What is a Education Loan?

Education is the most important thing to succeed in the knowledge economy. Along with the awareness for education, the cost of education is growing rapidly. With time, higher education is becoming too expensive and unaffordable for common people. An education loan plays a vital role in helping people who wants to get the best possible education. Student loan is a type of loan that is designed to provide financial support to deserving students to pursue higher education in India or abroad. These loans are taken to cover tuition fees, books and supplies and other living expenses. An education loan is the most effective means to fund your education if you are unable to bear all the expenses or to get a full scholarship. Various banks have now launched different education loan schemes to benefit the students.

Why You Should Take an Education Loan?
In recent years, a large number of students pursuing any professional course in India or abroad are availing education loan. With increasing demands of education loan, banks are coming up with best student loans with lower interest rates and flexible tenure. There are a lot of reasons why one should opt for a study loan:

Education loans are easy to get. Today, there are several numbers of banks that provide education loans and ready to fund even the total cost of education. They have simplified the application process and made it easier for a common man to apply for a loan.

Student can apply for a loan without any collateral. Banks decides the loan amount as per the worthiness of the students.

An applicant can also avail tax benefit, once they start repaying their education loan. Under section 80E one can claim reduction in the taxes for the repayment of interest on their existing loan. This benefit can be availed even if the student is pursuing his studies abroad.

Since loans for students will provide you a flexible term of repayment, a student can repay the loan once he starts working. By taking a loan for education students can preserve family assets and can ease the burden from their shoulders.

Taking a loan to fund their education is a good opportunity for a student to build a good credit score from an early stage. Regular repayment will not only build up your credit history but will also open door for better loan options is future.

Features and Benefits of an Education Loan

“An investment in knowledge pays the best interest”- Benjamin Franklin As the cost of higher studies going up, loan for education is the only option for most of the students. There are certain features and benefits of student loan stated below:

Education loan not only covers the tuition fees but also other expenses like books, accommodation charges.

Education loan also helps in improving the credit score of the students.

The repayment of loan starts after a holiday period or moratorium period. This period starts after six months or 1 year from the completion of course.

The loan amount depends on your lender. Generally a loan amount of 10-15 lakhs can be obtained for studies in India and the amount is extended for overseas studies.

The tenure offered by the bank is generally goes up to 10 years. The repayment tenure also depends upon the lender and the applicant’s profile.

Banks also ask for a third party guarantor or co-applicant.

Most of the banks do not charge any processing fee while sanctioning an education loan. Some lenders charge an upfront fee depending on the type of loan.

Loans for college students will also helps them claim certain tax benefit under section 80E of the Income Tax Act.

Along with education loan some lenders also provides life insurance cover to the students who are availing student loan.

Generally, bank does not charge any penalty for pre-closure of the loan but some lenders may charge a pre-payment penalty of up to 4%.

Few banks also provide 0.5% concession on the applicable interest rates for the female students who wish to pursue higher education in India or abroad.

Eligibility Criteria of Education Loan

The common eligibility criteria to apply for student loan are as follows:

The candidate must be a native citizen of India to apply for a student education loan.

Should have obtained a seat in one of the recognized universities in India or abroad.

The age of the applicant should be between 16 and 35 years.

The candidate must possess a good academic record throughout.

The co-applicant guarantor of the loan must be secondary such as parents or spouse or secondary including father-in-law, mother-in-law.

Documentation Required for Education Loan

A student needs to submit the following documents to apply for a loan for school for higher studies:

Documents from student:

Application form completely filled and signed.

Two passport size photographs of both applicant and co-applicant.

Letter of admission from the institute where the student has applied.

Cost break-up of the course to be pursued from the institute.

Academic record of the student which will include 12 board mark sheet, certificate of graduation and post graduation.

Mark sheet of any entrance exam taken the student have taken.

Documents of scholarship if any.

Affidavit confirming that there is no loan from any other bank or any financial institute.

ID proof which can be any of the following- Passport, PAN card, Voter’s ID, Driving license or Aadhaar card.

Proof of Address.

Age proof like birth certificate or class X certificate.

Visa approval documents and travel papers.

Documents from Co-Applicant:

1. Salaried:

✓ Proof of Address.
✓ Proof of Identification.
✓ Last 3 months salary slip.
✓ Last 2 years Form 16 or last 2 years Income Tax returns.

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