India is witnessing a remarkable surge in the demand for higher education. In 2020-21, a total of 4.14 crore Indian students were pursuing higher educational courses aimed at skill development. As the aspirations of students soar and the Indian academic landscape evolves, the cost of pursuing advanced studies has also grown significantly. To bridge the financial gap and enable talented individuals to access quality education, education loans have become invaluable. Whether you’re planning to study in India or abroad, understanding how to get an education loan is essential.
Follow these steps to acquire an education loan and chase your personal horizons:
Step 1: Secure Admission
The first step is to research and choose the educational course and institute you want to attend. Consider factors like tuition fees, living expenses, and the reputation of the institution. Having a clear understanding of your financial requirements will help you determine the loan amount needed.
Step 2: Identify Eligibility Criteria
Different lenders and loan schemes have varying eligibility criteria. However, common factors include:
- Indian Citizenship: The applicant should be an Indian citizen.
- Age Limit: Most lenders have a minimum and maximum age limit for education loan applicants. Typically, the minimum age is around 18 years, and the maximum age for an education loan can vary but is usually around 35 to 40 years.
- Admission to Recognised Courses: The applicant should have secured admission to a recognized educational institution or course in India or abroad. The course should be approved by relevant regulatory bodies, such as the University Grants Commission (UGC) or the All India Council for Technical Education (AICTE).
- Academic Performance: Lenders may consider your previous academic performance, including the marks obtained in qualifying examinations, to determine your loan terms and eligibility.
- Credit Score: While some lenders may not emphasize credit scores for education loans, having a good credit score can strengthen your application and may lead to more favorable terms. A credit score of above 750 would be ideal to get the best loan terms available.
- Co-Applicant or Guarantor: In most cases, especially if the loan amount is large, education loans require a co-applicant or guarantor, often a parent, relative, or guardian, who shares the responsibility of loan repayment. The co-applicant or guarantor should have a stable source of income and a good credit history. Documents will have to be furnished accordingly.
- Collateral (if applicable): For higher loan amounts, lenders may require collateral, such as property, fixed deposits, or other assets. The collateral’s value should cover a certain percentage of the loan amount. You can pledge any of the following assets a collateral for an education loan:
- House or flat
- Non-agricultural land
- Fixed deposits
- Term insurance policy
- Government bonds
- Loan Amount: The loan amount should be within the maximum limit specified by the lender. Loan limits can vary among lenders and depend on factors like the course’s nature, location, and the institution’s reputation.
- Income of Co-Applicant: The co-applicant’s or guarantor’s income should be sufficient to cover the loan’s monthly installments comfortably. Lenders calculate the debt-to-income ratio to assess repayment capacity.
- Repayment Capacity: Lenders evaluate the applicant’s ability to repay the loan after completing the course. Some lenders may consider factors like the applicant’s employability prospects and expected income post-graduation.
Step 3: Choose Your Loan and Lender
Explore different lenders, including banks, non-banking financial companies (NBFCs), and government schemes, such as the Vidyalakshmi Education Loan portal. Compare interest rates, loan terms, processing fees, and repayment options. Government schemes may offer lower interest rates and extended repayment periods but may come with stricter restrictions on use.
|Lender||Loan Amount||Interest Rate (p.a.)||Tenure|
|SBI Bank||Up to Rs. 20 lakhs||9.15 -11.15%||Up to 15 years|
|HDFC Bank||Up to Rs. 150 lakhs||9.55% – 13.25%||Up to 15 years|
|ICICI Bank||Up to Rs. 1 crore||From 9.85%||Up to 12 years|
|Axis Bank||Rs. 50,000 to Rs. 75 lakh||6.50-14.70%||Up to 10 years|
|Bank of Baroda||Up to 1 crore||From 8.55%||Up to 15 years|
|Vidyalakshmi||Up to Rs. 4 lakhs||8.40%||15 years|
Step 4: Prepare the Paperwork
Prepare the necessary documents required for the loan application, which typically include:
- Proof of identity (Aadhaar card, passport, or voter ID).
- Proof of address (utility bills or rental agreement).
- Admission offer letter from the educational institution.
- Academic transcripts and certificates.
- Income proof of co-applicant or guarantor.
- Bank statements of co-applicant or guarantor.
- Income tax returns.
- Credit reports of both applicants.
- Collateral documents (if applicable).
- Passport-size photographs.
Ensure that you have both hard and soft copies of these documents.
Step 5: Calculate Loan Amount
Determine the total cost of education, including tuition fees, living expenses, travel costs, and any other relevant expenses. Subtract scholarships, grants, and personal savings to calculate the required loan amount. It’s advisable not to borrow more than what is necessary to avoid excessive debt.
You can always use the free Education Loan EMI Calculator by Finnable to estimate your monthly repayment amount, loan tenure, and interest rate you prefer.
Step 6: Select Your Co-Applicant or Guarantor
Most education loans require a co-applicant or guarantor, often a parent or guardian, who shares the responsibility of repayment. Ensure that your co-applicant or guarantor has a good credit history and a stable source of income.
Step 7: Complete the Loan Application
Fill out the loan application form of your chosen lender. Pay attention to accuracy and completeness, as any errors can delay the approval process. Some lenders offer online application options for added convenience.
Step 8: Loan Approval and Disbursement
Once your application is processed and approved, the lender will issue a sanction letter outlining the loan terms and conditions. After accepting the offer, the funds will be disbursed directly to the educational institution or to your account, depending on the lender’s policies.
Make sure you create a repayment plan that aligns with your post-graduation financial prospects. Most lenders offer a grace period, allowing you to start repaying the loan after completing your studies. Stay in touch with your lender throughout your course to address any concerns or changes in your circumstances.
As the thirst for higher education in India surges, education loans emerge as a lifeline for countless aspiring scholars. Wisely navigate the eligibility criteria to select the right lender. Once your loan is approved, funds will flow directly to your educational institution.
Crafting a robust post-graduation repayment plan is the ultimate step. Education loans not only bridge the financial chasm but also empower dreams, enabling you to grasp the transformative power of knowledge and envision a brighter tomorrow. By following these steps and being well-prepared, you too can secure the financial support needed to pursue your educational aspirations confidently.