Education loan: Lowest Interest Rates, Calculator Eligibility, Required Document

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Introduction to Education Loan

In order to build a successful career and future, quality education is a must. Parents spend a lot when it comes to their child’s education as they know that education is the only thing that will make their children’s life happy and going. However, with the cost of education rising day by day, it has become difficult for the parents to manage the tuition fees of their children. The cost of higher education in India as well as in foreign countries is rising and it has become difficult self-financing education fees for the parents. Hence, the demand for loans to cover the education cost has risen in the past few years. Numerous financial institutions are offering education loans at attractive rates. However, the education loans are provided to the deserving and meritorious students who hold the potential to make best out of their educational loan, achieving the best education they can get in Indian or in foreign countries. In the present scenario, almost every financial institution and NBFC in India offer education loans to the students who are interested in pursuing a wide range of educational qualifications including graduate, post graduate, doctoral and professional degrees and courses.

The education loan doesn’t only covers the tuition fee and the examination charges but also covers the allied expenses including the books, uniforms, travelling, tools, and equipments like laptops and tablets, and any other entity required for attaining a proper education. The education loan covers the following expenses.

  • The amount required for purchasing uniforms, books, and other related items.
  • The amount required for purchasing laptops and computers, if deemed necessary for the course.
  • Additional fees like examination fees, hostel fee, library fee, and laboratories, etc.
  • Caution deposit, building fund, the refundable deposit will also be covered under the loan.
  • Travel costs particularly when the student is traveling abroad.
  • Some additional expenses like study tours, projects, thesis and more.

Why Education Loan?

As we know that education can be a costly affair, choosing an education loan over a personal loan can help the individual to manage the education expenses. Why education loan?

  • Education is an expensive affair:

If your children hold the potential to reach heights with education, then you would think of sending them to higher education. But, in today’s world, with literally everything really expensive, it is difficult for the parents to enroll their children in good schools and colleges. Education loans are availed instantly and instead of accumulating money, one can rely on education loans to fund their children’s higher education.

  • Specialized Help:

Paying the tuition fee isn’t enough to cover the education. There are several additional charges attached to it like the cost of the books, uniform, traveling expenses, projects, and more. A comprehensive education loan will take care of all the additional charges ensuring that the education of the individual is not affected.

  • Easily and Widely Available:

Educational loans are priority products in most of the financial institutions and thus, it makes it easy to avail. However, the loan will be sanctioned based on the borrower’s repayment capability, and other factors.

  • Timely Assistance:

In a successful education life, a good education loan acts as a pillar where it provides with timely assistance whenever required. Thus, the student doesn’t have to worry about other stuff; he/she just focus on his/her studies.

Benefits and Features of Education Loan

If you think compromising with your children’s education is not an option, then availing an education loan can help you finance the education costs in big time. Education loan is a long-term investment and it is the first step towards your child’s secure future. The education loan comes with the following features and benefits.

  • Any Indian student can apply for education loan for studying abroad or in India for professional, graduate, doctoral, and post graduate degrees and courses.
  • However, the education loan cannot be assigned to the student alone. The student’s guardian or parent must be the co-signor of the loan.
  • The female students are benefitted the most. Availing education loans for the female students can be a cost-effective affair as they are showered with discounts, offers and the lower rate of interest on the loans.
  • The education loan amount will depend on the annual family income and their loan repayment capacity.
  • The education loan taken below Rs.4 lakhs doesn’t require any guarantor or security.
  • On the other hand, the borrower is also not required to provide collateral for a specific loan amount (above 7.5 lakhs). However, the collateral in the form of property, fixed deposit or other entity approved by the financial institution might be required.
  • The loan amount that can be availed by an individual is between Rs.10 lakhs to Rs.15 lakhs and can go to the maximum of Rs.20 lakhs depending on the needs of the borrower.
  • The education loan repayment tenure generally varies from 5 years to 7 years, but depending on the loan amount, it can last up to 10-15 years.
  • The moratorium period of 365 days is provided with every education loan. One can avail an education loan at the time of the study, but it is not necessary to get it serviced at the time of the course.
  • Based on the Income Tax Act, Section 80 E, the education loan borrower will benefit with student loan tax benefits. On the other hand, there are several subsidy schemes offered by the government to help the students from the economically backward sectors.
  • It is quite difficult to rely on money saving due to the recent price shifting and inflation. A comprehensive education loan will make sure that you don’t require engaging yourself in accumulating extra income to cater the expenses related to your child’s education. In the present scenario, a good education is expensive and is continuously increasing. Thus, it is better to rely on education loan than availing a personal loan.
  • School or college funding is not all about paying the tuition fee, there are more to it. The building deposits, library fees, caution deposits, laboratory fees, uniforms, books, travel, hostel and more, there are numerous aspects that need to be covered in order to complete a course or degree, and education loan covers all the expenses related to it.
  • Studying abroad has become really easy with the help of education loans. The Reserve Bank of India has listed education loans as a part priority sector and so did the financial institutions.

