Education Loan in India
Quality education is an important aspect of today’s life. However, the cost of education is increasing on a daily basis. In fact, the expense of education is already high at reputed institutions. Despite all the fund and savings, one may still face a shortage of fund. Thus an education loan plays a vital role to bridge the gap.
There are several schemes introduced by the government with an intention to extend the helping hands towards the students and their family to achieve the dream of attaining the dream of higher education.
This article clears all the doubts about accessing education loan for Indian students which include education loan details such as important factors to consider, interest rate, eligibility criteria, documents required and so on in the table of content listed below
- Important Factors to be Considered
- Interest Rate for Education Loan in India
- Documents Required For Education Loan
- Education Loan Eligibility
- Education Loan Repayment
Important Factors to be considered
One must be extremely conscious and well informed before taking a major decision such as applying for a loan. It compulsorily has to be the perfect fit in order for it to work for or towards for interests. This requires the right information and guidance with respect to education loans. Some of the key important factors to be considered when applying for an education loan have been listed below.
Education Loan Interest rate - There are two types of interest imposed on educational loan which are fixed rate of interest and floating rate of interest. Basically, a fixed rate of interest is higher but it is constant in nature and not affected by the constant fluctuation witnessed in the market. By floating the rate of interest, the EMI is usually lower but it is subjected to the risk of variation in the market. The borrower can choose the appropriate one according to financial convenience.
Waiver Period - It is another extremely important factor to be considered before applying for an education loan. The loan repayment usually does not start immediately after the exams as there is a waiver period given for the students to seek job employment or to establish any business. An important point to be noted is that banks do impose interest during the waiver period. So it is up to you to select the education loan which is appropriate to you.
Margin Money - It refers to the part of the amount ought to be paid by the applicant. The percentage of margin money is mentioned in the terms section of the loan which has to be arranged by the student. However, an education loan of up to Rs 4 lakhs usually does not require any margin money. It is only applicable to loans above the amount of 4 Lakhs. It requires a 5% margin for studies within India and 15% for studies overseas.
Preclosure of education loan - Some of the banks impose a penalty in case the borrower wants to settle the loan with the full amount before the loan period ends. Thus it is important to check for the prepayment conditions in the terms and conditions aisle before proceeding in order to avoid any future problems at the time of preclosure.
Collateral - Everyone knows that bank requires any asset particularly an immovable property or asset such as fixed deposits, shares, bonds and so on to be pledged to the bank to secure the loan. If the borrower stops repaying the loan, the bank has all the right to seize the collateral to recover the loss incurred with the loan provided. But just in case if the loan applicant does not have any collateral to pledge, there are many banks that give education loan without collateral on the basis of the academic excellence of the student.
Expense covered - It is important to check the list of expenses covered by the bank. The students who opt to study overseas especially have to make sure that the loan covers all the necessary aspects of the expenses that may incur in the academic period. Most of the education loans cover even the expenses incurred for the purchase of study materials which are essential for the academics. However, it is advisable to check for the terms and condition before proceeding with the education loan
Additional charges - While applying for a loan, one should also look out for bank charges such as those related to processing, pre-payment, late payment of EMIs, etc. Most lenders charge a processing fee of around 0.15 per cent of the loan amount.
Interest Rate for Education Loan In India
The interest rate is an important factor to be considered before applying for an education loan. Here you get an overview of the interest rate imposed by various banks and it varies with the range of loan amount. However, there can be a revision by the bank in the values. As this information is intended to give a basic structure of the interest rate, you can visit the official website of the particular bank to check for an update.
Canara bank Education Loan Interest Rate
The interest rate ranges from 9.95% and 10.70% and various upon the loan amount fetched from the bank.
For Male Students
- Loan up to Rs. 4 lakh - 10.20%
- Loan about Rs 4 lakh to 7.5 lakh - 10.20%
- Loan more than Rs. 7.5 Lakh - 10.50%
For Female Students
- Loan up to Rs. 4 lakh - 10.20%
- Loan about Rs 4 lakh to 7.5 lakh - 10.20%
- Loan more than Rs. 7.5 Lakh - 9.95%
Bank of Baroda Education Loan Interest rate
The rate of interest for Bank of Baroda is about 10% and in the case of the girl students, they get a concession of 0.5% rate of interest. The rate of Interest for various loan amount is listed below
- Loans up to Rs.4 lakhs - 11.25%
- Loans from Rs.4 lakhs to Rs.7.50 lakhs - 11.25%
- Loans above Rs.7.50 lakhs - 10.50%
HDFC Education Loan Interest rate
The rate of interest for HDFC Education Loan is up to 14.1%. In HDFC Bank loans up to Rs. 7.5 lakhs may be obtained without any collateral or security requirements.
