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Education Loan Interest Rate In India

IndianMoney.com Research Team | Posted On Friday, February 08,2019, 02:42 PM

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Education Loan Interest Rate In India

 

 

What is Education loan?

Education loan is the best way to fund education-related expenditures, without disturbing the finances of your family. This type of loan helps bridge the gap between the required amount and the shortfall, helping you pursue and achieve educational goals.

It helps reduce the financial burden on families as education loan comes with a special benefit, where the repayment process starts after completion of the course.

The main borrower of the education loan is the student, but he must have a parent or guardian as co-borrower. An education loan can be availed for full time, part time and vocational courses. An education loan not only helps fund education but also helps you save on taxes and build a good credit score.

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Education Loan Interest Rate In India

Features and Benefits of Education Loans:

Both banks and NBFCs offer education loan to students. Education loan not only helps cover various expenses related to your education but also helps fulfill aspirations. The benefits provided by education loan are:

  • Education loan helps get quality education without disturbing the finances of your family.
  • Education loans have easier terms and conditions and offer lucrative interest rates.
  • One of the main benefits of availing education is that offers flexible repayment schedule. The repayment period starts 6 months after the completion of the course.
  • There is no penalty for pre-payment of education loan.
  • Education loan not only covers the basic course fee, but also other related expenditure like cost of books and equipment, lab fees and caution deposit, travel expenses and other expenses like study tour, projects and thesis.
  • Education loan also helps save taxes. Interest paid on education loan can be claimed as deduction under Section 80E of the Income Tax Act.
  • Student loans help in building good credit score for students, enhancing his/her creditworthiness and improving relations with banks, which makes it easier to avail loans in the future.

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Documentation Required When Applying for an Education Loan:

You have the basic list of the requisite documents that an applicant must submit along with the loan application:

  • Completed loan application form.
  • Documents of proof of age (self-attested).
  • ID proof and address proof.
  • Passport sized photo of the applicant and the guarantor.
  • Copies of highest educational qualification.
  • Proof of income (IT returns of parents/guarantor).
  • Six months bank statement (applicant / parent / guarantor).
  • Details of collateral security (if applicable).
  • Passport /visa-copy, airfare costs as established documents for studies abroad.

The above list is the basic documents required. Banks in their own capacity may request for more documentation and proof.

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Top Banks Offering Education Loans in India:

Listed below are the top 6 lending institutes offering education loan at best interest rate:

Banks/NBFCs

Min-max loans offered

Rate of interest

Punjab National Bank

Different types of loans are offered like PNB Kaushal, PNB Honhaar etc

8.55% to 10.45%

Canara Bank

loans offered are below 4 lakhs, up to 7.5 lakhs and above

6.60% to 10.40%

Axis Bank

Loans offered are from 4 lakhs to 7.5 lakhs and above

13.7% to 15%

SBI education loan

Loans offered are from 4 lakhs to 7.5 lakhs and above

10.25% to 10.50%

Avanse

For all loan types and amounts

10% to 16.5%

Credila

For all loan types and amounts

11.85% onwards

Education Loan Interest Rates:

Education loan is also known as student loan. This is an unsecured loan where the main borrower is the student. No collateral is required for availing an education loan.

However, parents, siblings or guardian will have to execute the loan as co-borrower. The bank uses the Marginal Cost of Funds based Lending Rate (MCLR), plus an additional spread to decide interest rate.

The rate of interest varies across lenders and also depends on the amount of loan sanctioned. Generally, banks offer lower interest rate of 6.60% a year for loans below Rs 4 lakhs. For loans between Rs 4 to 7.5 lakhs, the rate of interest offered is 8.50% up to 14.5%. For loans above 7.5 lakhs, the rate of interest offered by the banks is in the range of 10.30% to 16% a year.

How to calculate EMI for education Loans?

The rate of interest in education loan is floating in nature and the rate of interest is the prime factor in education loans. To calculate the monthly EMI, you have to use the Education Loan EMI Calculator Online. You have to select the loan amount, select the loan tenure and select the rate of interest offered by the bank. EMI will be displayed as soon as you give these inputs.

Educational Loan FAQs

How does the bank track my educational progress through the course period?

Yes, the bank asks the borrower to submit academic progress report periodically. This can be in the form of mark sheets or a letter from the institute which serves the purpose.

Does taking an education loan entitle me to any tax benefits?

Yes, education loan helps you save taxes as well. The interest paid on the education loan can be claimed as a deduction as per Section 80E of the Income Tax Act, 1961. However, the income tax benefit can only be claimed on interest part of the loan, the principal part does not qualify for it.

Is there any age restriction for education loan?

The applicant must be above the age of 18 years to apply for education loan. There is no restriction on the upper age.

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