What Affects Education Loan Interest Rates?


  • How is my education loan interest rate determined?
  • Read this post and know about it in detail.

An education loan can help you pursue higher studies without any problem. The loan helps you pay for the semester fees, books, equipment, etc. All you need to do is crack the entrance test or obtain necessary marks in a qualifying examination to get admission to the institute you want to. After completing the course, you would like the monthly installments i.e. EMIs to be affordable. To ensure it happens, the education loan interest rate has to be lower. Now the question is, how will you get the loan at a lower rate of interest? Let’s find out in this article that elaborates on factors affecting education loan interest rates.

Academic Record of the Student

You can borrow an education loan from a bank or an NBFC based on your academic records like the 10th or 12th mark sheet and certificates. If your score is good and you are successful in getting admission to a college, it would help you borrow money from the bank. Your loan request will be approved quickly as per your marks and other academic performances. You will get a lower education loan interest rate too.

The Reputation of College or University

To borrow money from a bank or NBFC at a low rate of interest, you must secure admission to the top college or university. When you secure admission to the top colleges or educational institutes in India or abroad, the lender may provide relaxation on your education loan interest rate. There are placement options for students in top educational institutes which ensure the lender that you’ll pay the loan on time.

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Type of Course You Pursue

You can have a low education loan interest rate when the course you pursue comes with massive job prospects. There are benefits for the students who pursue engineering, doctorate, or other courses as they can meet the repayment capacity which the lender requires. If you apply for a loan to pursue courses having fewer job prospects, the education loan interest rate could be high.

Collateral You Provide

To borrow a loan above INR 7.5 lakh, you need to provide collateral security against the borrowed amount. And the collateral can be your land, house, insurance policy, Fixed Deposit, etc. No agricultural property or land is accepted as collateral for an education loan. The education loan interest rate depends on the value of your collateral. If you provide a house as collateral for your loan, the interest rate will be low. If and when the borrower defaults, the lender can cease the collateral to recover the loan amount.

Joint Borrower Income & Credit History

An education loan is borrowed jointly with parents as a co-borrower. In this case, parents need to submit income proof and other documents. If a co-borrower’s income is high and his/her credit history is good then it will help you get a low rate of interest on the borrowed amount.

Economic Condition of the Country

The current weak demand in the economy due to Coronavirus and other problems has made the Reserve Bank of India (RBI) cut the repo rate by more than 200 basis points in a little more than a year, giving banks the space to cut lending rates of their retail loans including education loans. The repo rate now stands at 4%. This rate cut is likely to reduce your equated monthly loan installments and makes it cheaper to borrow loans for higher studies. So, you should take advantage of this opportunity and meet your educational needs at a lower rate of interest.

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Personal Loan Interest Rates September 2023
Fullerton India12.00% - 24.00%
HDFC Bank10.75% - 14.50%
ICICI Bank10.75% - 19.00%
IndusInd Bank10.25% - 26.00%
Kotak Bank10.99%
RBL14.00% - 23.00%
Standard Chartered Bank11.49%
Tata Capital10.50% - 24.00%
Home Loan Interest Rates September 2023
Axis Bank8.75% - 9.15%
Bank of Baroda8.50% - 10.60%
Citibank8.75% - 9.15%
HDFC8.50% - 9.40%
ICICI Bank9.00% - 9.85%
Indiabulls Housing Finance Limited8.65%
Kotak Bank8.85% - 9.40%
LIC Housing8.50% - 10.50%
Piramal Capital & Housing Finance10.50%
PNB Housing Finance8.50% - 10.95%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI9.10% - 9.65%
Tata Capital8.95% - 12.00%