How to Apply for Education Loan in India?

There are plenty of bright students in India who cannot afford to carry on further with their education due to lack of money. Education loan is purely for educational purposes and is a boon to such students as it helps them continue their education in a hassle-free manner. It’s a good thing that education loans have lower interest rates as compared to other forms of loans such as home loans, vehicular loans, etc. Once the desired course is complete, the student can start repaying the loan soon after he becomes capable to start earning on his own. Education loan is an excellent support system for brilliant students.

Types of Education Loans:

You can easily avail the below-listed education loans in India.

(1.) Undergraduate education loans for students-

A student whose higher secondary education is finished can avail this loan for three to four years in order to enhance their opportunities for getting a decent job.

(2.) Graduate or professional education loans for students-

When students complete an undergraduate course, they can apply for a professional or graduate loan for carrying out higher education and obtain an advanced degree from a reputed college or university.

(3.) Career education loans for students-

The students who desire to take undergraduate programs that are career-oriented at technical and trading institutes throughout the country can opt for career loans.

(4.) Loans for the parents of a student-

Loans that can be availed by parents or even relatives of a student for paying a student’s educational expenses like transportation costs, uniform, tuition fee, hostel fee, etc.

Benefits of Education Loans:

There are certain advantages that education loans provide which is the reason for their increasing popularity among the middle class. Let us take a look at some of the major benefits of education loans-

1. An education loan doesn’t let a talent get wasted away merely due to financial instability. If a child is capable of learning and gaining knowledge, education loan eradicates the financial hurdle that students have to face.

2. The interest rates are lesser than other kinds of loans. This encourages more students to pursue the path that is right for their career and eliminates a factor of hesitance right there.

3. Another big advantage of education loans is that the student doesn’t have to worry about the repayment until his or her course is complete. The repaying of the loan starts after the course is over.

4. The borrower gets a rebate in tax.

5. Quality education is not just a dream anymore. Students can actually achieve what they aspire for. Education loans play a huge role in fulfilling their dreams.

6. It also includes other expenses like library fees, caution deposits, building deposits, tuition, laboratory fees, examination fees, money for buying books, hostel fees, travel expenses, instruments, uniform, etc.

7. Banks offer loans from Rs. 2 lakhs to 22 lakhs. The amount of the loan depends largely on the course the student applies for. To study abroad, the amount can go up to Rs. 20 lakhs.

HOW TO APPLY FOR EDUCATION LOAN:

The annual income of the family of the student and the fees demanded by the college of choice for that particular course are the two main factors taken into account while applying for an education loan in India. It is mandatory for a co-applicant such as one of the parents, spouse or a sibling to be there for the process. For loans that are above Rs. 4,00,000, a third-party guarantor is required. Although, it is not necessary when the loan amount is below Rs. 4 lakhs. If the loan amount is greater than Rs. 7.5 lakhs, a collateral is required. For studying abroad, insurance is mandatory.

ELIGIBILITY CRITERIA:

1. The applicant must be an Indian National or an Indian citizen.

2. If the student is applying for a loan to study in a college or university overseas then he/she should have obtained the offer letter from the concerned university at the time of applying for an education loan.

3. The student should have acquired admission by qualifying a legitimate entrance test for Universities or colleges in India.

DOCUMENTS REQUIRED:

Documents required for salaried applicants-

1. ID proof (any one of the below-mentioned IDs):

-Passport
-Driving license
-Voter ID card
-PAN card
-Latest salary slip and salary certificate
-Government department ID card
-Bank account statement

2. Residential proof (any one of the below-mentioned proofs):

-Recent electricity bill
-Recent phone bill
-Existing agreement of the house lease
-Last 6 months Bank Statement or Pass Book
-Guarantor Form (Optional)
-Copy of letter of admission of the Institute attached with fee schedule
-Report cards degree courses

Documents required for other applicants-

1. ID proof (any one of the below-mentioned IDs):

-Passport
-Driving license
-Voter ID
-PAN card

2. Residential proof (any one of the below-mentioned proofs):

-Recent electricity bill
-Recent phone bill
-Existing agreement of the house lease
-Last 6 months Bank Statement or Pass Book
-Guarantor Form (Optional)
-Copy of letter of admission of the Institute attached with fee schedule
-Report cards degree courses

COURSES COVERED:

There are many courses of different streams that are covered by education loans.

