Planning to take Education Loan? Check some Important FAQs on Education loan

Good education is the only tool to upgrade and uplift the standard of life however, many students don't have the privilege of getting higher education that too from abroad locations as education is costly in the current scenario and if you belong to a middle class family then loan is the only option left. Education loans seem like a very lucrative opportunity but in the backend it has a lot of complexities involved. Check here some of the most important FAQs related to education loans.

For most in society, a good education is the only tool to upgrade and uplift their standard of life. And many students along with their parents are exploring this route to realize their middle-class dream. Quality education, especially abroad, demands abundant money, which is often beyond the reach of parents, leaving many a dream shattered. However, with education loans, these dreams can be nurtured.

Read on to find out everything you want to know about education loans. From interest rates to documents needed, we have it all covered for you!

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Which is the best Indian Bank to apply for Education Loans?

The Reserve Bank of India along with the Indian Banker's Association have come together to frame an educational loan scheme that ensures every deserving student can get access to quality education without worrying about finances.

What is the loan scheme all about?

On average, the education loan scheme looks like this for most banks. The scheme makes available loans up to Rs 7.5 lakh for studies in India and up to Rs 15 lakh for studies overseas (this can vary according to individual banks’ guidelines). For loans up to the amount of Rs 4 lakh, no collateral or margin is required and the interest rate does not exceed the Prime Lending Rates (PLR). For loans above Rs 4 lakh, the interest rate will not exceed PLR plus 1 percent. You will get a window of 5 to 7 years with the provision of a grace period of one year after the completion of your studies. Generally, some banks offer a concession of 1% to borrowers if they have been regular in repaying their loans.

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What is the Interest Rate charged as of now?

Name of the Bank	Type of loan	Loan amount	Interest Rate
Axis Bank	Education Loan (EL) EL for girl child	Upwards of 7.5 lakhs Upwards of 7.5 lakhs	16% 15.50%
Bank of Baroda	Baroda Scholar	Upwards of 7.5 lakhs	14%
Credila	Education Loan		11.75% + spread
Punjab National Bank	Education Loan	Upwards of 7.5 lakhs	10.75% repayable in less than 3 years
State Bank of India	Education Loan	Upwards of 7.5 lakhs	13.25%

**Banks listed above are in no particular order/ preference

Loan for studying purposes is a part of the priority sector lending activity for Indian banks. The interest rates offered by banks are fixed interest rate and floating interest rates. Banks charge interest on a daily or monthly reducing balance. Usually, nationalized banks offer variable interest rates for student loans, while private and foreign banks offer fixed interest rates. Some banks also offer a choice between the two.

What are the formalities involved in applying for an education loan?
Applying for an education loan when you have an offer from a leading institute is a cakewalk. Generally, the offer letter/ letter of admission from an institute of repute can be your ticket to get an easy and hassle-free education loan. All you need to do is visit the banks that suit your budgetary requirements and get your education loan application going. Generally, the bank treats your parents as the co-borrowers.

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What will the loan cover?

The disbursement and quantum of the loan given will vary from one bank to another. On average, the loan will cover up to 75% to 85% of the entire tuition fees, hostel and mess charges, library fees, or any other fees/charges payable to the institution as well as one-way passage for those going abroad, subject to a maximum of Rs 5 Lakh for studying in India and Rs 10 Lakh for going abroad.

Which documents are required?

The complete loan application, proof of identity, proof of income, proof of residence, six-month record of the passbook, guarantor note, and other documents like a letter of admission, mark sheets, educational record of the student, etc, specified by the bank are required.

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Disclaimer: Banks revise the rules, regulations, eligibility conditions, repayments, interest rates, etc from time to time to keep pace with the changing capital market conditions. Therefore, students and parents are advised to thoroughly check the terms and conditions of the educational loan scheme on offer at the time of application.

Compiled by Garima Upadhyay Rawat

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