Personal Loan For Students

Student loans are a boon for people who want to study but struggle with financial constraints. The concept of banks paying for your education while you study and then repaying when you start earning is a great boost for banks, as well as for your career. Almost all major banks in India offer loans to students. The quantum of loan depends on the collage and the course. The most significant advantage of a student loan is that it can be repaid a year after completion of the course or after securing a job, whichever is earlier.

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Personal Loan For Students

Student Loan Eligibility Criteria

To get a student loan from a bank or a financial institution, the applicant needs to fulfil some basic eligibility criteria. Listed below are the general eligibility criteria for a student loan:

• The applicant must be an Indian citizen
• The applicant must be in the age group of 16-35 years
• A co-applicant is required along with an applicant to avail a student loan.
• Collateral is required as security in case the loan amount is more than the specified limit.
• The co-applicant’s salary should meet the minimum salary criteria specified by the banks
• The applicant must secure admission in a college or course before applying for the loan.

Documentation Required for a Student Loan:

To avail an education loan, the applicant must submit a specific set of documents. The documents required for the loan are same for all banks.  The list below shows the documents that need to be submitted for a student loan:

• Proof of age: school certificate or birth certificate
• Proof of address: Aadhaar card or voter ID
• Identity proof: Passport or PAN or driving license
• Income proof of the co-applicant or guarantor
• Bank statement of the co-applicant if required
• Copy of the admission letter
• Guarantor’s form

Student Loan Interest Rates:

The rates of interest on student loans are slightly higher than home loans. Though the rates of interest vary across banks, they generally belong to a range of 11.75% to 14.75% per annum. The students who secure admission in prestigious institutes like IIT or IIM can avail the student loan at a relaxed interest rate. Certain public sector banks provide a lower interest rate for female applicants.

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Features and Benefits of Student Loans:

Listed below are some of the features of student loans in India:

• Education loan enables you to achieve career goals by paying for education expenses.
• Student loans can be obtained easily and do not have strict guidelines. This is a popular loan among students.
• Student loans are a great alternative vis-a-vis other types of loans like personal loans. The student loans offer interest rates that are lower than the personal loan rates and come with easier terms and conditions.
• The most significant feature of an education loan is that the student starts repaying the loan after the completion of the educational course. The student loan can be deferred till the time the applicant starts earning within a stipulated timeframe.
• The Student loans not only help the borrower manage the expenses of education, but also offer tax benefits. Interest paid towards education loans can be claimed for tax exemption under section 80E of the Income Tax Act.
• Existence of one education loan in a family might affect procurement of other education loans in the same family.
• The bank requires collateral to be submitted as security against the loan amount that is higher than the specified limit.  

Student Loan for Studying Abroad:

Education loan can not only be availed by students studying in India but can also be taken by the students who wish to pursue education from a college or university abroad. The money required for pursuing education in a foreign institution is much more than that required for completing the course in India.

For example a post graduation course in India is much more expensive than that in the U.S which can cost up to Rs 30 lakhs each year. An applicant who wishes to study abroad has to manage the money required to continue and complete the course. As education abroad is expensive and banks have a specified limit up to which the education loan can be sanctioned, the students require to either look for scholarships or take up part time jobs to manage the expenditure. The applicant requires insurance as it is compulsory for education loan for study overseas.

SEE ALSO: Why Should You Take A Personal Loan?

Student Loans for Studying in India:

In India, almost all financial institutions offer education loans to students. These loans can be availed for various professional courses, post graduation courses in the field of engineering, management or medicine. The loans can also be availed for vocational and part time courses as well. The interest rates are lowered for students securing admission in premier institutes like IIT, IIM or NIT.

Student Loan FAQs

What percentage of the student loan do I have to pay out of my own pocket?

The banks can finance up to 100% of the loan depending on the amount. Currently, for loan up to Rs 4 Lakh, there is no margin money required. For studies in India, 5% of the money has to be financed by the applicant. On the other hand, for studies overseas, the margin money increases to 15%. 

What expenses are covered as part of student loan?

The education loan covers the below mentioned expenses:

• Tuition fees and hostel charges
• Exam, library, and lab fees if applicable
• Any refundable caution money paid to the educational institute
• Cost of books, uniforms, and other essentials for completion of the course

Who all are eligible for education loan?

Any student who wishes to pursue education in India or abroad can avail the loan provided the student is above 16 years of age and a resident of India.

Is there an age criteria that is applicable to education loans?

The applicant must belong to the age group of 16-35 years to avail a student loan.

Is a co-applicant mandatory?

Yes, a co-applicant is mandatory. The co-applicant executes the loan as co-borrower who can either be a parent or sibling of the applicant.

Can I pre-pay my education loan?

Yes. Pre-closure of student loan is possible; however some banks levy a prepayment fee on pre-closure of loan.

What is the loan amount offered to students?

The amount of loan that can be taken depends on the cost of the course. It also depends on the country where the applicant is doing the course.

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