The expense of education is increasing every passing day. Education loans are the best solution for common people when thinking about higher education. There are numerous banks and financial institutions that provide education loans to students. If you have been planning to apply for student loan, you must know about the available options, how to apply for an education loan, eligibility, and documents required, student loan interest rates, repayment procedure etc. Here is a step-by-step guide on “Education loan: How to apply and repay?”
Table of Contents
What is Education Loan?
Education loan is the financial help provided by banks and some financial institution to students to pursue their higher education. Students can avail student loans with flexible repayment options and minimal paperwork to meet the expenses of their education at a registered education institute in India as well as abroad. It is essential to check the education loan interest rates and repayment terms & conditions before availing student loans.
Eligibility Criteria
Before you apply for a student loan, you must check the eligibility criteria of availing it. Here’s a short list of points to check your eligibility for an education loan.
1. Must be a resident of India
2. Age limit: 18 to 35 years
3. Must have meritorious academic record
4. Must be pursuing graduation/post-graduation/ PG Diploma
5. Have confirmed admission letter from a recognized institution in India or abroad
6. Must provide security through tangible collateral or a parent/guardian as guarantor
Documents
Knowing the document requirement is the first step in the guide of ‘student loan: How to apply and repay?’ You must prepare the following documents to cover the paperwork of a loan.
1. Age and ID proof such as Aadhaar card, Voter card, passport, driving license (any of it) of the applicant and the guarantor
2. Residence proof of the student or co-applicant such as rental agreement, gas bill, telephone bill etc.
3. Income proof of the co-borrower such as salary slip, updated ITR, Form 16 or bank statement of last 6 months.
4. Documents stating the asset and liabilities of the parent/guarantor
5. Copy of latest education certificate
6. Statement of education expense
7. Passport size photograph
8. Duly filled KYC/ student loans form of the bank you are applying.
Guarantee or Collateral
Most banks requires a tangible or intangible security for lending the loan which is called guarantee or collateral. It can be a property, a fixed deposit, life insurance policies or LICs, KVP, NSC and government bonds. Collateral requirement varies from bank to bank. It is indeed an essential research topic for your guide on ‘How to get an education loan’. You may also avail the loan with third party collateral, i.e, collateral belonging to your family or friends.
Loan Amount
The loan amount covers 90% to 100% of the stated education expense depending on the eligibility of the applicant, co-borrower and reputation of the education institute. Most banks provide maximum loan amount ranging from Rs.10 lakh to Rs.15lakhs for education in India and Rs.20 lakhs to Rs.30 lakhs for education abroad. However, the maximum loan amount varies from bank to bank and you can avail a higher loan amount depending on the collateral.
Education Loan Interest Rates
Checking out the education loan interest rates serves as another important step in your journey of “How to apply for student loans?”. To make the research easy, we have assimilated the student loan interest rates of some major banks.
| Bank Name | Education Loan Interest Rates (in % p.a) |
| State Bank of India (SBI) | 7.95 to 10.05 |
| Bank of India | 8.95 to 9.75 |
| Punjab National Bank | 7.30 to 9.80 |
| Bank of Baroda | 8.00 to 10.25 |
| Central Bank of India | 7.60 to 9.60 |
| IDBI bank | 8.25 to 10.25 |
| Axis Bank | 13.70 to 15.20 |
| ICICI Bank | 11.25 to 14.60 |
| UCO Bank | 9.95 to 10.35 |
| HDFC Bank | 9.55 to 13.25 |
Student Loan: How to apply for education loan in bank?
You can visit the nearest branch of the bank and ask for the education loan form. You have to fill up the form and present the required documents. The bank undertakes verification of the documents and collateral. Once approved, the loan is disbursed directly to the education institute.
Some banks allow application for education loan through their online portal. You must look up “How to apply for education loan online at (bank name)?” to know the steps of online application.
How to repay education loan?
Just knowing how to avail this loan is not enough, you must also be aware how to pay back education loan you have taken. You have to repay the education loan through EMI after the completion of the course. Most banks provide flexible repayment options. The usual repayment tenure ranges from 5 years to 7 years. However, it can be extended up to 15 years depending on the terms with the bank.
If you planning repayment beforehand, you can calculate the EMI through various Education loan EMI calculators online.
Frequently Asked Questions
1. Do I always need a coborrower?
Yes, you must have a co-borrower if you are pursuing full-time course. Your parents or a guardian can be your co-borrower.
2. How much education loan can I get without collateral?
You can avail up to Rs.7.5 lakh as loan without collateral if specific criteria are met.
3. Is there any prepayment charges?
Most bank do not levy any charge for the prepayment of the loan. However, you must cross-check about prepayment charges with the bank.
4. Is there any penalty for late repayment?
Yes, you have to pay penalty for late repayment of education loan EMI. The penalty amount varies with bank.
5. Is there any processing fee on education loan?
Yes, most bank charges a processing fee on this loan. Enquire about the processing fee before applying for loan.
Final Thoughts
Higher education is essential to establish a better career. Therefore, you can always take education loan to fulfill your need for higher education. Hope our thorough guide on ‘How to apply for study loan?’ helps you out for a successful higher education journey.
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