An educational loan is a loan that students take to complete their education. It is taken for the purpose of full-time undergraduate or postgraduate studies in India or abroad. At a time when the cost of education is high, the education loan for abroad studies helps students to pursue their dream of studying abroad. An educational loan can be provided by government banks as well as private enterprises.
To get a better understanding of the education loan application process, along with the eligibility criteria, and its overall significance, continue reading this blog!
This Blog Includes:
- Significance of Educational Loan
- Education Loan Application Process
- Educational Loan Eligibility Criteria
- Education Loan Documents Required
- Education Loan Interest Rate
- Important Things to Consider Before Applying for an Education Loan
- NBFC Education loan
Significance of Educational Loan
Educational loan is important for various reasons. Some of them are as follows
- Educational loan reduces the financial burden on students
- EMI’s on educational loans are only applicable after the completion of the course
- You can get reasonable interest rates from the top banks
- A student does not have to depend on the family’s income.
- Can develop good credit history which will help to get cheaper loans in the future
Education Loan Application Process
Here is the step-by-step process of taking an education loan in India
Step 1. Submit the loan application form
The education loan process in India can be divided into online and offline. Here, is how can apply for the same. For the online application, you can check the website of the respective banks. However, it is always best to call up banks and discuss the details thoroughly. For the offline process, you can visit the branch of the bank with the necessary documents. You would also have to submit the application form.
Step 2. Personal Discussion
Once the application is submitted there will be a round of personal discussions. At this stage, the bank employee might ask various questions relating to the academic performance of the student, the course and the institute that you want to apply to.
Step 3. Provide the supporting documents
The applicant has to provide admission-related documents to the bank. The bank does this to verify the enrollment of the student. If your loan amount is more than lakhs you might have to provide the collateral for the same.
Step 4. Approval or denial of the education loan
Bank before giving the approval for the loan will check the credit history of the guarantor. A guarantor can even be your parents. When the process is complete bank will either approve the loan or deny it.
Step 5: Loan disbursement
After the applicant has completed the relevant formalities the bank will disburse the loan. The bank will directly give the amount as a fee to the institute that you are applying to.
Educational Loan Eligibility Criteria
Educational loan eligibility in India for students is as follows. This criterion can vary from bank to bank.
- The institution that you are applying for must be recognized
- Must receive confirmation of acceptance from the college
- The age of the applicant must be between 16 to 26. For some banks, it can be between 16 to 35.
- The applicant must have an excellent academic record
- Regular income of the parent or the co-applicant is a must
Education Loan Documents Required
The following documents are required for you to take an educational loan
- Admission letter
- A detailed course fee structure
- Duly filled loan application form and photographs
- KYC documents
- Marksheet of educational qualifications
- Pan card of student and parent/guardian
- Identity proof (driving license, passport, Aadhar, or any other government-approved identity card)
- Residential proof (driving license, passport, electricity bill, telephone bill)
- Student/co-applicant/ guarantor’s last 6 months’ bank statements
- A statement of assets and liabilities of parent/guardian/co-applicant
- Proof of income of parent, guardian, or the co-applicant
- 2 passport-size photographs
Education Loan Interest Rate
Education loan interest rate in India varies from bank to bank. It will also depend on the amount taken, the college, the institution, and the course you are applying to. Generally, the interest rate on educational loans ranges between 9-14%.
Some banks such as the Bank Of Baroda offer fixed interest rates. It is usually 2.25% higher than the bank’s base rate. Women students receive special concessions on interest rates. It is 0.5/1 percent. Generally, the interest rate on educational loans ranges between 9-14%.
Banks also offer concessions to students who got admission into prestigious institutions. For example, IIT and IIM. In such a scenario, the loan might be cheaper by half a percent.
Important Things to Consider Before Applying for an Education Loan
Loans are taken with the intention of repaying it back with interest. Hence, it is important to consider certain factors before applying for an education loan India.
- The student is the main applicant for the loan. In case, the student is unable to pay back the loan the co-applicants (parents, spouse, siblings) will be held responsible.
- Banks will only give you a loan if the college and the course are accredited. Hence, select a degree that will lead to a job that will pay you enough to repay the loan.
- Your repayment period will start as soon as the course ends. Depending on the institution you have taken the loan you may get relief for 6 months before the repayment starts.
- While taking the loan take into consideration the processing charges, prepayment charges, and charges of late payment of EMI. It might vary from bank to bank.
- You are eligible for benefits under the 80E of the income tax Act. As per this, you will get deductions on the interest for the loan. However, it is only applicable to individuals paying loans for themselves, legal guardians, spouses, or children.
NBFC Education loan
NBFC’s full form is a non-banking financial corporation. It provided an alternative to banks in financing the customer’s needs. The main difference between banks and NBFC is that NBFC borrows money from investors, financial institutions, and banks to lend money to a debtor. They also have fewer regulations and are more flexible with their customers. Here are the top NBFC in India in 2022.
- Bajaj Finance Limited
- Mahindra and Mahindra Financial Services Limited
- HDB finance services
- Tata Capital Financial Services
- Mutooth Finance Limited
- Aditya Birla Finance Limited
- L and T Finance Limited
- Edelweiss Financial Services Limited
- Chloamandalam Investment and Finance company Limited
- HDFC Credilia
An educational loan can cover tuition fees, health insurance, air tickets, library fees, hostel fees, and other living expenses.
The maximum amount lent by banks in India is 10 lakhs. However, for studying abroad, you can get a loan of up to 20 lakhs.
For loans, up to 4 lakh co-obligation of parents is required. For loans, up to 7.5 lakh co-obligation of parents with 3rd party guarantee is required. For any loan above this amount, the co-obligation of parents with tangible collateral security is mandatory.
That was all the insights into understanding the education loan application process! For better information, reach out to Leverage Edu experts! Call us immediately at 1800 57 2000 for a free 30-minute counselling session.