Overview Features & Benefits Eligibility Criteria Documentation Q & A

Overview

An Education Loan is a sum of money borrowed to finance post-secondary education or higher education-related expenses. Education loans are intended to cover the cost of tuition, books and supplies, and living expenses while the borrower is in the process of pursuing a degree. Payments are often deferred while students are in college and, depending on the lender, for an additional six-month period after earning a degree.

There are two types of Education Loans :
* Domestic Education Loan. Students who would like to pursue education in India can apply for this loan type.
* Overseas Education Loan. Such loans help students realise their dream of pursuing the course of their desire in a foreign institution.

Features & Benefits


1. The loan amount can go up to Rs.1 crore for international students and up to Rs.50 lakh for domestic students.
2. 100% financing available for certain conditions.
3. The financing covers other expenses, such as student exchange travel expenses and laptop.
4. Preferential forex rates may be available for international disbursements.
5. Parents should be joint borrowers for the education loan.
6. Loan repayment tenure can go up to 15 years.
7. Loan moratorium period of up to 6-months to 1 year from completing the course.
8. Tax benefits up to 8 years on the loan interest payment.

Eligibility Criteria


* The loan applicant's minimum age should be 18 years and the maximum should be 35 years.
* Loans are granted to approved undergraduate programmes, postgraduate programmes, PhDs, diploma courses of six months or longer duration, job-oriented courses and technical/professional courses
* Applicants should be studying or obtaining admissions in approved recognized institutions, government institutions, professional institutions and international colleges and universities.
* Applicants should have completed 10+2 (12th standard) for an undergraduate course and a degree for a postgraduate course.

Documentation

Identity Documents :
* Know Your Customer (KYC) documents
* Citizenship
* Address Proof
* Regional Domicile

Academic Documents :
* Latest admission proofs
* Last qualification marksheet, certificates, scorecards, diploma
* Basic qualification records

Financial Documents
* Income Tax documents
* Bank statements

Generic Administration Documents
* Guarantee forms
* Duly filled application form
* Subsidy application forms

*Terms and conditions apply. Education Loan at the sole discretion of Banks/NBFCs. Loan disbursal is subject to documentation and verification as per Banks requirement.

Frequently Asked Questions

1) 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.

2) Does an education loan require security or collateral?
The requirement of collateral varies from one bank to another.

3) Who is eligible for an education loan?
Every bank has its own eligibility criteria for dispensing education loans. Below are a few common parameters
* 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

4) 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).

5) What are the expenses covered by education loans?
* 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.

6) Does education loan have any Income Tax benefits?
Loan borrowers can avail tax benefits on interest paid on education loan under Sec 80E of the Income Tax Act. This benefit is available over and above the Rs. 150,000 deduction allowed under Section 80C. Tax benefits can be availed once the borrower starts paying the interest on the education loan. Further, the deduction is available until the borrower pays off the full interest amount on the loan or for a maximum period of 8 years, whichever is earlier.

7) 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.

>8) Is credit score important in case of education loan?
A majority of students applying for an education loan do not have previous credit history such as other loans or credit cards. Thus, education loan specialized lenders have a specialized credit scoring model that scores education loan application based on the University, College and the Course of admission. They factor the academic background of the student as well as the credit history of the co-borrower into their decision.

9) Is the loan disbursed in favour of the borrower or the institute/college/university?
The tuition and hostel fees are disbursed directly to the institute as per their schedule and fee structure usually in the form of a draft. Other components of the loan such as course-related expenses for lab equipment, laptop computer, uniform, travel expenses etc. may be claimed by and provided to the loan applicant.

10) Is there a prepayment penalty on education loan?
Most banks do not levy prepayment penalty on education loan. However, it is best to check with the bank before signing the dotted line.

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