education loans – are for students who plan to apply for a postgraduate or any other professional course to get advanced degrees and increase their job opportunities. The applicants should have already finished an undergraduate course to apply for this loan.
  3. Career education Loans – Apart from undergraduate and postgraduate courses, loans are also offered for professional training courses for a particular field of career. People aiming for a particular job can avail of this loan.

Loans Based on Location

  1. Domestic education loans – are available to students who aim to apply for a course within the territory of India. While some banks offer pre-admission loans, the applicant should have already secured a seat in the desired institution for easier availing of the loan.
  2. International education loan – is beneficial for the students aiming to study abroad. Like the domestic loan, in this too, the applicant should have already secured a seat in the institution.

Loans Based on Collateral

  1. Loans against property such as agricultural land/residential land/ flat/house as collateral.
  2. Loans against fixed/ recurring/ or gold deposits.
  3. Loans against securities such as bonds, debentures, equities, etc.
  4. Loans through the third-party guarantee such as a certificate from an employer or a home loan.

Loans for Parents

Banks and NBFCs also have the option for parents to avail of education loans for their children. These are unsecured loans but help parents fund 100% of the education and can be used to cover even extra expenses. Even relatives can use this facility. Parents can also avail loans for their children studying in college. If the college student is studying and working, the loans have to be cosigned by the parents.

Education Loan Eligibility Criteria

  1. In case the applicant is a major, the minimum age of the co-applicant or the guarantor should be 21, and the maximum age at loan maturity should be 70.
  2. In case the applicant is a minor, the criteria for the co-applicant is the same. However, the applicant would be liable to provide a letter of ratification to the banks upon attaining majority.
  3. The applicant should be an Indian national.
  4. The applicant/student must have already secured a seat in the desired course and the desired institution.
  5. The applicant/student must have applied to a course or its equivalent recognized internationally by the relevant bodies.

Essential Documents Required for Education Loan

An education loan requires the following documents for salaried individuals (in public/ private/ cooperatives or start-ups) as well as others:

  • Basic KYC documents such as Identity Proof, Address Proof.
  • Banks statements of the last 6 months.
  • A guarantor form in case of a guarantor.
  • A copy of the admission certificate of the desired course from the desired institution as well as the fee schedule document. 
  • Some banks also require mark sheets of degree courses, especially in cases of pre-admission loans

Documents required for the first disbursement:

  • Loan agreement signed by the applicant and co-applicant.
  • Sanction letter signed by applicant and co-applicant.
  • Disbursement request signed by applicant and co-applicant.
  • A demand letter from the institution.
  • Receipts of margin money paid to the institution.
  • In the case of collateral, documents for the collateral security.
  • In the case of overseas education, form A2 signed by the applicant or co-applicants

Documents for subsequent disbursements:

  • A demand letter from the institution.
  • Disbursement request signed by applicant and co-applicant.
  • Receipts of margin money paid to the institution.
  • In the case of overseas education, form A2 is signed by the applicant or co-applicants.
  • An exam progress report or a mark sheet.

Tax Benefits on an Education Loan

Availing an education loan will provide you with a tax deduction on the interest amount under Section 80E of the Income Tax Act, 1961. This benefit can only be availed by individual borrowers seeking higher education. 

The tax deduction is only applicable on the interest portion of the EMI and not on the principal amount. However, there is no limit to claim this benefit. 

The tenure of this benefit is 8 years from the year you started your repayment or until the interest portion of your loan has been repaid, whichever occurs first. A document from your respective bank citing the principal amount and interest rate will be required.

Education Loan Repayment

Usually, loan repayment for a study loan starts 6-12 months after the completion of your respective course or when you get a job, whichever occurs first. The moratorium periods for applicants vary from one lender to another. Once the repayment starts, monthly installments in the form of EMIs are to be paid by a fixed date every month. 

Repayments can be made using any of the below mentioned modes:

  • Internet Banking – Pay online through the lender’s website or a mobile app.
  • Cheque – Pay monthly cheques at the branches.
  • Direct debit – Direct debit of the EMI amount from your account
  • Demand Draft – Pay through a DD.

Fulfill all your professional goals by not letting money be a hindrance and consider taking an education or student loan that have low-interest rates and easy repayment options. Pay off your loan once you have completed your education or have secured a job.

Education Loan Prepayment and Foreclosure

education loanEducation loan prepayment means repaying a part of the loan before the loan tenure ends. This helps you to reduce the burden of loan repayment, but in some cases, it might charge you a penalty.

Education Loan foreclosure means when the borrower pays the entire loan amount lump sum, instead of in the form of EMIs. Even though prepayment and foreclosure charge you penalties, they are still the better option as they save the interests from piling up, like in the case of EMIs.

