Education is a powerful tool that can open doors to a brighter future. However, with the rising costs of education, many students and their families face financial constraints
when it comes to pursuing higher studies. In such cases, education loans can be a viable solution to bridge the gap between aspirations and affordability.
You can apply for an online education loan while also sitting in the comfort of your home. One can apply for an education loan for a maximum duration of 20 years at an affordable interest rate, which starts from 7 % and varies from bank to bank. It may go up to 16% also.
What is an Education Loan in India?
An education loan is an unsecured loan or financial assistance a student gets from the bank or any financial institution. The loan can be availed by not only your parents but also by other adult relatives who are your legal guardian. Loans could be applied for admission to secondary schools, military elementary schools, and religious, private, or non-public schools across the country. Parents and siblings can be co-applicant(s) in an Education Loan.
What are the different types of Education loans in India?
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Domestic Education Loan – It is applicable when you are pursuing an educational course within geographical limits. The loan will be approved on getting a secured seat in an institute that meets the requirements of the lenders.
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Study Abroad Education Loan – For educational courses where the student is going outside the geographical boundaries of the country.
The most popular courses for which a student applies for Education Loan in India
- Undergraduate programs
- Post Graduate Programs
- For pursuing PhD
- Diploma Courses
- Skill Development Courses
Top factors to consider at the time of applying for an education loan in India
- Eligibility criteria
- Guarantor required
- Collateral required
- Interest rate
- Margin amount
- Loan amount
- Repayment tenure
The eligibility criteria to apply for an online education loan in India
- Nationality: The applicant should be an Indian citizen or an NRI (Non-Resident Indian).
- Age: Most banks have an age limit for education loan applicants, typically between 16 and 35 years.
- Academic Background: The applicant should have secured admission to a recognized educational institution in India or abroad. The institution should be approved by competent authorities such as the University Grants Commission (UGC) or the All India Council for Technical Education (AICTE).
- Course Eligibility: Education loans are typically available for undergraduate, postgraduate, and professional courses. This includes courses in engineering, medicine, management, arts, science, etc. The specific courses eligible for loans may vary among lenders, so it’s essential to check with individual banks or financial institutions.
- Academic Performance: Some banks may consider the applicant’s academic track record like your examination results, entrance test scores, and overall academic achievements.
- Co-applicant: Most lenders require a co-applicant for education loans, usually a parent, guardian, or spouse. The co-applicant is typically required to have a stable source of income and a good credit history.
- Loan Amount: The loan amount may vary depending on the course, institution, and the borrower’s financial situation. Lenders generally set maximum loan limits, and the applicant’s ability to repay the loan is also taken into consideration.
- Collateral and Security: For loans above a certain threshold, banks may require collateral or security. This could be in the form of property, fixed deposits, or other assets. However, certain loans under specific government schemes may not require collateral for lower loan amounts.
Who can apply for an education loan in India?
- Indian citizens
- Non-Indian Residents (NRIs)
- Overseas Citizens of India (OCI)
- Persons of Indian Origin (PIOs)
- Students born to Indian parents abroad and wish to study in India
The must-have documents to apply for an education loan in India
- Mark sheets of 10th &12th
- Admission letter
- Fee structure
- Signature proof
- Salary slips
- Updated bank account statements
- Latest 3 months ITR
- Audited balance sheet
- Latest passport-size photographs
- Visa copy if planning to study abroad
- If there is a co-applicant then may require the income documents of the co-applicant, mainly salary slips or income-tax returns (ITR) of the co-applicant.
KYC documents
- Age proof
- ID proof
- Address proof
Features of Education Loan
- You can apply for a loan of up to 1 crore for studying abroad and up to Rs 50 Lakh for domestic.
- 100% financial assistance is available
- Education loans cover expenses like student exchange travel expenses and laptops.
- To avail of most of the benefits of an education loan, parents must be joint borrowers.
- Loan repayment tenure can go up to 15 years.
- Loan moratorium period of up to 6 months to 1 year from completing the course is also available in education loan.
- Tax benefits up to 8 years on the loan interest payment.
List of expenses covered under education loan
- Educational Institution fees
- Exam fee/ laboratory/ library fee
- Traveling expenses
- Payment of insurance premiums for student borrowers
- Caution money deposits/ fund/refundable deposits supported by institution bills/receipts (total expense should not exceed 10% of the total loan. Overall, a refundable deposit is 20% of the total loan.
- Computer or laptop purchases/ any other expense incurred for course completion, such as study tours, project work, thesis, etc. (total expense should not exceed 20% of total loan).
- While computing loans required, scholarships, fee waivers, etc., if any available to the student borrower.
