Everything About Your Education Loan

Last Updated : March 15, 2016, 10:34 a.m.

Education loan is a financial tool for those students who want to pursue their desired course in any college/university in India or abroad. It provides you financial support to fund your studies. It is offered to students who want to pursue any professional, technical, non-technical degree, diploma or any vocational course in India and abroad from a recognised college/university. Now you can chase your dreams to get higher education in India or abroad from a recognised university with the help of education loan. You should remember that everything comes with a price. These loans also comes with a special price. The rate of interest of different banks may vary from bank-to-bank. Every bank ask for specific documents and eligibility criteria to lend you loan. No deserving students should drop their studies because of lack of funds. Here are some important points which will prove helpful if you are looking for borrowing an education loan.

Eligibility Criteria

• You should be an Indian national between the age of 16 years to 35 years, pursuing graduate/postgraduate degree/ diploma in India or abroad
• Must have secured admission in a college/university recognised by UGC/Govt/AICTE, etc., for different courses.
• You must be pursuing a course/professional course under streams such as management, engineering, medical science, computer science, architecture, hotel and hospitality, agriculture, BA/MA/B.Com/M.Com. Some vocational and technical courses are also approved for which you can take a loan such as aviation, air-hostess training, etc.
• If you want to borrow a loan higher than Rs. 7.5 lakhs, a collateral security will be required.
• Co-applicants: A co-applicant is mandatory for all full-time programs. Your co-applicant could be parent/guardian/spouse (if married)/parent-in-law (if married).

Charges and fee covered under education loan:

• 100% tuition fee payable to educational institution
• Accommodation/hostel charges
• Exam and library fees
• Books and equipment’s including computer
• Travelling expenses if going to study abroad
• Other expenses required to complete the course
• Amount to buy two-wheeler if already applied

Time required for application approval:

Banks will give the decision within 15 working days from the date of receipt of the application if the application is complete in all respects.

Disbursement of loan amount:

The bank will disburse the amount directly to the college/institution to pay the fee. The loan amount might be disbursed in full or in instalments taking into account the requirements of funds or fee schedule as assessed by the bank. The bank also pay directly for the books and equipment’s or instruments to the vendors.

Loan Amount

Maximum amount to study in India is Rs. 10 lakhs

Maximum amount to study abroad is Rs. 30 lakhs

(The amount may vary for different banks)

Security

Upto Rs. 4 lakhs – No security, but in this case parents need to be a joint borrower

Between 4 -7.5 lakhs – along with parent’s collateral security in the form of third party guarantee

Above 7.5 lakhs – Parents should be joint borrowers + tangible collateral security of suitable value required.

Types of collateral accepted by banks

Residential property (house/flat/apartment)

Fixed Deposit

Life insurance (sum assured being as least 100% of the education loan amount)

Non-agricultural land

Loan repayment tenure

Course duration + 1 year or 6 months after getting the job (whichever is earlier)

Documents required for education loan

1. Admission letter from the respective college/university/institute
2. Detailed break-up of the costs of the course
3. Complete loan application form and photographs
4. KYC (Know Your Customer) document
5. Mark sheets/passing certificates of S.S.C, H.S.C. Degree
6. PAN card of the student and Parent/Guardian/Co-borrower
7. Identity proof: Driving Licence/Passport/Aadhar Card/Any other valid photo identity proof
8. Residential proof (Driving Licence/Passport/Electricity bill/Telephone bill)
9. Student/Co-borrower/guarantor’s bank account statement for last 6 months
10. IT return/IT assessment order of last two years of Parents/Guardian/Co-borrowers
11. Brief statements of assets & liabilities of Parent/Guardian/Co-borrowers
12. Income proof of Parent/Guardian/Co-borrowers

Rate of Interest

Different banks may charge you different rate of interest on your education loan.

Interest Rate = Base rate + Mark up

Base rate: 9.5% to 10%

Total interest rate comes between 11.75% to 14.75% depending upon the bank and reputation of the college

Girl students may borrow a loan at a slightly cheaper rates-by up to 0.50% lower.