Education Loan Balance Transfer

Education loan balance transfer means transferring your entire outstanding loan from one lender to another. Even though the new lender might charge you a transfer fee, you can still financially gain from this process, by availing a larger loan amount or lesser interest rates.

If you pay your EMIs regularly, you can avail of the loan transfer facility easily. However, it is always advisable to consider the factors such as the difference between interest rates of both the lenders, the tenure left, the amount to be repaid, etc., before transferring your loan.

Education Loan EMI Calculator

Dialabank brings to you a facility known as the online EMI calculator, which helps you calculate your EMIs beforehand on the basis of your principal, your interest rate, and the chosen tenure so that you can compare various deals and choose the one that fits you the best. 

To calculate your EMIs for free, click on the link Education Loan EMI calculator.

How to Apply for an Education Loan

There are broadly two ways of applying for a student loan:

Apply Online:

  • This is the easiest and the most convenient way of applying for a loan.
  • Just fill a form on the dialabank website, which will include your name, location, income, the loan you are seeking, etc.
  • Click on “Request a Quote.”
  • You will soon be contacted by our relationship manager who will assist you regarding your loan query.

Offline

  • Visit a Branch: You can apply for a loan by visiting your nearest branch offering the loan with the necessary documents for KYC, discuss the terms of the loan with a representative, fill the form, and apply in person. 
  • Call the Lender: You can also call the lender or request a call back by expressing your interest. You can then discuss the loan terms and proceed to apply.

FAQs for Education Loan

✅ What are the eligibility criteria for an education Loan?

To avail of an education loan, there is no age bar for the applicant. However, the applicant should be above 18 years old and below 70 years old at the time of loan maturity. The applicant should be an Indian national and should have already secured a seat in the desired course and institution.

✅ What repayment options do I have for an education loan?

To repay your education loan, you can either pay in the form of Equated Monthly Installments (EMIs), or you can choose the option of prepayment, wherein you can pay a part of the loan before the term ends, or foreclosure, wherein you can pay the entire amount in one go.

✅ What will happen if I fail to repay my education loan?

In case you fail to repay your education loan, you will be added to the CIBIL’s defaulters list. Your credit score will decline considerably, making it very difficult for you to avail any loan in the future for a considerable period of time. 

✅ Can I apply for an education loan without a co-applicant?

It is not possible to avail of an education loan without a co-applicant. The co-applicant can be any close relative such as father, mother, sibling, or even spouse. The loan depends upon the income of the co-applicant. 

✅ From when does my repayment period start?

You will have to repay your loan from the time it is disbursed. However, if you opt for a moratorium period, you will have to repay after the moratorium period ends.

✅ Can I apply for an education loan in India if I want to apply for an institution abroad?

Absolutely. Banks and NBFCs offer overseas education loans.

✅ Do I have the option of balance transfer in education loans?

Yes, you do. The new lender might charge you a processing fee, but it will be financially beneficial for you. If you pay your EMIs on time, your loan balance is easily transferred. 

✅ What is the moratorium period for my education loan?

The moratorium period of a study loan is the period of time between getting the loan and paying your first EMI as a repayment. At DialaBank, we offer you a moratorium period also known as the holiday period of 6 months after you complete your course or 3 months after you have secured a job, whichever is earlier. During this time, you are excused from paying any EMIs for your study loan.

✅ Why should I choose DialaBank as my agent?

If you are looking to secure your future with the best education loan in India, your search ends at DialaBank. We provide you with numerous features at an affordable interest rate that makes it easier for students to pursue their dreams. Some of these features include:

  • Loan sanction or Disbursement before Admission/Visa
  • Flexible Repayment Options
  • Hassle-free & Transparent Process
  • Doorstep Service
  • Post Disbursement Online Account Management
  • Covers all pre-Admission expenses such as costs of Test Preps, Admission -Applications, and your Course Fees & Living Expenses.
  • 100% Finance: No Margin Money
  • No Upper Limit on Loan Amount
  • 1 day Loan Sanction

✅ What are the basic documents requirements?

The basic documents required to avail a study loan include KYC documents, educational documents, the details of the cost of your course, the income documents of the co-borrower, and Collateral documents.

✅ What is the maximum limit that I can avail as a study loan?

Depending on your loan worthiness, a study loan amount is decided by the lender. Generally, loan amounts easily go up to Rs. 50 lakh mark in case of premium institutes or study for abroad. However, lenders can provide even more than this amount. All banks provide a loan of up to 10 lakh easily. 

To get a better idea of the loan amount you can get, you should always check the education eligibility criteria and the EMI calculator.

✅ What is the current interest on study loan?

The current interest rate for study loans in India generally ranges from 7.95% to 16.50%. However, it can vary from lender to lender. If you want to enjoy lower education loan interest rates, you can choose to provide some collateral to secure your loan.

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