Education Loan Covered Courses

The education loan availed from any financial institution in India can be used to pursue the following courses within the country – diploma programs, Post-Graduation, Graduation, Management courses, technical courses, and other professional courses. On the other hand, those who wish to study abroad for the courses like Post-Graduation, Graduation, and Certificate Degree courses from CPA-USA, CIMA- London, and other universities can avail the education loan.

The universities and colleges offering any of the following courses are eligible for education loans;

  • Hotel and Hospitality
  • ICWA, CA, CFA etc.
  • Professional courses including Engineering and Medicine
  • Courses conducted by IIMs, IITs, IISs, XLRI. NIFT, NID etc.
  • Management courses (both full time and part time)
  • B.A/B.Com/M.A/M.Com/MCA/MCM etc.
  • Courses such as SAP, ERP, GNIIT, and Air Hostess Training programs etc.
  • Courses offered in India by reputed and certified foreign universities.
  • Architecture, Agriculture studies, Fine Arts and Designing etc.
  • Distance learning programs and online certifications.
  • Aircraft Maintenance Engg., Pre-Sea Training courses and the like.
  • Degree/Diploma courses like Aeronautical, pilot training, shipping, etc.,
  • Distance learning programs and online certifications.
  • Courses offered by reputed institutes that assure employment and are Govt. certified.
  • Nursing and Para Medical courses (includes admission via management quota).
  • The listed courses given in the following websites;
    1. www.aicte-india.org
    2. www.ugc.ac.in
    3. www.education.nic.in

Eligibility Criteria for Availing Education Loan

The eligibility criteria requirement is different for the different service providers. However, there are some basic criteria that must be met to avail education loan benefits.

  • The applicant must be an Indian citizen
  • The applicant must possess the valid Indian passport if he/she is a Non-resident Indian (NRI)
  • The applicant must fall under the given age bracket defined by the respective financial institution
  • The applicant must possess the confirmation letter stating that he/she has granted admission in that particular college or university.
  • The education loan has to be applied along with a co-applicant by the applicant’s side with a regular income source.
  • The CIBIL score and credit history of the co-applicant should be good along with that; the applicant must possess a good academic record in order to avail the loan quickly.
  • On the other hand, some of the financial institutions require the applicant to pass the national level entrance exam.

The role of Loan Guarantor:

Availing an education loan requires a guarantor with a regular source of income. The guarantor can be anyone from the applicant’s parents, guardians or anyone else related to the applicant. Moreover, education loans worth Rs.4 lakhs doesn’t require any guarantor, collateral or security of any form. But, some of the financial institutions ask for securities in the form of fixed deposits, gold, shares, real estate, LIC policies and other investments. In case, if the co-applicant does not come in the blood relation with the applicant, they are required to provide a third party guarantee. The third party can be the applicant’s uncle, a family friend or any other relative. The third party phenomenon is considered because, if the applicant and co-applicant fail to pay the loan, the third party is liable to repay the loan amount with interest.

Depending on the loan amount, the loan guarantor is set.

  • For the loan amount up to Rs.4 lakhs, the co-obligation of the parents is required.
  • For the loan amount above Rs.4 lakhs and up to Rs.7.5 lakhs, the co-obligation of the parent along with the third party guarantee is required.
  • For the loan amount above Rs.7.5 lakhs, the co-obligation of the parents along with a suitably valued security or collateral is required.

Documents required for availing Education Loan

The applicant is required to provide the duly filled application form of the financial institution along with the signature and passport size photograph. Apart from this, the applicant is required to provide the following paperwork to avail the education loan.

