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Education Loan

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Education Loan

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What is an education loan?

You borrow money to finance your higher education or college fees. Payments are often deferred while you are in college, and for a six-month grace period after graduation called moratorium period.

Many banks have special education loan schemes for meritorious and needy students. The fee for the course is normally disbursed to the college/institute directly by the bank.

While you apply for an education loan, the bank will verify the tenure of the course and determine its total cost. Every year, you are required to submit a form to the bank which gives the details of the money required, after which the bank directly disburses the loan to the college/ institute.

Why avail Education Loan?

Reduces Financial Burden

You can preserve your savings and still provide for the costly education of your children. You don't have to break your Fixed Deposits.

      

Low Interest

Banks offer education loans at lucrative interest rates. No collateral for education loans up to INR 7.5 Lakhs.

     

Easy Repayment

You don't have to repay the loan until you finish your studies. Repayment is after completion of the course, or getting a job.

 

Tax Benefits

You can claim a tax deduction on the interest portion of your educational loan. Tax deduction for a period of 8 years, after you start paying back the educational loan.

Eligibility criteria to avail an Education Loan

You should be an Indian citizen.
You should fall in the age bracket defined by the respective bank.
You need to apply to a recognized college/institution.
You need to apply for the loan with a co-applicant who has a regular source of income.
You need a minimum CIBIL score of 700 for the final sanction of your education loan.

Key factors to consider for Education Loan

What are the documents required to avail an education loan?

  • You need a loan application form and passport sized photographs.

  • Letter of admission received from the college/institution needs to be presented to the bank.

  • You need mark sheets starting from class 10th to the last qualifying exam you have cleared.

  • You need a declaration/affidavit to confirm no other loan has been availed.

  • You need an identity and an address proof.

  • The co borrower (Your Parents or the third party Guarantor) has to show proof of income (salary slips) as well as the income tax statements of the past 2 years.

 

Concepts & FAQ's Education Loan

What are Education Loans?

Many banks have special education loan schemes for meritorious and needy students. The fee for the course is normally disbursed to the college/institute directly by the bank. While applying for a loan, the bank will verify the tenure of the course and determine its total cost as applicable at that point of time. Every year, you are required to submit a form to the bank which gives the details of the money required, after which the bank directly disburses the loan to the college/ institute.

Although the bank may be in India, you can get your education loan amount in dollars for studies overseas; the amount is paid directly to the institution abroad. Banks charge a fee for the remittance.

Tax benefits : One can get tax benefits for education loans.

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Frequently Asked Questions

For what type of courses can educational loans be taken?

Educational loans can be taken to pursue a wide variety of courses, for example: School/graduation courses, like High School, B.Sc., B.Com, B.A., etc. Post-graduate/specialized courses, like M.Sc., M.A., M.Com, etc. Professional courses, like M.B.A., M.C.A., B.E., M.E., B.Tech, M.B.B.S., etc. Other courses, like computer courses, fashion designing, commercial pilot training, etc. Keep in mind, however, that, usually, the courses financed should be for durations of more than a year, i.e., 12 months.

What are the costs covered under educational loans?

Educational loans usually cover the costs of tuition fees, hostel fees, mess fee and examination fees. Some banks may also finance the cost of books, equipments and other instruments required by the student for that course. For studies abroad, banks may provide one-way air fare. But this needs to be checked with your individual bank.

What security does one needs to provide for the loan?

The security depends on the loan amount. It is quite possible that banks may not require security for a loan of up to Rs 4, 00,000, but would require it for amounts greater than that. These limits are usually in slabs that vary with banks. The usual securities that the banks generally take are National Savings Certificates (NSCs), bonds, gold, vehicle, house or property, etc. In addition to these, some banks might also require the applicant to have a life insurance policy equivalent to, or greater than, the loan amount.

What are the documents required for an educational loan?

The general documentation required by the banks for disbursing education loans is usually very simple. The most important among them is proof from the college/institute that the student has a confirmed admission there, an agreement with the students or the parents/guardians, and proof of residence. Proof of age is also important, considering that quite a few banks have a clause that they would not finance a student above a certain age limit. Also some documents are required to prove that the parents/guardians have a regular source of income, namely, salary statements, IT returns, etc. and lastly a resume of the student, clearly showing his past academic performances.

How is the disbursement made?

