Education Loan Interest RatesEducation Loan Interest Rates

Education Loans are usually borrowed by students who want to pursue their higher studies but are not financially eligible. Public sector banks, as well as the private sector banks, provide loans for the students. The rate of interest charged on these loans may vary from bank to another. The bank's rates usually start at 8% and go up to 15%. All the banks calculate the interest rates on the basis of the marginal cost of funds-based lending rate (MCLR) and additional spread is added on these rates. 

The repayment period for these loans differs from one institution to another. NBFC’s and Private sector banks usually expect the loans to be paid during the course period. Public sector banks provide a moratorium period or the interest-free period after the completion of the course where students are expected to secure a job and be able to repay the loan amount. During the course period, the education loan borrowed will be calculated under the simple interest method. After the completion of the course, the interest will be compounded and the students are expected to pay these amounts through Equated Monthly Installments (EMI). A concession of 2% will be given to female students.

Table of Contents

  1. Benefits of Education Loan in India
  2. Education Loan Interest Rates in Public Sector Banks
  3. Education Loan Interest Rates in Private Sector Banks
  4. Ways to Lower the Rate of Interest
  5. Repayment of Education Loan

Benefits of Education Loan in India

With rising inflation education has become a costly affair. To help parents meet the growing educational demands of today, experienced lenders (banks) offer lucrative loan options and schemes such as loan against property. This is a wise yet simple financing option which helps in liquifying ones fixed assets such as property and bonds. This does help to cater to the educational needs of your kids.

Banks understand the parents and students financial needs and thus offer a high-value loan up to Rs. 3.5 crores at an affordable interest rate and flexible tenure of 2 to 20 years. A loan seeker can apply for the loan online with minimum paperwork. Upon verification, eligible applicants enjoy instant loan approval and quick disbursement. Though, it must be noted that loan terms will depend on the individual profile and lending criteria of the loan provider.

Moreover, this is a hassle-free loan option that banks offer today with the Flexi Hybrid feature. This is a unique facility which lets you borrow as per your needs from the loan amount sanctioned. Interest is charged on these daily withdrawals which help to lower the EMIs by up to 45% and better manage your finances whilst meeting one's education needs.

Concessions

Banks might allow 1% concession on the interest rate of the loan if the interest is serviced regularly every month during the moratorium period. However, the concession is allowed only during the moratorium period and not after that.

For the girl students, 0.50% to 1% of concession is allowed by the banks on the interest rates of education loan.

Some of the banks give 0.25% of concession on the interest rate if the candidate is their existing housing loan borrower or if the student is getting admitted in top-rated institutes enlisted by them or for providing an additional guarantor.

Discounts

Discuss with your college or university whether there is any specific lender who will negotiate on the loan terms. One can also inquire about the pre-approved loan process to get flexible loan terms and low-interest rates.

If you plan to pursue studies in any educational institute abroad, you will get better interest rates on the loan as the basic rates of interest in the UK and US is currently low compared to India. Hence one could always opt for this option.

In case you or any of your family members have good terms with the bank’s branch manager you can expect to get better loan terms. You can ask for loans at lower interest rates in such cases.

Some banks charge a high-interest rate in case of the unsecured educational loan above Rs.4 lakh. In such cases, you can lower the rate of interest rate by offering security against the loan amount.

Most banks and financial organisations from time to time roll out several exciting offers on the existing loan interest rate.

Education Loan Interest Rates in Public Sector Banks

The public sector banks charge less interest compared to the private sector banks, however, the amount of loan that will be provided is also comparatively less. Some of the top banks have been covered below

State Bank of India

SBI Education Loan is available without any processing fee and the repayment period of up to 15 years after Course Period. It offers the loan of up to Rs 20 Lakhs and loan for numerous courses and universities.

State Bank of India (SBI) - Interest Rate for courses in India is 8.60% and for courses abroad it is 9.75%

For Loans up to Rs 7.5 Lakhs, the Rate of Interest is 10.25% per annum and the rate of interest for loans above the amount of 7.5 Lakhs it is 10.50% per annum.

