What is Education Loan in India?

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Education plays a vital role in shaping an individual’s future and the overall development of our nation. However, with the rising costs of higher education, fulfilling your academic aspirations can sometimes seem like a distant dream. That’s where education loans come in, bridging the financial gap and empowering you to pursue your academic goals.

Let us understand Education loans.

What is an Education Loan?

An education loan is a type of financial aid designed to help students cover the costs of their education, such as:

• Tuition and Fees: This is the primary expense that an education loan can help cover. It includes the cost of attending classes, as well as any associated fees like lab fees or student activity fees.
• Living Expenses: Depending on the loan, it can also help cover living expenses such as rent, food, and transportation, especially if the student is living away from home while attending school.
• Books and Supplies: The cost of textbooks and other course materials can add up quickly, and an education loan can help cover these expenses as well.

Living expenses coverage under education loans lacks standardization across lenders. Typically, lenders set a cap on monthly living expenses as a proportion of the total loan amount. Therefore, it is advisable to thoroughly discuss the extent of living expenses coverage with your lender prior to finalizing the agreement.

Education loans are typically offered by banks, credit unions, and other financial institutions. They come with interest rates and repayment terms that vary depending on the lender, the borrower’s creditworthiness, and other factors. Typically, loan repayments are paused during the student’s time in college and may also be postponed for an extra six months after graduation, depending on the loan provider. This postponement is known as a grace period.

Personal Loan for Education!

A personal loan for education is a type of unsecured loan you can use to cover education expenses. Unlike traditional education loans, it doesn’t require collateral, meaning you don’t need to pledge any asset like a car or house to secure the loan. Here’s a breakdown of key features:

Uses of Personal Loans for Education:

1. More Flexible: Unlike education loans specifically designated for tuition, personal loans for education can also cover living expenses, books, and other education-related costs.

2. A Wider Range of Expenses: This flexibility can be helpful in situations where an education loan might not cover all your needs.

So, if you can get a personal loan and fund your education. Wondering who will be your right lender? Choose Credmudra for a personal loan for education. We will match you with the right lender and ensure a smooth disbursement process!

Also, Read: Marksheet Loan: Eligibility, Document & How To Apply

Exploring Education Loan Options:

1. Location-Based Education Financing

• Domestic Education Financing: Designed for students aiming to study within India, these loans are accessible upon gaining admission to an Indian educational institution and fulfilling the lender’s requirements.
• International Study Financing: For students aspiring to study abroad, these loans cover tuition, accommodation, and airfare, contingent upon meeting the specified eligibility criteria.

2. Collateral-Based Loans

• Asset-Secured Loans: Allows pledging of immovable properties (e.g., agricultural or residential land, houses) or financial assets (e.g., fixed deposits, gold, bonds, equity shares) to secure funds for education.
• Guaranteed Financing: A guarantee from a bank employee or a home bank can assist in obtaining an education loan, providing a layer of security for the lender.

3. Course-Specific Education Loan:

• Undergraduate Education Funding: Supports students in financing their undergraduate studies across various specializations, typically ranging from 3 to 4 years. Obtaining an undergraduate degree is a stepping stone towards securing employment.
• Graduate Education Funding: Geared towards graduates pursuing further education, these loans support 2-year postgraduate courses in India, facilitating deeper knowledge in a chosen field.
• Professional Advancement Loans: Tailored for working professionals seeking to enhance their skills through professional courses or training. These loans are ideal for those aiming to attend prestigious business or technical schools for career advancement.

What’s Covered in an Education Loan?

Here are 7 expenses that are typically covered in an Education loan.

1. Tuition and Institutional Fees: Covers the cost of tuition along with examination, library, and laboratory fees.

2. Global Study Ventures: Funds travel and passage expenses for overseas education.

3. Borrower Protection: Includes insurance premiums for student borrowers, where necessary.

4. Deposits and Funds: Supports caution deposits and building funds with receipts from institutions.

5. Educational Resources: Finances books, equipment, instruments, and uniforms.

6. Technology for Learning: Assists in purchasing computers essential for course completion.

7. Course-Related Expenses: Covers additional needs like study tours, project work, and thesis. Financial Aids Consideration: Takes into account scholarships or fee waivers available to the student.