1. Bachelor degree courses or undergraduate degree courses in commerce, science, and arts such as B.Tech, B.E., B.A., B.Com, B.Sc.

2. Master degree courses such as MBA, M.Tech, M.Com, M.A., M.Sc, etc.

3. Pre-doctorate or before doctorate degree courses such as M.Phil.

4. Doctorate courses for Ph.D. in various streams.

5. Vocational courses such as information technology, retail, tourism, beauty care, tailoring, library assistant, mobile repairing, electrical technician, cottage industries, repairing of various electronic appliances, funeral services, cosmetics, etc.

TOP BANKS OFFERING EDUCATION LOANS IN INDIA:

Here are some top banks that offer education loans in India for various courses.

1. Axis Bank

Maximum amount: 20 lakhs

Interest rate: 13.75% – 15.75%

2. Bank of Baroda

Maximum amount: 20 lakhs

Interest rate: 10% for less than or equal to Rs. 4 lakhs and 12% for amounts higher than that

3. Canara Bank

Maximum amount: Rs 20 lakhs

Interest rate: 11% up to Rs 4,00,000; 12% for between Rs 4 lakhs-Rs 7.5 lakhs; 9.5% for greater than the amount of Rs 7.5 lakhs

4. HDFC Bank

Maximum amount: Rs 20 lakhs

Interest rate: 13.5%

5. ICICI Bank

Maximum amount: Rs 20 lakhs

Interest rate: 0% for less than or equal to Rs. 4 lakhs and 15% for amounts higher than that

6. Indian Overseas Bank

Maximum amount: Rs. 40 lakhs

Interest rate: Up till Rs 4 lakhs- 0%; above that- 15%

7. State Bank of India

Maximum amount: Rs. 30 lakhs

Interest rate: Up till Rs. 4 lakhs – 13.5%; somewhere in between Rs 4,00,000 and Rs 7.5 lakhs – 13.75%; above Rs 7.5 lakhs – 11.75%

INTEREST RATES:

The interest rates in India for the purpose of education loans can vary greatly depending upon different bank policies. However, it is mostly between 12 % to 16 %, that depends upon various factors including the base lending rate of the bank. According to the direction of RBI, the base lending rate is 9% to 10% for banks in India, in general.

REPAYMENT:

The process of repayment has to begin after around 6 months or 1 year of the completion of the desired course by the student. It can extend up to 5-7 years. Unfortunately, if the student is unable to repay the loan, both the co-applicant’s and the student’s credit history is adversely affected.

SOME TIPS FOR APPLYING FOR AN EDUCATION LOAN:

There are some crucial details that you should always keep in mind before applying for an education loan. Let us take a look at some useful tips.

1. Decide the loan amount well in advance. Analyse as to how much you can pay with the help of
your own savings and for how much you need a loan.

2. Select a long time period for the repayment of the loan. It has tax-saving benefits and lesser EMI’s.

3. You should always check the rate of interest provided by various reputed and trustworthy banks and select what best suits you.

4. Avail the loan to a maximum. Make sure all your expenses such as library fees, caution deposits, building deposits, tuition, laboratory fees, examination fees, money for buying books, hostel fees, travel expenses, instruments, uniform, etc are covered in the loan.

5. Check all the costs thoroughly. Indian students who wish to study abroad should also check the currency conversion rates. Also, calculate in advance the living expenses, transportation charges, and other expenses that may arise in addition to the college fee.

6. Keep the amount of downpayment and the collateral ready. The bank will ask for a certain amount that has to be paid in advance. So, make sure there is no confusion on that part.

7. Keep a proper record of all the documents related to the education loan.

8. Plan the repayment of the loan and repay well in time. Do not delay or worse, don’t fail to repay the loan otherwise it will adversely affect your credit scores. In future, the bank may also deny you any other loan.

9. Start exploring various sources of earning money after graduation, especially, if you have applied for a loan without any financial help from your parents. If in case, after graduation you need more time to find a suitable job, you should start looking for other alternatives to pay back sometime soon.

10. Also, plan on taking up a part-time job wherever you study so that you at least have some money saved up in order to start repaying as soon as possible.

 

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