An education loan is a special type of loan designed to suit the needs of students. An education loan is the money borrowed to finance and manage the expenses related to higher education. The amount borrowed can be repaid after the completion of the course along with interest.
In India almost all financial institutions like banks, NBFCs and other lending institutions offer education loans to students pursuing courses in India and abroad. These loans can be availed for various professional courses, post graduation courses in the field of engineering, management or medical studies.
The loans can also be availed for vocational and part time courses as well. The interest rates of education loans are lower for students securing admission in premier institutes like IIT, IIM or NIT. This type of loan helps aspirants fulfill their educational commitments and career goals.
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To get an education loan approved, there are some basic eligibility criteria that must be followed. The eligibility criteria of education loan are as follows:
Availing an education loan is easy as compared to other loans as there is not much documentation or paperwork involved. To avail the education loan, banks require some documents to be submitted. This is a basic list of the documents required:
The education loans covers basic course fee along with other related expenditures mentioned below:
The banks can finance up to 100% of the course fees. However, the maximum loan differs across banks. Currently, the maximum amount of loan sanctioned for courses in India is 7 - 10 Lakhs where 5% of the required amount has to be financed by the applicant. On the other hand, for studies abroad, the maximum loan amount sanctioned by the banks is Rs 15 to 20 Lakh where required margin money increases to 15%.
The education loan has helped deserving students fulfill desires of pursuing higher studies in preferred institutes in India and abroad. The process of applying for an education loan is easy and the amount borrowed is repaid in easy EMIs after six months of employment or 1 year of course completion.
Though the rates of interest vary across banks, they generally are in the range of 11.75% to 14.75% per annum. The banks decide the interest rate based on the base lending rate. The students who secure admission in prestigious institutes like IIT or IIM get education loan at a relaxed interest rate. Certain public sector banks offer a lower interest rate to female applicants. Some financial institutions and private lenders offer interest rate that is based on their own base lending rates.
How much tax rebate can I get for repaying an education loan?
Tax benefits can be availed for education loans under Section 80E of the I-T act, that allow a deduction on the interest paid. The deduction is allowed only for individuals paying the interest for himself, spouse or children or for the student to whom you are a legal guardian. The deduction is allowed for a maximum of 8 years. The principal amount does not qualify for any tax deduction.
When do I start repayment of my education loan?
Educational loans come with the special benefit of repayment after the completion of the course. Some banks also offer a moratorium period to make the repayment process easier. The repayment tenure is generally 5-7 years. Throughout the period, the bank charges simple interest rate on the loan. The payment of simple interest during the course period lessens the EMI burden on the student.
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