Bank Of Baroda 

For all loan types and amounts, the interest rate is 8.50% onwards. 

Bank of Baroda - Interest Rate for courses in India is 10.50% and for courses abroad it is 11.45%

IDBI Bank

Interest Rate for courses in India is 9.50% and for courses abroad it is 9.50%

Punjab National Bank

Education loan by PNB helps to meet the educational needs such as fee payable to school/college/hostel, examination fee, insurance premium and so on. The rate of interest charged by PNB is mentioned below

The interest rate for courses in India starts from 8.60% and for courses abroad it is 10.45%

Central Bank of India

The interest rate for courses in India is 10.10% and for courses abroad it is 10%

Canara Bank

Canara Bank takes nil margins and offers 100% finance for loans up to Rs 4 Lakh. It allows multiple co-borrowers for the loan in order to procure the maximum loan. Loans up to Rs 4 lakh are available without collateral and up to Rs 7.5 lakh with third party guarantee. And loans above Rs 7.5 lakh can be availed by submitting the adequate collateral asked for.

For all loan types and amounts, the interest rate is 9.90%.

Bank of India (BOI)

For all loan types and amounts, the interest rate is 9.80%.

Indian Bank

The interest rate for courses in India is 8.60% and for courses abroad it is 10.60%

For meritorious and deserving candidates, the loan quantum can be further increased.

Union Bank of India

For all loan types and amounts, the interest rate is 10.05% onwards

Oriental Bank of Commerce

For all loan types and amounts, the interest rate is 10.40%

Education Loan Interest Rates in Private Sector Banks

The rate of interest charged by the private banks is usually higher, but, the amount of loan that will be provided will also be higher and there is a chance of 100% coverage of the expenses. The repayment period can also be extended. There are a variety of banks and options to choose from.

ICICI Bank

For all education loan types and amounts, the interest rate is 11% 

HDFC Bank

The interest rate for courses in India and for courses abroad irrespective of the amount, the interest rate is 11.97%

Axis Bank

13.45% is the interest rate for courses in India and for courses abroad irrespective of the amount sought by the applicant

Kotak Mahindra Bank

The interest rate for courses in India is 10.25% and for courses abroad it is 15.5%

Yes Bank

For all education loan types and amounts (Indian and abroad education), the interest rate is 12.25% 

Federal Bank

For all education loan types and amounts including both Indian and abroad education, the interest rate is 10.90%

Indusland Bank

The interest rate for courses in India and for courses abroad it is 11%

RBL Bank

12.25% is the interest rate charged for all education loans at RBL Bank.

Bandhan Bank

The interest rate charged for all education loans at RBL Bank devoid of the amount is 10.52%

Karur Vysya Bank

For all loan types and amounts, the interest rate is 11.65% onwards

Ways to Lower the Rate of Interest

Offer Collateral:

The student can try to negotiate for a lower rate of interest when the loan is provided by a non-banking financial institution by providing collateral as a form of security even it is not required.

Use of academic records:

Scoring higher than average is advantageous if the student is planning to get a loan. Some lenders may offer preferential interest rates if the student has scored well. Even entrance exam scores will be taken into consideration

Refinance:

The students can enjoy discounted rates in the middle of their payment routines. The students have to find a lender offering lower rates and transfer their outstanding balance to that lender. This process is called refinancing and it is a great way to lower the rate of interest.

Repayment of Education Loan

  • The repayment period of the loans usually commences after the completion of the course.

  • Most of the banks also give the students a moratorium period during which no interest will be charged and the students are supposed to secure a job within 6 months or a year (whichever is earlier).

  • However, the students also have the option of prepayment where the loan is cleared before the given period. This helps improve the credit score and, in the future, loans can be procured easily.

  • The interest rates can be paid beforehand and the amount of EMI to be paid will be reduced.

  • The students should ensure that the repayment happens regularly and on time.

  • To know in depth about repayment of education loans one can check out the article link in this point.



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