Covered Courses in an Education Loan

1. Foundation and Advanced Learning: Includes graduation and post-graduation courses (professional/technical/diploma) recognized by UGC, IMC, AICTE, and other regulatory bodies.

2. Specialized Institutions: Encompasses courses offered by autonomous institutes such as IIM, IIT, IISc, and others in various disciplines.

3. Regulated Professional Courses: Covers degrees or diplomas in fields like pilot training and maritime studies approved by respective regulatory authorities.

4. Career-Oriented Programs: Supports job-oriented professional/technical courses at the graduate and postgraduate levels, including internationally recognized certifications like CIMA and CPA.

3 Eligibility Criteria for Education Loan

1. Loans are available for recognized undergraduate and postgraduate programs, PhDs, diplomas of at least six months, job-oriented, and technical/professional courses.

2. Eligible candidates must be enrolled or secure admission in accredited institutions, including government and professional institutions, as well as international colleges and universities.

3. For undergraduate courses, completion of 10+2 (12th grade) is required, and for postgraduate courses, a bachelor’s degree is necessary.

Also, Read: 50000 Loan on Aadhaar Card – Check Eligibility & Step to Apply

Required Documents for Education Loan

1. KYC documents. (Know your Customer)

2. Academic records: 10th, and 12th-grade mark sheets, graduation, and entrance exam results.

3. Admission confirmation letter.

4. Detailed fee structure.

5. Co-applicant’s KYC and proof of income, when applicable.

Depending on the lender, additional documents might be needed on a case-by-case basis. Now to the main question:

How to Apply for an Education Loan?

There are 5 basic steps you need to follow to apply for an Education Loan, which are:

1. Select a Bank and Loan Scheme: Choose your preferred bank and an education loan scheme that suits your needs.

2. Application: Either download the application form from the bank’s website or click on the ‘Apply Now’ option.

3. Submit Application: Complete the application form, attach the required documents, and submit.

4. Bank Review: The bank will review your documents, assess the chosen course, and evaluate any collateral provided.

5. Loan Approval and Disbursement: The bank will disburse the loan amount following approval.

An education loan can be a powerful tool for realizing your dreams of higher education. By planning carefully, researching thoroughly, and choosing the right loan, you can invest in your future without undue financial worries!

Do you have experience with education loans in India? Share your story in the comments below! If you have questions, let’s discuss them and help you make informed decisions.

Also, Read: I Need 30,000 Rupees Loan Urgently In a Day

FAQs:

1. What Defines An Education Loan?

An education loan represents a financial amount that is lent to individuals to fund expenses related to post-secondary or higher education. The purpose of such loans is to financially support the borrower by covering essential costs, including tuition fees, study materials, and living expenditures during their academic journey toward obtaining a degree.

2. What are the Criteria for Eligibility to Obtain an Education Loan?

A resident of India is eligible to apply for an education loan. The age of the applicant must be at least 18 years and not exceed 35 years at the time of application. Furthermore, eligibility requires that students have gained admission to a higher education program at accredited institutions, whether in India or overseas, through entrance examinations or merit-based selection processes.

3. How Challenging is it to Repay an Education Loan?

Repaying an education loan demands careful financial planning, as it involves preparing for a range of unpredictable events that can span more than ten years into the future.

4. Is it Possible to Secure an Education Loan of 20 Lakhs without Collateral?

Certain private banking institutions, including Axis, ICICI, and IDFC FIRST, may provide education loans up to 20 lakhs without the need for collateral, contingent upon the specific course being pursued and the eligibility criteria of the applicant.

5. Is it Feasible to obtain a Loan that Covers 100% of Educational Expenses?

Education loans are designed to offer comprehensive financial support, encompassing 100% of the costs associated with course fees, as well as living and travel expenses. They also come with added benefits such as tax deductions, competitive interest rates, and a grace period before repayment begins.