What is Education Loan?
Quality education is essential for every individual, and students go as far as to achieve it. However, the cost of education has recently risen, and taking an education loan appears to be the best option.
It is a type of loan students apply to meet the financial requirements of their course. Various banks and non-banking financial companies in India provide education loans at competitive rates to help educate the next generation of innovators and leaders.
What are the Feature and Benefits of Taking an Education Loan?
- The loan amount can go up to Rs.1 crore for international students and up to Rs.50 lakh for Indian students.
- 100% financing may be available but with certain conditions.
- It also covers other expenses, like student exchange travel expenses and laptops.
- Preferential forex rates may be available for international disbursements.
- Loan repayment tenure can extend up to 12 years after six months from completing the course.
- Parents should be the joint borrowers for the education loan.
- Fees to be paid to educational institutes.
- Fees for examinations, libraries, and laboratories.
- If applicable, student loan borrowers must pay an insurance premium.
- Caution deposit, building fund/refundable deposit should be supported by bills/receipts from the institution.
- Purchasing of books, equipment, instruments, and uniforms.
- If a computer is required to complete the course, it should be purchased at a reasonable price.
What are the Eligibility criteria for Education Loan?
- Only Indian citizens are permitted.
- Admission/invitation from a university to a degree/diploma course at an approved university/college.
- Education: For an undergraduate course, you must have completed 10+2 (12th grade) and a degree for a postgraduate course.
- Colleges and universities offer approved courses leading to graduate/post-graduate degrees, and post-graduate diplomas are offered by colleges/universities recognised by the UGC/Govt./AICTE/AIBMS/CMR.
- Courses such as ICWA, CA, CFA, and others. IIMs, IITs, IISc, XLRI, NIFT, and NID offer courses.
- Aeronautical, pilot training, and shipping are examples of regular degree/diploma courses.
What are the Documents required for Educational Loan?
- KYC documentation
- Mark sheets from the 10th, 12th, graduation, and entrance exams
- Letter of Acceptance
- Structure of fees
- In some cases, co-applicant KYC and income proof are required.
- In some cases, additional documents may be required.
How to apply for Educational Loan?
You can inquire about the loan process at the bank of your choice or apply online. When you submit your loan application, the bank will begin by verifying your documents, evaluating the course of study you want to take funds for, and assessing the collateral you can provide. The bank will then keep you updated.
What are the Repayment System for Education Loan?
After completing the course, some lenders offer a 6-month grace period to find a suitable job and begin repayment. This grace period may differ depending on the lender. If you find work within this time frame, you may begin the repayment process in the form of EMIs.
You can contact the bank officials, and the bank officials will recommend an EMI based on your monthly income. If you agree with this proposal, you can begin making monthly payments. Otherwise, you can negotiate prices. In any case, the maximum repayment period is generally eight years.
How much is the Education Loan’s interest rate?
Interest rates on education loans in India vary depending on the bank. It can, however, range between 12% and 16%, depending on the bank’s base lending rate and other factors. The RBI-mandated base lending rate for banks in India is around 9- 10%.
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Does Bank ask for any collateral/security for Educational Loans?
Based on the value of your loan, your bank may request a third-party guarantee or even collateral. The collateral can take the form of an insurance policy in the bank’s favour. The premium for your policy may be deducted from the amount of your education loan.
FAQs on Educational Loan
✅ What is the difference between a student loan and an education loan?
Education Loan refers to a loan taken to cover tuition, hostel fees, and other related expenses for pursuing a specific educational course in an institution. Banks provide student loans to certain institutions in India and abroad to pursue pre-specified courses.
✅ Is an education loan interest-free?
No, education loans in India are not interest-free. However, student loans with no interest are available in India through scholarships and subsidies. 0% interest scholarships and government subsidy programmes can help you avoid paying interest on your education loan.
✅ What are the types of student loans?
Federal student loans are available in four varieties:
- Direct subsidized loans.
- Direct unsubsidized loans.
- Direct PLUS loans.
- Direct consolidation loans
