Understanding education loan through FAQs

Education is getting expensive and higher studies are costlier than ever, especially if you wish to go abroad. Hence, education loan has become popular and assist by providing financial aid to worthy and needy students for meeting their expenses concerning higher education in India or abroad. Let us understand the concept in-depth through FAQs –

What is an education loan?

Also called student loan, are available solely for those who wish to pursue higher studies.

Some of the conditions which you need to fulfil under the same are –

Must be a full-time course.

It could be a graduation, post-graduation, diploma, or master’s course in technology, engineering, architecture, medicine, management, etc.

You can continue your studies abroad or India.

You also receive tax deductions on them.

Who gives such loans and what gets covered under them?

Every bank and non-banking financial company (NBFC) offers such a credit. The study loan not only manages your finances for study per se, but also other expenses related to admission, tuition, examination, library fees, accommodation, travel expenses, computers, and other equipment. Some loans also account for health insurance since the medical costs are expensive abroad.

What are the eligibility criteria?

The criteria vary from lender to lender. The common ones are –

Must be a recognised institute.

Admission letter confirmation from the concerned university or college.

Students must be between the age group 16-26 years. Some banks extend the age limit to 35 years.

The student should hold an excellent academic record.

Regular income of the parent or guardian.

How much amount do the lenders rent, and what are the interest rates?

Students can avail up to INR 10 lakh for studying in India and up to INR 20 lakh for studying abroad. The interest rates again differ from lender to lender. Education loan in India is usually on floating rates. Then there are banks which provide fixed rates. Female students receive some concession on the interest rates. If you have got admission in a premium institute, the interest rates decrease further.

Do you need to produce a guarantor?

No study loan applications are complete without a guarantor or co-applicant as students are not financially able. If the amount is as low as INR 4 lakh, there is no requirement of a guarantor. However, they do ask for some security or collateral like Government securities, gold, shares, fixed deposits, etc. Some lenders ask for a third-party guarantee as well. The conditions for a co-applicant are as follows –

Co-obligation of parents required for an amount up to INR 4 lakh

Co-obligation of parents along with a third-party guarantee for an amount up to INR 4 lakh and INR 7.5 lakh

Co-obligation of parents along with tangible collateral for loans above INR 7.5 lakh

What are the fees applicable under such loans?

For approving and doing the paperwork, lenders may charge processing fees. They are inexpensive. Students might also have to bear the margin cost, also called as a down payment. Usually, lenders do not approve of an education loan which requires to cover the entire education costs. If the amount is above INR 4 lakh, then margin cost is applicable.

What is the documentation process?

The document lists vary from lender to lender. The most common documents are –

Admission proof

Fee receipt from the university

Mark sheet of the previous qualifying examination

Photographs

In case of salaried aspirants, bank statement, ITR, income proof, and statement of liabilities