Education is the key to unlock the golden key of freedom. Ever heard of that? Getting an education loan in India is easy because most private and public sectors offer loans to students to help them get higher education in and outside the country. Education loans come in handy to those students who are less privileged. Education will put them in better places to have a great future ahead. Sometimes the Indian government gives education loan subsidies to students who come from less fortunate societies. This blog will take you through everything regarding education loans in India, how to get them, the amount you can get, and more.
Education loans in India
Education loan is mainly a unique lending system designed by the Indian government to offer financial help to students and help them pursue their higher education. Financial institutions and public sectors deal with the provision of these loans. These loans can be given to students studying in India or those who want to go outside the country. Education loans are not only for students pursuing postgraduate or undergraduate courses but also for those who want to do vocational training.
Areas that are covered by the education loan
Education loan is meant to cater to specific areas during the study period. It is supposed to pay for the total payable education fees in college or university. It includes all expenses in the fee structures, such as examination fees.
If the student studies outside the country, this loan can cater to travel and caution expenses. Education loans can also cater to students’ miscellaneous expenses, such as buying laptops, books, etc. The student’s expenses should not be 20% of the loan.
The maximum amount of education loan a student can receive
There are various things that the bank considers before giving a student a loan. These include:
The time taken to complete the course: If you are taking a long-term course, the bank will consider giving you more loan amount than the one taking a short-term course. Students taking vocational courses tend to receive a lesser amount.
Institution type: Students who have been admitted to a high-level institution tend to receive more loans because their school expenses are more. They also assume if you get admitted to these institutions, you are likely to get a high-paying job which will help to repay the loan easily.
The location of the institution: Another factor considered by the bank is the geographical location of the institution. Students studying outside the country will be given higher loan amounts than those studying within the country. This is because those going abroad will have more expenses like transport fees.
Loan security: Before the lender approves your education loan, you will have to provide collateral to secure the loan in case you fail to repay. High-value collaterals will always be given higher loan amounts.
Payment capacity: The banks will always look at the earning capacity of the student after completing the course. If you take a high-paying course, you will be given more money. They also check the credit score of guarantors and co-borrowers.
Who is eligible for an education loan in India?
Even though students are allowed to apply for education loans in India, there are other factors considered to be eligible for the loan.
- The student must be a citizen of India.
- Must have completed secondary school.
- Should have an admission letter to a recognized college or university.
- The student must be eligible for the courses as approved by the government.
What other charges and interest rates are applicable to education loans in India?
The following are the charges that are imposed on the education loan if it gets approved.
Processing fee: To receive the loan, one has to pay for it to be disbursed. This fee is usually included in the loan amount. Most banks charge, on average, from 9.5%.
Penal interest: This happens if the borrower fails to repay the EMI on time. Even if they pay later, they will be charged some amount for overdue payments.
Prepayment penalty: The borrower can be charged if he/she decides to pay some additional money on top of the monthly installment. It can also be charged if the borrower completes the loan before the loan tenure.
These three are the applicable charges on education loans. The processing fee is usually paid prior. Some lenders deduct it from the total loan amount, which means you will receive a lesser amount. The rest of the charges are imposed after one receives the loan. Before applying for education loans, it is good to conduct research because there are banks that do not charge the above-mentioned charges.
The application process for education loans in India
Applying for an education loan can be done in two ways: either apply online or visit your prospective bank.
These are the steps one can follow when applying for an education loan.
- i) Choose the bank you want to obtain the loan from. Go to the back and acquire the loan scheme.
- ii) Use the lender’s website to download the application form and apply manually. Or you can click on the apply button and apply online.
iii) Either online or manually, fill in the form, attach the required documents, and then submit.
- iv) From here, the bank will begin the process by scanning your documents. They will check the course you have chosen and the collateral assigned to the loan.
- v) If you qualify for the loan, they will approve it and disburse the amount to your bank account.
Education is the most valuable asset one can obtain. As a result, it is critical to grab the greatest opportunities. To take advantage of such opportunities to study at the best universities, one should secure a proper education loan. A person can apply for education loan if he/she can’t afford education fee. There are hundreds of Banks and private lenders who are providing loan for education, check their interest rates and tenure before applying for a personal loan for your education.