Beginner’s guide to avail education loan in a step-by-step way

Education loan application process for students going for higher studies

Krishnendu Chatterjee
Jul 14, 2021, 19:09 IST
Education Loan Details for Indian Students
Education Loan Details for Indian Students

Education is the only scale of measurement for human intellect, and there’s no substitute to knowledge whatsoever. Education makes life complete in every sense as it shows the way to live in a matured and disciplined way. There were times when getting admission in top schools and colleges were not everyone’s cup of tea. However, things have changed now and if you have talent, you are ought to scale high in your life. Nevertheless, it’s easier said than done. One thing that’s troubling every parents and student is the growing cost of education, specifically the cost of higher studies. Even if a candidate gets through a tough entrance test for admission in a respective college, the fees of the college is so damn high that students find themselves standing in a no man’s land.

The fact of costly education impels parents to go for investment plans, and still face the shortage of funds when it comes to pay the college fees. In such a situation, Education Loan proves to be a life-saving element. Seeing the rapid rise in the fees of MBA and other professional colleges, banks have started providing education loans to students to continue their education without any type of hassle.

Education loan package

A typical education loan includes the basic course fee along-with other concerning expenses such as accommodation and exam charges.


Eligibility for applying education loan

It’s the student who has got admission in an authorized college is eligible to apply for education loan. In addition, parents, sibling or spouse can also apply on behalf of the student as co-applicants. The loan is particularly offered to the student who wants to pursue high education in India or overseas. The amount and interests rate for domestic and international education loans varies from bank to bank.

Courses eligible for education loans 

Education loans can be availed for full-time, part-time, graduation and post-graduation courses in the areas of management, engineering, medicine, hospitality, and many more.

Types of documents required

The candidate applying for education loan must be an Indian Citizen and has got admission in a college that is recognized by a government or reliable authority. It is also mandatory for the applicant to have passed higher secondary education when applying for education loan. Depending upon the reputation of college, some banks also offer the education loan well before the admission date. There’s no restriction in the upper age limit to apply for the education loan as per RBI guidelines. However, some banks have set the age limitation as well. Documents such as admission letter of the college, class 10th and 12th mark sheet are required. Further, the salary slips and income tax returns of the co-applicants are also needed.

Loan financing requirement

Depending upon the amount (college fees), banks can finance up to 100% of the loan. As of now, no margin money is needed for loan up to Rs. 4 Lakh. However, in India, 5% of the total amount has to be funded by the applicant itself. For overseas education loan, the margin exceeds up to 15%. The bank doesn’t need any collateral or third-party guarantee is required for availing loan up to Rs. 4 lakh. Nevertheless, a third-party guarantee is required for education loan above 4 lakh and up to 7.5 lakh. Collateral is asked for an amount exceeding Rs. 7.5 lakh. As soon as the loan is finalized, the amount is directly transferred to the college by the respective bank.

Interest rate Calculation

To fix the interest rate on education loan, banks use the Marginal Cost of Funds based Lending Rate and additional spread. At present, the additional spread falls in the 1.35% to 3% range.

Repayment Policy

The loan has to be repaid by the student. The repayment cycle starts once the course the course gets completed. However, there are some banks, which provide a relaxation period of 6 months or an year after securing a job and completion of studies respectively. The repayment period generally falls in-between 5 and 7 years, however, it can be extended in special cases as well. Meanwhile, the bank charges simple interest on the loan amount during the period of course, which must be taken into consideration.

Important: Please make a note that while applying for a loan; make sure to check for pre-payment bank charges and late payment EMIs.

Hope this guide will help you to avail education loan without any type of hassle. In case, you have something to say, please feel free down your view in the comment box below. Further, you can also share this article across your circle to let your friends know about the process to avail education loan.

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