Education is the key to unlocking the doors of opportunities, and every student dreams of pursuing higher education to pave the way to a successful career. However, the rising cost of education has become a stumbling block in the path of many students. An education loan helps bridge the financial gap between the rising cost of education and the ability to afford it. The availability of education loans has made it possible for students to pursue higher education with ease.
An education loan against property, also known as a student loan, is a type of loan offered by banks or financial institutions to students to help them cover their tuition fees, accommodation expenses, books, and other related expenses. The loan can be availed by students who want to pursue undergraduate or postgraduate courses in India or abroad. The education loan covers all expenses related to studies such as tuition fees, hostel fees, examination fees, travel expenses, books, and equipment expenses.
Before availing an education loan, there are certain things that a student should keep in mind to make sure that the process is smooth and hassle-free. Here are the key things that students should know before availing an education loan in India.
Student Loan Application Process
The application process for an education loan in India is similar to any other loan application process. The bank requires the student to submit the following documents along with the loan application:
– Mark sheets of the previous examinations
– Proof of admission to the course
– Cost estimate of the course
– Identity proof
– Address proof
– Income proof of the co-borrower
The above-mentioned documents are required to be submitted along with the loan application form. The student can also submit an online application to avail of the loan. The loan application is evaluated by the bank, and the loan amount is disbursed to the educational institution as per the terms and conditions of the loan.
Eligibility Criteria for Education Loan
The education loan eligibility criteria against property for availing an education loan in India vary from bank to bank. Most banks in India consider the following factors when evaluating the eligibility of a student for an education loan:
– The academic performance of the student
– Admission to a recognized university
– Age of the student
– The credit history of the student or the co-borrower
Apart from the above-mentioned criteria, banks also verify the details of the course for which the loan is being taken. Some banks have their own set of criteria, which are more stringent than the ones mentioned above. Therefore, it is recommended that students check the eligibility criteria of the bank they intend to approach before submitting their loan application.
Loan Repayment
The repayment of the education loan starts once the student completes their course. Typically, the repayment period for an education loan is between 5 to 15 years, depending on the bank’s terms and conditions. The student is required to start repaying the loan once they complete the course and start earning an income. In some cases, banks offer a grace period of 6 to 12 months, allowing the student to start repaying the loan after they secure a job.
The interest rate of the Loan
The interest rate charged on education loans in India varies from bank to bank and depends on several factors such as the loan amount, the duration of the loan, the type of course and the student’s academic performance. The interest rate for education loans starts from 8.5%. Some banks also offer a concession in the interest rate of the loan for female students and meritorious students. Students should compare the interest rates of different banks before availing of an education loan. It is recommended that students choose a loan with a lower interest rate, as it will help them save on the total interest payable over the repayment period.
Collateral Required for Education Loan
In most cases, the bank asks for collateral security or a guarantor for the education loan. Collateral security can be in the form of immovable property or fixed deposit. However, some banks provide unsecured loans i.e. loans without collateral security or third party guarantees. In some cases, the bank may ask the student to provide collateral security if the loan amount exceeds the bank’s threshold limit. It is recommended that students check the collateral security requirement of the bank they intend to approach before submitting the loan application.
Tax Benefits on Education Loan
An education loan provides tax benefits to students under Section 80E of the Income Tax Act. The tax benefit is available for the interest paid on the education loan, and the student can claim a deduction for up to 8 years from the loan sanction date or until the interest is fully repaid, whichever is earlier. The tax benefit is only available for individuals, and the loan must be taken for the purpose of higher education. The tax benefit can help reduce the overall cost of availing of an education loan.
In conclusion, an education loan is a financial instrument that helps students pursue higher education without worrying about the high costs. However, before availing of an education loan, students should carefully evaluate their financial needs and compare the loan features and interest rates of different banks. The student should also check the eligibility criteria and the collateral security requirement of the bank before submitting the loan application. With proper planning and research, students can avail of education loans with ease and achieve their academic dreams. Read more blogs on our website.