State Bank of India Education Loan Interest rate
The rate of Interest for SBI Bank Education Loan for varying loan amount is been listed below
- Up to Rs 7.5 lakh, the effective rate of Interest is 10.50%
- Above Rs 7.5 lakh, the effective rate of Interest is 10.75%
Note: For girl students, there is a concession of 0.50% in the rate of Interest in Education Loan
Indian Bank Education Loan Interest rate
The rate of Interest in Indian Bank is about 12.25% for Education loan under both IBA and Non-IBA scheme irrespective of the loan limit. A concession of 0.50% for girl students are given under the IBA Scheme
PNB Education Loan Interest rate
PNB Education loan interest rates are in the range of 8.45% and 11.05%, and it varies for the amount of loan requested by the student. The rate of interest for the various loan amount is been listed below
- Loans up to Rs.4 lakhs - 10.45% Rate of Interest
- Loans from Rs.4 lakhs to Rs.7.50 lakhs - 10.45% Rate of Interest
- Loans above Rs.7.50 lakhs - 11.05% Rate of Interest
Documents Required For Education Loan in India
Education Loan Documents Required are listed below
- Proof of identity - Passport, Voter ID card, Driving license, or PAN card. (Any one of the listed document)
- Proof of residence - Bank account statement, Latest electricity bill, Latest mobile or telephone (landline) bill, or Existing house lease agreement (Any one of the listed document)
- Age Proof - Class 10th certificate or Birth certificate
- Latest salary slip or Form 16 along with recent salary certificate. ( Applicable only for the salaried candidate)
- Bank Statement / Pass Book of the last 6 months
- Copy of admission letter of the Institute
- Fees structure from the Institute
- Application form
- Two passport size photos (both Applicant and Co-Applicant)
- Mark sheets or passing certificates of previous degree courses (Scholarship documents if any)
- Affidavit or that confirms that no loan has been availed from another bank or financial institution
- Visa approval and travel papers (only for studies overseas)
Documents required for Co-applicant for Education Loan
- Address proof
- Identity proof
If salaried then one needs to also give
- Last 3 months salary slips or salary certificate on company letterhead
- Last 2 years Income Tax returns or Form 16 from the employer
If Self-employed one needs to provide the following
- Last 6 months bank statement
- Last 2 years Income Tax Returns
- Proof of office - lease deed, utility bill, or title deed (any of the following)
Education Loan Eligibility
Some of the basic eligibility criteria are given below as it varies for each bank and schemes
- The applicant must be an Indian Citizen.
- The student should have already confirmed the admission to any recognized educational institutes in India or abroad.
- The applicant should be between the age of 18 to 35 years.
- There should be a co-applicant who can be either parent/guardian or spouse/parent-in-law in case of married applicants.
- Students should display a good academic record of excellence.
- The course applied for should be either professional, technical or at least developmental, leading to job oriented learning.
- The educational university or college one is applying to also plays a major part. A top recognized institute will definitely help secure a loan quickly. A good example would be schools such as IIT and IIM to name a few.
Education Loan Repayment
The repayment rules of Education loan are listed below
- After the completion of the course, those taking education loans get a moratorium of six months to a year, before they start repaying.
- In the case of an engineering course, a student is granted four years (the course duration), along with an additional year, to start repaying.
- The repayment has to commence a year after the course is over, even if the student doesn't manage to secure a job. Once the repayment starts, the borrower can avail tax exemption benefits under Section 80-E of the Income Tax Act.
- Usually, it is the first loan a student avails of and, therefore, by repaying on time, students can build good credit histories; this will be of immense help when they seek to avail of automobile loans, home loans, credit cards, etc.
- With timely education loan repayment histories, students have been building great credit scores for themselves. In many cases, they get pre-approved loans for other requirements, based on impressive credit scores.