Popularly known as student loans, education loans help you borrow money from banks to pay your educational expenses. Students go for this type of loan mostly for higher education or specialised courses in reputed institutions within and outside the country.
Often lakhs of Indian students get through some of the top universities for higher education, but they find it difficult to arrange a huge corpus to complete their studies. It is seen that some courses and institutions are expensive and require funding from banks. Since getting an education loan is easy and terms and conditions are also flexible, it helps deserving students pursue their higher studies in top colleges in India and abroad. Depending on your requirements, many education loans help you cover your course fees and your travel and accommodation expenses.
Banks keep simple criteria and instant disbursal process for education loans so that students don’t pay late fees and other charges. If you meet the criteria, getting a loan for your education is very simple. Before you start applying for an education loan, it is advisable to check your eligibility in advance. You can check your eligibility online on portals like BankBazaar.com.
Banks are cautious in analysing the eligibility to ensure that their funding only reaches deserving students. So, they would typically check students’ academic performance, education institutions he has studied and is going to study, ranking in entrance exams and the course from employment perspectives, admission status etc.
To apply, you will need to fill up an application form. You can also visit the nearest bank branch, log on to the bank’s website, or contact customer care to help you out with the process.
Remember the role of your parent/parents, spouse etc., is very important in this process as your guardian will be treated as a co-applicant in the loan. One of the benefits of taking an education loan is that you will get a tax deduction under Section 80E of the Income Tax Act on the interest.
For studying in India, you can avail of a loan amount up to Rs 50 lakh, while students going abroad can even take a loan up to Rs 1 crore depending on their eligibility. The repayment tenure is up to 15 years which may vary from bank to bank.
Typically, no security is required for a loan up to Rs 7.5 lakh, but collaterals with a co-applicant are mandatory for loans above Rs 7.5 lakh. If you meet the bank’s eligibility criteria, you will likely get 100 per cent financing. The interest rate on your loan may vary depending on the loan amount. Banks may also require student life insurance for the amount equivalent to the borrowed loan. The repayment of the education loan starts at the end of the moratorium, which is normally a 6–12-month period after the end of the course. But this period may vary from bank to bank.
Please keep in mind that you need to repay the education loan on time. If there is a default, the borrower’s and co-applicants credit scores will be affected and the forfeiture of the collateral can also happen. In case of delay in repayment, interest may also increase, so there are many challenges if you delay or fail to pay back the loan. Hence, it is advisable to carefully go through all the terms and conditions and clear your doubts with the bank before signing the loan agreement.
In the table below, you can compare the interest rates and EMIs for educational loans of Rs 20 lakh for seven years.
Interest Rates & EMI on Education Loan
Compiled by BankBazaar.com
Note: Interest rate on Education Loan for all listed (BSE) Public & Pvt Banks considered for data compilation; Banks for which data is not available on their website, are not considered. Data collected from respective bank’s website as on 27 April 2022. Banks are listed in ascending order on the basis of interest rate i.e., bank offering lowest interest rate on education loan (irrespective of loan amount and tenure) is placed at top and highest at the bottom. EMI is calculated on the basis of interest rate mentioned in the table for Rs 20 lakh loan with a tenure of 7 years (processing and other charges are assumed to be zero for EMI calculation); *Min APR rate during period of Oct 21 to Dec 21.