  • The admission letter from the college or university received by the applicant.
  • The fee breakdown based on the semesters or quarterly, in whichever format the educational institution charges. Also, it is necessary to mention the tuition fee along with the additional charges required.
  • Mark sheets starting from class 10th to the latest qualifying exam.
  • An affidavit stating that you have no other loan dues pending that was availed for some other course.
  • Signature and identity proof of the borrower which include driving license, passport, PAN card, Voter ID, Aadhar Card or in case of a government employee, the Employee Identity Card.
  • Address proof of the borrower which include rent agreement, ration card, bank statement, credit card bill, voter ID, passport, driving license, utility bills like telephone (landline), water, electricity or gas bill, property tax.
  • Age proof of the borrower which includes class 10th mark sheet, voter ID, birth certificate, Aadhar card or passport.
  • Income proof of the co-applicant confirming that he/she is employed.
  • In case, if the co-applicant is a salaried individual, he/she is required to provide his/her latest salary slip along with salary bank account statement of the last six months or Form 16.
  • In case, if the co-applicant is self-employed, he/she is required to provide his/her latest income tax returns, a certified profit and loss balance sheet and proof of business continuity.
  • The applicant is also required to provide a copy of highest professional degree acquired as the qualification proof.

Interest Rates attached to the Education Loan

Different financial institutions offer different interest rates on the education loans. The interest rates calculated will depend on the market conditions of the financial institution as well as its liquidity requirements. There are numerous factors that affect the interest rates on the education loan such as the education loan tenure, the loan education amount and the competitive market rates. On that other hand, if the education loan is applied for a girl, then she will be benefitted with 0.5% off on the interest rates calculated on the education loan. Moreover, the interest rate calculated on education loan is computed on a percentage basis which usually stands between 1.5% and 2.5% above the base rate. Therefore, the interest rate calculated on the education loan starts from 11.25% per annum and it can vary depending on the loan tenure availed by the borrower. It usually goes around 12% per annum to 16% per annum for the loan repayment period of 120 months (10 years).

The Repayment of Education Loan

In general, the repayment of a normal loan starts right after the loan is disbursed to the borrower. The financial institutions provide the facility of Equated Monthly Installment (EMI) payment mode for easy and hassle-free loan repayment. But, when it comes to education loan, the loan repayment starts six months after the course or studies of the applicant are over or when the applicant has gotten a job, whichever is earlier. The moratorium period is the period where the applicant is not required to make any payments. Moreover, the rate of interest on the loan is not calculated at once, but when the loan disbursal takes place. This is calculated during the moratorium period. During this period, the financial institution starts calculating the interest on a simple interest basis and is accumulated until the moratorium period is over. Furthermore, there are several financial institutions that offer concessional rates on the education loan if the borrower tends to pay the interest portion of the education loan even during the moratorium period.

Securing an Education Loan

Securing an education loan is simple and only requires following minimal procedures. Follow the below-given procedures to secure an education loan both offline and online.

  • Filling the application form:

Before applying for any of the financial institutions, it is mandatory that you first check and compare the education loan products of various banks. Choose your preference as per your requirements; fill up the form provided and other details if required. Buying education loan from your existing financial institution will get you extra benefits like better interest rates and more.

  • Verification:

After the submission of your valid documents, the lender will review all the documents to check whether if there is any flaw or not. Also, the lender will check your admission status with the respective educational institution at which you have applied for. The credit history and the CIBIL score of the co-applicant will also be verified.

  • Know your Course:

You will be required to attend the interview with the bank’s representative. He/she will ask you about the course you have applied for, what are you going to achieve with this particular course, what is the potential income you will generate after doing this course and more.

  • Promissory Note:

After everything from filling the application to the verification and the interview with the bank representative, finally, your education loan will be sanctioned. Once the loan is passed, you will be provided with a promissory note that needs to be signed by you. The promissory note is kind of a contract that contains the rules and regulations regarding the education loan you availed. Read it carefully and then only sign it.

  • Final Disbursal:

After verification, filling up the form and other signing formalities, the financial institution will disburse the loan amount to your account.

Top Banks in India offering Education Loans

Every private sector, as well as public sector banking sectors in India, offers education loans to the customers. The eligible and deserving borrowers can easily avail education loans, provided that they fall under the required eligibility criteria. There are numerous banks in India that offer education loans and there are some of the leading banks in India that offer education loans at competitive interest rates and flexible tenures.

