Student Loan - Key points to know about education loan

Student Loan - Key points to know about education loan

admin | 2021-05-05
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The second wave of the Covid-19 pandemic has aggravated the challenges for many. Even young people are facing challenges when it comes to planning for their higher education. One of the most common ways to bridge any funding deficit for education is to take a loan. However, before applying for an education loan, you should be aware of a few key points, including its eligibility criteria, tax implication, etc.

Fulfilling eligibility criteria
If you are below 18 or don’t have a source of income, you can apply for an education loan with your parents or siblings as co-applicants. There is no collateral requirement for education loans up to Rs 4 lakh. For a loan amount of above Rs 4 lakh and up to Rs 7.5 lakh, the bank may ask for collateral if the income of the co-applicant is insufficient. For loan amounts above Rs 7.5 lakh, banks usually require a co-applicant and adequate tangible collateral security.

Before applying for an education loan, the student also needs to have a confirmation letter for admission in a recognised college as per UGC, AICTE, governments, etc. A loan is also allowed for admission in premier autonomous colleges such as IITs, IIMs, etc. Education loans are available for both undergraduate and post-graduate courses. You can also get an education loan for admission in a foreign college.

Education loan covers expenses such as fees or expenses for college/school, hostel accommodation, examination, libraries, laboratories, books, uniforms, purchase of computers, caution money deposit up to a defined limit, travel, two-wheeler purchase up to a specified limit, or other costs essential for the course.

How much loan to apply for
The upper limit of an education loan may vary depending on the type of course or college and also the borrower’s eligibility. For example, banks may allow a loan up to Rs 30 lakh for an MBA course in India, whereas it may allow a loan up to Rs 80 lakh or more for medical courses. Some banks allow a loan to the extent of 100% value of the tangible collateral security. Now the question arises, how much loan amount should you apply for?

The answer is not that simple. You should apply for a loan as per your current needs, future earning probability and collateral security availability. You may want to avoid taking a higher loan amount if you have a sufficient amount to pay from your own sources—this would help you save a lot in interest repayment. You may also avoid taking a loan for admission in a college where the fee is very high and the average salary on placement is very low—it could make it difficult for you to repay the loan after completing the course.

Banks/NBFC	Loan Amount	Rate of Interest
Axis Bank	Up to Rs. 4 Lakhs	15.20%
	Loans greater than Rs. 4 Lakhs and upto Rs. 7.5 Lakhs	14.70%
	Loans greater than Rs. 7.5 Lakhs	13.70%
Bank of Baroda	For all loan types and amounts	8.50% onwards
Canara Bank	For Vidhya Turant Loan Scheme	6.60%
	Up to Rs. 4 Lakhs	10.40%
	Rs. 4 Lakhs to Rs. 7.50 Lakhs	10.40%
	Loans above Rs. 7.50 lakhs	10.20%
	IBA´s Model Loan scheme for Vocational Education & Training	9.90%
HDFC Bank	Minimum APR	9.00%
	Maximum APR	13.86%
	Average APR	11.57%
Kotak Mahindra Bank	For all loan types and amounts	11.5% to 24%
Punjab National Bank	PNB Kaushal	8.55% onwards
	PNB Saraswati/Udaan	10.30% onwards
	PNB Pratibha (for admission to IITs , IIMs and XLRI Jamshedpur)	8.45% onwards
	PNB Pratibha (for admission to other colleges)	8.55% onwards
PNB Honhaar	10.45%
State Bank of India	Up to Rs. 7.5 Lakhs	10.25%
	Above Rs. 7.5 Lakhs	10.50%
Avanse	For all loan types and amounts	10% to 16.50%
Credila	For all loan types and amounts	11.85% onwards

 

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