How to get education loan for higher studies in India?

Higher studies in India are growing expensive by the day. While most people prefer self-financing their education with a little help from parents, sometimes that isn’t an option. If you’re struggling to meet the entire cost of paying your tuition fees, you can always look towards an education loan. It always helps to do your research first and compare different options. Here’s how you can get an education loan for higher studies.

 
Search well

You can get an education loan from different banks and NBFCs. In fact, most institutes have a tie-up with lenders. If a lender has an approved list of courses and institutions and yours falls in the list, you will be able to enjoy a faster processing of your application with favourable terms and conditions.

Factors

You have to pay some processing charges and margin money while taking a loan. The lender will also ask you for a collateral as security. However, lenders can waive this fee for some reputed courses and institutions. They typically consider four things while giving a loan – the student’s academic performance, university and course, collateral, and the co-borrower’s profile. Most lenders give a floating rate of interest. Ultimately, the interest rate will depend on the course, university, academic performance, credit score, etc.

Repayment

The repayment schedule of a personal loan for education is different from that of other loans. Since there is a moratorium period (typically equal to the length of the course), you don’t need to start paying EMIs immediately; you only have to pay simple interest. This can help one decrease the debt burden.

Amount that can be borrowed

The maximum amount of education loan is set by the Indian Banks’ Association – Rs. 10 lakhs for studies in India and Rs. 20 lakhs for studies abroad. For courses in premier institutes, lenders will often finance a higher amount compared to the others.

Guarantee and collateral

Typically, collateral is not required on an education loan of up to Rs. 4 lakh. But you will need a co-borrower, generally a parent. For a higher amount, the lender will ask you for a guarantee apart from a co-borrower. If the loan amount exceeds of Rs 7.5 lakhs, the lender will also ask for pledging securities of an equal value. In many cases, collateral will not be required.

Things to know

Do make sure you keep paying the simple interest on the loan; if you’re frequently skipping it, interest will keep accumulating. In fact, parents can make the interest payment and get tax benefits under section 80E of the Income Tax Act, 1961. Further, you could even get a concession of 1% on the interest rate if you pay simple interest regularly. After the moratorium period ends and you start earning, you can start paying EMIs to the lender. On the interest amount, there is no ceiling for getting the tax benefit; however, you don’t get any tax benefits on the principal repayment.

Before applying for an education loan, do check your education loan eligibility and keep your education loan documents ready with you.

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Created on Mar 25th 2020 08:43. Viewed 632 times.

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