Education Loan

The standard and Quality of education has risen over the past decade. With the rise in this demand, the cost too has shot up tremendously. Be it studying in India or abroad, getting even a basic graduation degree from a reputed educational institution can cost up to Rs.3-4 lakhs for a 3 years course. Apart from investing in education funds for your child from a very stage, people often use other means such as Mutual Funds and Fixed Deposits. But often even these fall short specially so if the child goes abroad for further studies.

Education loan comes as a big boon to aspiring students who wish to continue higher studies or do professional courses. Most of the Public sector banks in India provide Education Loan to students.Says Gaurav Gaur, CEO and Founder,  mudrahome.com 

Eligibility – Students can borrow up to Rs 4 lakh without providing any security or margin. The amount of Rs 4 lakhs to Rs 7.5 lakhs can be availed against a third-party guarantee.

Age Eligibility. There is no specific age restriction for a student to be eligible for an education loan. Age of joint applier, the co-borrower or the guarantor should be minimum 21 years at the time of loan origination and maximum age at the time of loan maturity can be 70 years.

Important factor considered –

• Foremost, the academic background and qualifications of the student comes into the picture. The track record of marks, credits and achievements are considered.
• The details of the course for which the loan taken are looked into. Courses sought for should be accredited and worthy of studying. Placement after the completion and job prospects are important, so that the applicant can repay the loan.
• The institute or College where the course will be undertaken is also significant. The university, school or college should be recognized and have an excellent reputation.
• The bank will take into account the collateral offered and its value to asses whether or not the applicant should be provided the loan. The job profile and credibility of the co-borrowers whether parents, guardians or a third party as guarantors of the loan are also scrutinized.

Documents required for an Educational Loan:

• Filled up application form.
• Passport size photographs (2Nos).
• Graduation or Secondary School or High School Certificates and/or mark sheets.
• KYC documents which had valid ID, address, and age proof.
• Proofs for Signature.
• Income Proof of parents, guardian or the third party.

For loans without any collateral, the time may vary from 2 days to 2 weeks. The process usually takes 1 week. In India, for the loans for higher studies the typical loan process can be shorter or longer, based on the kind of institute you are heading to.

Types of courses covered under the loan

Loans can be taken for a full-time, part-time or vocational course and graduation or post graduation. It can be in any fields of engineering, management, medical, hotel management, architecture, etc.

Precautions which should be undertaken

While applying for a loan, one should also look out for bank charges such as those related to processing, pre-payment, late payment of EMIs, etc. Most lenders charge processing fee of around 0.15 percent of the loan amount.

Repayment

Usually the repayment starts once the course is completed. Some banks for repayment, offer a relaxation period of 6 months after securing a job or a year after the completion of studies.

The repayment time can be between 5 and 7 years, or even extended beyond that.

Benefits under Income-tax Act

Section 80E of the I-T Act allows for deduction on the interest paid on the repayment. This deduction is allowed only for the individuals paying interest on the loan for himself or any family member.