1. State Bank of India Education Loan:

The education loans offered by State Bank of India cater the need of every deserving individual. If you want to pursue your studies in India, you can avail up to the maximum loan amount of Rs.10 lakhs whereas, if you want to go abroad for higher studies, you can avail up to the maximum of Rs.30 lakhs as the loan amount from SBI. The loans offered by SBI sports customer-friendly features and benefits. The loan tenure varies from 5-7 years and the interest rates vary from 11.60% per annum to 13.60% per annum, but it will depend on the loan amount.

2. Axis Bank Education Loan:

Axis Bank is one of the largest private sector banking corporations in India that offers student-friendly loans for education. Education, in the recent times, has got expensive and it is difficult for an average family to fund the education expenses of their children. Axis Bank with its education loan schemes has provided the customers a sense of opportunity to fulfill their children’s dream of getting higher studies. If you want to pursue your studies in India, you can avail up to the maximum loan amount of Rs.10 lakhs whereas, if you want to go abroad for higher studies, you can avail up to the maximum of Rs.20 lakhs as the loan amount. On the other hand, the interest rates vary from 15.95% per annum to 17.95% per annum, but it will depend on the loan amount and tenure. The tenure lasts up to seven years max.

3. HDFC Bank Education Loan:

When it comes to offering student-friendly loans, HDFC Bank education loans are considered the best due to its transparency and flexible tenures. One can avail loan for pursuing higher studies in whatever course they like and the education loans come with competitive interest rates. The bank currently offers education loan worth Rs.10 lakhs for pursuing higher studies in India only. On the other hand, the interest rates vary from 12% per annum to 13% per annum, but it will depend on the loan amount and tenure. The tenure lasts up to the maximum of fifteen years.

4. Punjab National Bank Education Loan:

The education loans offered by Punjab National Bank can be availed by the meritorious students who have the capability to do something big with their knowledge and education. One can apply for education loan for pursuing any degree or courses like post-graduation, graduation and more. The interest rate is calculated on an individual basis and the maximum loan one can avail is Rs.10 lakhs. Moreover, the loan tenure can go up to 15 years.

5. ICICI Bank Education Loan:

The most important factor that you look for before availing education loan is that the sheer number of options your bank provides with. ICICI Bank has emerged as India’s one of the best private sector banks that offers customer-friendly products and services. If you want to pursue your studies in India, you can avail up to the maximum loan amount of Rs.10 lakhs whereas, if you want to go abroad for higher studies, you can avail up to the maximum of Rs.20 lakhs as the loan amount. Moreover, the interest rates vary from 5% per annum to 15% per annum, but it will depend on the loan amount and tenure. The loan tenure can last up to seven years.

Know More How To Apply ??

Know More About

Education Loans

You're eligible for a Education Loans if you:


Are legally adult enough to handle it


Have still got it


Get a regular pay check


Make more than a basic buck

Your eligibility depends on:


Earn more than minimum income required


Maximum allowed Education Loans is Rs. 10K to Rs. 45 lakhs


EMIs of other loans loweryour eligibility

Boost your eligibility by:


Pay off your credit card bills


Choose longer tenure loan up to 5 years

Nothing gets done without that paperwork (which we'll happily carry over to the bank for you, no sweat). Here's what you'll need:

  • 1. Photo ID and age proof
  • 2. Signed application form with photograph
  • 3. Residence proof
  • 4. Last 6 months bank statement
  • 5. Documentation for salaried applicants:
    • Last 3 months salary - slips
    • Form 16 or Income Tax Returns
  • 6. Documentation for self-employed applicants:
    • Last 3 years Income Tax Returns with computation of Income
    • Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account

Education Loans Interest Rates

Updated on 25 Nov 2017

Education Loans Details
Interest Rate (Monthly reducing balance) 9.5% - 15%
Processing Fees Varies with bank
Loan Tenure year to 7 years
Pre-closure Charges Varies with bank
Guarantor Requirement Varies with bank

Education Loans EMI Calculator

Loan Amount

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1L
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50L
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100L
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150L
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2Cr

Interest Rate

%
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5
|
10
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12.5
|
17.5

Loan Tenure

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1
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10
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20
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25
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0
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120
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240
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300


Your Monthly Loan EMI


₹24,959