An education loan can help cover tuition, living expenses, and more. This blog explains everything about education loans in India, including benefits, eligibility, application, and repayment options.
Benefits of Education Loan
If you want to pursue higher education but are worried about the financial burden, education loans can be a great option for you. Education loans are specially designed to support students and their families in fulfilling their educational aspirations. Here are some of the benefits of education loans:
- Provide financial support: Education loans cover your tuition fees and other related expenses, such as books, accommodation, travel, etc. You can focus on your studies without stressing over money matters or compromising on the quality of education.
- Offer repayment flexibility: Education loans give you the advantage of paying back the loan amount after you finish your course and get a grace period of a few months. This way, you can look for a suitable job and plan your finances before you start repaying the loan.
- Have low-interest rates: Education loans have lower interest rates than other kinds of loans. In addition, some banks offer special discounts on interest rates for female students and borrowers from economically weaker sections.
- Have tax benefits: You can claim tax deductions on the interest paid on education loans under Section 80E of the Income Tax Act. This reduces your taxable income and helps you save money.
Eligibility Criteria of Education Loan
To apply for an education loan, you need to meet certain eligibility criteria. These may vary slightly from bank to bank, but generally include:
- Age: You should be between 16 and 35 years old.
- Academic Course: You should be pursuing a recognized degree, diploma, or vocational course in India or abroad. The course should be relevant to your career goals and have good employment prospects.
- Admission to a Recognized Institution: You should have secured admission to a recognized institution and course through a transparent selection process. You should also have a valid student visa (if applicable).
- Co-applicant: You should have a parent or guardian as a co-applicant for the loan. The co-applicant should have a regular source of income and a good credit history.
Application Process of Education Loan
If you want to borrow money for school, you need to do these things:
- Find the best loan: Look at different people who give loans and see which one is best for you. See how much money they charge, how much time they give you to pay back, how much money they give you, what things they need from you, and what other good things they offer.
- Get your papers ready: Collect the papers that you need to show to the people who give loans. These may include your letter from the school, your marks, your name and address, your co-applicants’ income, and any other important papers.
- Fill out the form: Write your details on the form and attach the papers to it. You can either give it to the people who give loans in person or online through some websites or portals.
- Wait for the answer: Wait for the people who give loans to check your form and papers. They will see how good you are in your studies, how much money your co-applicants make, what course and school you have chosen, and what things you have given them (if any). They will then say yes or no to your loan.
Repayment Options
To repay your education loan, you have several options to choose from. These are:
- Deferment Period: Most education loans come with a deferment period, during which you only need to pay the interest on the loan. This period lasts until you complete your course and a certain grace period afterwards (usually 6 to 12 months). This gives you time to find a job and start earning before repaying the principal amount.
- EMI Repayment: After the deferment period ends, you start repaying the principal amount along with interest in Equated Monthly Installments (EMIs). The loan tenure varies from lender to lender but is usually between 5 to 15 years. The EMI amount depends on factors such as the loan amount, interest rate, and repayment period.
- Partial Interest Payment: Some borrowers opt to start paying a part of the interest during their course period. This reduces the overall interest burden on the loan and makes the EMI amount more affordable.
Examples of Education Loans
Here are some stories of students who borrowed money from different people to pay for school:
- Riya: Riya wanted to learn about business in Australia. She got money from HDFC Bank. She got Rs. 20 lakhs and had to pay 9.5% extra every year. She did not have to pay the money back for 2.5 years (the time she was in school plus some more time). After that, she paid Rs. 26,000 every month for 10 years.
- Rahul: Rahul wanted to learn about engineering in the USA. He got money from SBI. He got Rs. 30 lakhs and had to pay 8.5% extra every year. He did not have to pay the money back for 5 years (the time he was in school plus some more time). After that, he paid Rs. 40,000 every month for 15 years.
- Pooja: Pooja wanted to learn about fashion design in India. She got money from Axis Bank. She got Rs. 5 lakhs and had to pay 10% extra every year. She did not have to pay the money back for 1.5 years (the time she was in school plus some more time). After that, she paid Rs. 6,000 every month for 10 years.
Conclusion
Sometimes you need money to go to school and learn new things. You can borrow money from some people who will help you pay for school. This is called an education loan. Education loans are good because they help you learn, they let you pay back later, they don’t charge a lot of money, and they can save you some money on taxes. But you also need to know some things before you borrow money. You need to know if you can get the loan, how to apply for it, and how to pay it back. You should also look at different people who give loans and pick the best one for you.