Disbursement of the educational loan is made directly to the institute/college to which the student has applied for admission. In the case of mess and hostel charges, the relevant amounts are given to the concerned authorities. In the case of air fare, which is also available for studies overseas, the amount is given directly to the airlines. Some banks do give the students themselves a certain amount on a monthly or quarterly basis for purchasing books, equipments and other related material associated with the course. This, again, depends on the discretion of the bank.

Can a minor avail an educational loan?

No, a minor cannot avail of an educational loan. But his parents/guardians who satisfy the eligibility criteria can do so. Banks assess the individual's repaying capacity at the time of disbursing the loan, and, hence, minors are ineligible for educational loans. To know whether you can qualify for an education Loan, call us on 080 67974000 and ask our experts!

How does one repay the education loan?

Is a prepayment of education loan possible? What are the charges?

Is there any Grace Period in repayment of education loans?

How can one get Tax benefits on education loans?

When are education loans NOT eligible for tax deduction?

 

Education Loan Articles

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Get Money to Send Children Abroad for Higher Education

16 October 2019, Wednesday    

To give your children a bright career, you might have to send them abroad. There’s no greater joy you can give your child than sending them to study in the US, UK, Germany or France. But, this costs a lot of money. So you got to get the finances ready. This is not an easy task. The cost of ....

Education Loan Scheme by Narendra Modi – Vidya Laxmi Portal

15 October 2019, Tuesday    

How Much Education Loan Can I Get From Vidya Lakshmi portal? Vidya Laxmi Portal is an online platform launched by the Finance Ministry of India in partnership with the Department of Higher Education, Indian Banks Association and Ministry of Human Resource Development. It is a platform through ....

How to Get Education Loan to Study Abroad?

19 September 2019, Thursday    

Studying abroad is a dream that comes with a heavy price tag. It is a life-changing decision that requires a huge financial back-up to be fulfilled. An Education Loans helps to bridge the gap between the total amount required and the shortfall. It is a way you can fund your education and pursue a ....

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Education Loan News

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Number of Indian students in the US up 3%: Report

Monday, November 18, 2019, 3:39 PM

The number of Indian students in the US has increased by around 3% over the previous year to 202,014, according to the 2019 Open Doors Report on IIE. While undergraduate student numbers at 24,813 showed an increase of 12.3% over 2018; the non-degree category increased marginally at 1.1% to 2,238; the biggest increase was in the optional practical training category at 41.9% to 84,630.

Come 2020, admissions to AIIMS, JIPMER will be through NEET

Friday, October 4, 2019, 5:46 PM

Admission to MBBS courses in medical colleges across the country including JIPMER and all the AIIMS will be through the common national entrance test NEET from 2020, Union Health Minister Harsh Vardhan announced on Friday. Currently, admissions to all medical colleges except AIIMS and JIPMER (Jawaharlal Institute of Post-Graduate Medical Education and Research) are done through the National Eligibility cum Entrance Test (NEET).
 

Karnataka produces second largest number of PhDs

Monday, September 30, 2019, 11:28 AM

Karnataka produces the second largest number of PhDs in the country 5,020 PhDs were awarded in 2018, of which 1,821 were for women, says the HRD ministry's All India Survey for Higher Education 2019. Tamil Nadu tops the list with 5,844 PhDs, and Uttar Pradesh is third with 3,996. The total number of students awarded PhD-level degrees in India last year was 40,813.

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Education Loan Videos

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Education Loan Education

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What is education loan?

Thursday, February 8, 2018, 6:53 AM

Quality education is a must for a complete and successful-life. For many, it is equivalent to graduating from a top institution. An education loan, therefore, plays a vital role in such a scenario by helping to bridge the gap between the shortfall and the required amount. It covers the basic course fee and other related-expenses such as (college) accommodation, exam and other miscellaneous charges.

Interest paid on education loan is tax deductible under Section 80E

Saturday, December 2, 2017, 12:22 PM

If you have taken an education loan for yourself, spouse or children, then the interest-paid on the loan qualify for tax benefit under Section 80E. The best thing here is that there is no upper limit on the amount of deduction. But the criteria is that the loan must have been taken from a financial-institution or approved charitable institution and for full-time higher education.

Retirement Rules: #6 Borrow for education, save for retirement

Saturday, May 13, 2017, 7:05 AM

In an effort to fulfil the needs of the child, parents sometimes dip into their retirement funds to pay for the child's education. This is risky because your retirement is going to be very different from that of the previous generations. You can borrow money for your children education, but it's very difficult to borrow money for retirement.

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