What is Education Loan?
Education loans are offered by banks to students to enable them to pay for higher studies such as graduation and post graduation courses, both in India and overseas. Apart from the tuition fees, other aspects of expenses such as hostel charges, equipment purchases and other course related expenses may also be covered by the education loan. In case of overseas studies, many education loan providers include the price of a return ticket into the education loan corpus. As most students have no previous credit history, the parent or guardian has to co-sign for an education loan as a guarantor. Moreover, education loans also require key lender approved collateral such as property documents, fixed deposits, etc. Though there is an interest free (moratorium period) for an education loan, if you service the interest accrued on an education loan during the period, you may receive a further discount on the education loan.
Q1. Who is eligible for an education loan?
Every bank has its own eligibility criteria for dispensing education loans, but a few common parameters are: Applicant should be an Indian national. Applicant should have confirmed admission in a college/educational institution at the time the loan application is made. Applicant should be in the age bracket 16–35 years. The Applicant should have a co-borrower such as a parent who acts as guarantor for the loan Collateral in the form of a fixed deposit etc. is required for loan amounts higher than Rs. 7 lakhs.
Q2. What documents does the lending bank ask for?
Documents that are to be submitted with the education loan application include: Admission confirmation letters and papers validating any scholarships the applicant has qualified for. Schedule of expenses for the course including tuition fees and other expenses. Score sheet of qualifying test(s). Copies of foreign exchange permit/student visa for overseas studies. Bank account statements for last 6 months. (Can be a joint account with parent/guardian) Statement of assets and liabilities of borrower. Proof of age Proof of residence 2 passport size photographs Documents related to collateral required for education loans exceeding Rs. 4 lakhs.
Q3. What documents does the lending bank ask for?
Documents that are to be submitted with the education loan application include: Admission confirmation letters and papers validating any scholarships the applicant has qualified for. Schedule of expenses for the course including tuition fees and other expenses. Score sheet of qualifying test(s). Copies of foreign exchange permit/student visa for overseas studies. Bank account statements for last 6 months. (Can be a joint account with parent/guardian) Statement of assets and liabilities of borrower. Proof of age Proof of residence 2 passport size photographs Documents related to collateral required for education loans exceeding Rs. 4 lakhs
Q4. What are the courses for which an education loan can be availed?
Education loan can be availed for all courses recognized by the UGC in case of India and all regular courses abroad. Each lender has its own list of educational institutions and courses that they would provide a loan for whether overseas or within India.
Q5. What are the expenses covered by education loans?
Education loans can be used for paying: Tuition fees and hostel expenses Exam, library, and lab fees if applicable Any refundable caution deposits paid to the educational institute Cost of books, uniforms, and other essentials for completion of course Travel expenses (return fare for international flights.
Q6. Is a co-applicant for education loan needed?
Yes, for all full-time courses a co applicant is required. The co-applicant can be Parent/Guardian or Spouse (if-married).
Q7. Who can be my co-borrowers?
Your parents/ guardian can be a co-borrower as well as spouse in case of a married applicant. The co-borrower should have a steady source of income and a good credit history in order to improve the applicant’s chances of a successful loan application.
Q8. Is there a maximum limit on an education loan that a lender can disburse?
Most lenders have a maximum limit of Rs 10 lakhs to Rs 15 lakhs for studies within India, while the maximum limit on education loans for overseas studies is between Rs 20 lakhs to Rs30 lakhs. In case of some lenders, the applicant can get a higher loan amount sanctioned provided bank-accepted collateral is provided.
Q9. What is the tenure of an education loan?
The average tenure for an education loan is between 5-7 years in case of most lenders. However, some lenders can offer a longer tenure of up to 15 years in case of higher loan amounts.
Q10. What is the maximum loan amount one can get for overseas studies?
Banks generally fund up to 90% of the education expenses as loan and some even provide loans for 100% of education expense. However, the exact loan amount an applicant is eligible for depends on a range of factors including the monthly earning of the parent/legal guardian, the value of collateral provided, the academic record of the applicant and other factors.
Q11. Does an education loan require security or collateral?
The requirement of collateral varies from one bank to another, however, the following is generally the thumb rule: For loans up to Rs. 4 lakh – No collateral or Third Party Guarantee is required. For loans from Rs. 4 lakh to Rs. 7.5 lakh – Collateral is not needed but third-party guarantee is required For loans above Rs. 7.5 lakh – Collateral is required. Some of the key types of collateral accepted by banks include LIC/NSC/KVP, Fixed Deposit held with the lender, property documents owned by the applicant or co-signor.
Do you have any questions
Please mail us, we will contact you as soon as possible