How to Choose the Right Education Loan for Your Needs

How to Choose the Right Education Loan for Your Needs: In today's time, it is the dream of every student to get a good education. But many times this dream remains unfulfilled due to financial constraints. In such a situation, Education Loan is a means that helps students to complete their studies. But before taking an education loan, it is very important to understand which loan will be right for you.

In this article, we will know in simple language what is an education loan, how it works, and how you can choose the best loan for yourself. Thousands of student searching on internet for low interest student loans, student loan consolidation, college loans for parents, student loans no cosigner and private school loans etc.

How to Choose the Right Education Loan for Your Needs:

What is an education loan?

An education loan is a type of loan that a bank or finance company gives to students to meet their study fees, books, hostel, travel and other expenses. It usually has to be repaid after the student completes his studies.

Why is an education loan necessary?

Studies should not be interrupted: Many students leave their studies due to financial problems. Education loan provides a solution to this problem.

Admission in a good college: Many times students want to get admission in a good college but the fees are high. In such a situation, education loan helps.

Low interest rate: The interest rate on education loan is usually low, especially when taken from the government or government bank.

Tax exemption: As per the rules of the Government of India, tax exemption is available on the amount of interest paid on the education loan.

Main types of education loans:

For studies in the country (Domestic Education Loan):

It is given to study in any recognized college, university, or institute within India.

For studies abroad (Abroad Education Loan):

It is taken for higher education abroad (like MBA, MS, etc.). It requires more money and some additional documents.

What things should be kept in mind before taking an education loan?

1. Recognition of the course and institute -

Loan is available only for those courses and colleges which are recognized by the government or UGC/AICTE. First check whether your course and college are valid or not.

2. Loan amount -

How much money do you need? It is important to know this. Apart from the fees, keep in mind the expenses of hostel, books, laptop, travel etc.

3. Interest rate:

Every bank or institution has a different interest rate. Some banks give loans at 8%, while some give up to 12%. The lower the interest rate, the better.

4. Margin money:

Many times banks do not pay the full fee. For example, if the fee is ₹ 10 lakh, then the bank will give ₹ 9 lakh and you will have to pay ₹ 1 lakh yourself. This is called margin money.

5. Repayment time limit:

Some banks ask to repay the loan in 5 years, while some give time of 10 to 15 years. After completion of studies, there is also a 'moratorium period' of 6 months to 1 year in which EMI does not have to be paid.

6. Security and guarantee:

If the loan amount is high (say, above ₹7.5 lakh), the bank may ask for mortgage of the property (house, land etc.). Smaller loans are usually available without security.

7. Co-signer or guarantor:

In most cases, a parent or guardian has to be the co-applicant. This means that if the student does not repay the loan, the bank can recover the amount from them.

Which bank should I take an education loan from?

Many government and private banks in India offer education loans. Below is information about some popular banks:

Bank Name Interest Rate (Approx.) Maximum Loan Amount Features

State Bank of India (SBI) 8.15% - 10.50% Up to ₹1.5 crore Long moratorium period

Punjab National Bank (PNB) 8.55% - 10.75% More than ₹10 lakh Separate scheme for studies abroad

Bank of Baroda 9% - 11% Up to ₹80 lakh Easy documentation process

HDFC Credila 11% - 13% Up to ₹40 lakh Loan possible without guarantor (in some cases)

ICICI Bank 10% - 12% Up to ₹50 lakh Quick approval

Note: Interest rates keep changing from time to time. Before applying, do check the bank's website or branch.

Documents required for education loan:

Student's identity and address proof (Aadhaar, Passport, Voter ID etc.)

Previous educational certificates (10th, 12th, graduation etc.)

Admission letter from college

Fee structure

Income Certificate

Bank statement

Co-signer's documents

How to apply for a loan?

Online: Most banks have the facility of online application on their website.

By visiting bank branch: You can also apply by visiting the nearest branch of the bank.

Vidyalakshmi Portal: Government of India's Vidyalakshmi Portal (https://www.vidyalakshmi.co.in) is a platform where you can apply for education loan in multiple banks from one place.

Ways to repay the loan:

Paying interest during studies: Some students start paying interest during studies so that the total amount is less.

EMI starts after completion of studies: In most loans, EMI starts after completion of studies.

Auto debit: The bank deducts EMI from your account every month.

Tips: How to choose the right education loan?

The interest rate should be low.

The repayment period should be long.

The moratorium period should be good.

The loan approval process should be easy.

Tax exemption benefits should be available.

The full amount should be available as per your requirement.

Conclusion:

Taking an education loan is a big decision. It not only helps you continue your studies, but also makes you self-reliant. But taking a loan without thinking is not right. Evaluate every option properly, keep the documents ready, and choose the bank or institution from which you get the best terms. We hope you get all point related to private student loan interest rates, grad school loans, the best student loans and current student loan rates etc. from this article.