Factors determining the education loan EMI
- Loan amount
- Interest rate
- Repayment tenure
Benefits of applying for an education loan
- 1. Financial Independence
Financial freedom starts with an education loan. Many young adults are dreaming and looking forward to build-up their education on their own terms. With the help of education, they are ready to take charge of their future and remain financially independent.
- 2. Work on family savings
With an education loan, no need to worry about the impact of your educational expenses on family finances. If you chose an education loan to pave the way for your bright future, without dipping into your family’s savings.
- 3. Build your credit
If you have no credit history, you want to build the same, by opting for a student loan. You can build your credit score and credit history and enjoy better interest rates in the future.
- 4. Tax benefits on education loan
You are also getting tax rebates on education loans; the interest payout on your education loan will be liable for tax exemption under Section 80E. Only the interest payout, not the principal amount.
The best part about getting tax exemption on an education loan is that there is no limit to the amount you can claim on the education loan. You can obtain a certificate for the same from the bank or your lender. You can claim tax exemption only for 8 years from the year you started repaying the loan until the interest is fully paid off.
- 5. Loan Repayment flexibility
The repayment tenure for education loans is usually extended, allowing borrowers sufficient time to repay the loan. The tenure can range from several years to up to 15 years, depending on the loan amount and the policies of the lending institution.he course.
How to apply for an education loan in India
Online Process
- Log on to the website of the bankfrom where you are planning to apply for a loan.
- Download the application from the bank website and click on ‘Apply’.
- Fill in the application, upload the required documents, and submit the application.
- Submit the form
- The bank initiates the process of document verification and evaluates the course and institution for which you wish to take the loan and the collateral you can provide.
- Post Verification will grant the loan.
Offline Process
You can even apply for an educational loan offline by visiting in-person to the bank. Fill out the application form and submit it with the necessary documents.
Importance of buying insurance along with education loan in India
When it comes to taking an education loan, it is essential to consider the importance of insurance coverage. While the primary focus is often on the loan amount and repayment terms, having insurance alongside your education loan provides an additional layer of financial security. Here are some key reasons why buying insurance along with an education loan is crucial:
Loan Repayment Protection: An insurance policy acts as a safety net by ensuring that the burden of loan repayment does not fall solely on the family or co-borrower. The insurance coverage helps in paying off the outstanding loan amount, relieving the financial strain on the family during a challenging time.
Financial Security for the Family: By purchasing insurance, you are safeguarding the financial well-being of your family members. In the absence of the borrower, the insurance proceeds can be utilized to repay the outstanding loan, ensuring that the family is not burdened with the debt.
Peace of Mind: Knowing that your education loan is protected by insurance brings peace of mind. It allows you to focus on your studies and career development without constant worry about how your family would manage the loan repayment in your absence.
Key takeaways
So now there is no need to compromise on the quality of education. As there is a wise saying that Padhega India Tabhi Badhega India.
So let your dreams fly high, and don’t let financial worries come your way!
FAQs
Is insurance mandatory for education loans?
By buying an insurance plan on an education loan, you can be sure that the co-applicant is not responsible for repaying the loan in the event of your sudden demise. Though it is not mandatory, if you want to keep your family financially secure in your absence then must purchase an insurance plan on an education loan.
Who can be my co-applicant for an education loan?
Your parents, sibling, or legal guardian can become a co-applicant for an education loan. A co-applicant must be the primary debtor and hold an Indian bank account that allows them to sign cheques.
What is the education loan limit in India?
You can apply for an education loan up to Rs 1 Crore subject to meeting the eligibility criteria of the lender.
Is an Education loan interest-free?
No, an education loan is not interest-free, but you can claim tax exemption on an education loan. However, this is applicable only for the interest amount paid, not the entire loan amount
Can I close the education loan after 1 year?
Yes, you can close the loan but after 6 months of loan disbursement, you have to pay off the entire principal amount along with accrued interest of 6 months.
Can I get an education loan if my parents are unemployed?
Yes, you can get an education loan without parental income also, but only in that case, if you give collateral to the lender to compensate for the lack of parental income.
Is it good to close an education loan early?
There is no doubt that the longer the tenure will be, the higher will be the interest liability. So closing off the loan early is wise, but before that, go through the lender’s terms and conditions to save yourself from paying any penalties for early loan repayment.
What happens if I am unable to pay an education loan in India?
If you are unable to pay off your education loan, the bank will put you on the loan defaulter list. You would not be able to secure any loan in the future for a long time. Additionally, the lender will initiate legal proceedings against you and the guarantor.
What are the age criteria to apply for an education loan?
The minimum age to apply for an education loan is 18 years and the maximum is 35 years. The maximum age may vary from bank to bank.
