How to get Bank Education Loan? Bank Education Loan Interest Rates 2021, Processing Fee, Eligibility Criteria, Documents, Apply Process
Every child needs quality education to lead a successful life. Unfortunately, such education has a price to pay. Which not everyone who deserves it can afford. This is where education loan comes into play. Education loans are offered by banks and financial institutions to the meritorious students to help them pursue their dream course.
Bank Education Loan interest rates are very competitive for pursuing education in the best institutions in India and for studying abroad. The interest rates on education loans are floating, and keep changing with the change in MCLO. Bank education loan interest rates range between 7.15% and 10.30%.
What is Bank Education Loan?
An education loan is a loan or money obtained by an individual for pursuing higher studies in India or abroad. The student loan repayment starts after the completion of the education and a grace period of 6 months is given to the students to join or get a job.
The repayment amount will be determined by your choice of interest, you need to decide how you want to repay the loan. That is, if you want to start payment during the moratorium period itself or after the moratorium period. Moratorium period is the time of your education plus 6 months or 1 year given to get a job. It is only after this time that you are expected to repay the loan.
Interest starts accruing from the time the loan is credited to the account. Hence you have a huge amount to repay at the time of your graduation. Another option is that your parent or guardian can start repaying the loan during the moratorium period itself, where it is calculated as simple interest.
This way, at the time of graduation, your loan amount comes down considerably.
Types of Bank Education Loan
There are 4 types of education loans in India.
- Graduation Education Loan – These are given to the students who have completed their secondary education and want to pursue higher studies as a graduate. This can be done in India or abroad.
- Post Graduation Education Loan – These are education loans to individuals who wish to pursue post graduation after completing their graduation course from a reputed university/college. Here also the loan can be for studies in India or abroad.
- Parents taking education loan – This is the case where parents take loan for the purpose of education of their children. It is an unsecured loan and is required not only for undergraduate or postgraduate courses but also for primary and higher secondary courses.
- Career Growth Education Loan – These are loans given to youth who want to pursue courses or training, certification, which will benefit their career growth.
Documents required to apply for Bank Education Loan
- All required KYC documents, such as address proof and identity proof.
- Your college admit card.
- Fee structure of your course.
- Income documents like salary slips, bank statements and IT returns
- If you need to study in a foreign university, pre-admission approval of education loan can be obtained.
Margin Percentage of Education Loan
No margin will be required for education loan up to Rs.4 lakh. However, for education loans above Rs 4 lakh, there is a margin of 5% which is applicable for higher studies in India. The margin percentage for studies abroad is 15%.
Guarantee or Collateral for Education Loan
Your bank may ask for a third party guarantee or even a collateral, and this is based on the value of your loan. Collateral can be in the form of an insurance policy in favor of the bank. Your policy premium can be included in the education loan amount.
Key points to note about Bank Education Loan
- After taking the loan, you are eligible for income tax benefits under section 80(E).
- If you are a student, you will get a concessional interest rate for education loan.
Benefits of education loan which are applicable to all.
Any student who wants to study can apply for education loan. Even the economically backward sections of the society can avail education loan under government sponsored subsidy schemes like ‘Central Scheme to Provide Interest Subsidy’ (CSIS).
Applicable for all courses: Education loan can be used to pursue all types of courses – undergraduate, postgraduate, diploma courses, professional courses – whether in India or in foreign universities.
easily available: Education loans are widely and easily available. In fact, they are priority products across all banks as per RBI guidelines.
miscellaneous loan amount: Banks can offer loans anywhere between Rs 2 lakh to Rs 22 lakh for studies in India. Of course, the size of the loan depends on the course applied for. Loan amount up to Rs 20 lakh goes for studying abroad.
helps to complete education: The cost curve of education is rising with inflation and changing prices. Education loan becomes necessary to avoid hindrance in studies.
the gain: Education loan includes many additional benefits like caution deposit, library fee, building deposit, laboratory fee, tuition, examination fee, hostel fee, money to buy books, equipment and uniform, travel expenses for studies abroad etc.
Lower interest rate for womenLoans are generally offered to female students at lower interest rates.
Easy Repayment : Also, another great advantage of education loan is that there is no need to repay the loan amount immediately. The repayment period can be extended from 5 to 7 years after the completion of the course. This makes repayment easier.
Compare Top Bank Education Loan Offers 2021
|Name of Bank||Interest Rate (pa)||Loan Amount||Processing Fees|
|pnb||6.90% to 9.55%||Up to 15 Lakhs||1% of loan amount|
|SBI||6.85% to 8.65%||Up to Rs.1.5 crore||Rs.10,000 + taxes|
|axis||13.70% to 15.20%||Up to 75 Lakh||Nil to Rs.15,000 + taxes|
|Bank of Baroda||6.75% to 9.85%||Up to 4 Lakh and above||1% of loan amount up to Rs.10,000|
|HDFC||9.45% to 13.34%||Max Apr||Up to 1.5% of loan amount + taxes|
|Tata Capital||10.99% onwards||Up to 30 Lakh||Up to 2.75% of loan amount + taxes|
|Union Bank of India||8.80% to 10.05%||Need-based finance||Nil for Indian students 0.50% of loan amount + GST for NRI students|
|Bank of India||6.85% to 9.35%||For courses in India: Up to Rs.10 lakh For courses abroad: Up to Rs.20 lakh||Nil for courses in India Rs.5,000 + other fees for study abroad|
|Kotak Mahindra Bank||Up to 16%||For courses in India: Up to Rs.10 lakh For courses abroad: Up to Rs.20 lakh||Contact the bank|
|ICICI Bank||10.50% onwards||For courses in India: Rs. 50 lakhs For courses abroad: Rs. up to 1 crore||Contact the bank|
|Federal Bank||10.05% onwards||For courses in India: Up to Rs.10 lakh For courses abroad: Up to Rs.20 lakh||Contact the bank|
List of Expenses Covered in Bank Education Loan
Here’s what the loan amount will cover:
- tuition fee
- hostel fee
- Travel expenses money for students studying abroad
- insurance premium
- Cost of books/equipment/equipment/uniform
- Examination/Laboratory/Library Fee
- Cost of Computer/Laptop required to complete the course
- Fixed Deposit, Building Fund/Repayable Deposit, supported by Institution’s Bills/Receipts
- Any other expenses required to complete the course such as study tours / thesis / project work
Features and Benefits of Bank Education Loan
- Loans up to Rs.1 crore are available on Finance.
- Loan repayment period up to 15 years.
- Get education loan for studies in India and abroad.
- Some lenders offer loan disbursement before applying for a visa.
- Door-step service for collecting required documents.
- Children of bank employees enjoy preferential rates at many banks.
- Some banks offer concessional interest rates to girl students.
- Enjoy a moratorium period of up to 1 year after the completion of the course. During this period, you are not required to make payments on the loan.
- Enjoy tax benefits for up to 8 years on the interest paid.
Tax Benefit on Bank Education Loan
You will get tax deduction on the interest paid on your education loan under section 80E of the Income Tax Act, 1961. This benefit is given only to individual borrowers and for the purpose of higher education. The cut-off covers all fields of study in India and abroad. It includes vocational as well as regular courses.
Please note that the tax deduction is applicable only on the interest portion of the EMI and not on the principal amount. However, there is no maximum limit for claiming this benefit. To claim this benefit, you will need a certificate from your bank or financial institution separating the principal and interest portion of your EMI.
You can claim this benefit for 8 years from the year you started repayment or till the interest portion of your loan is repaid, whichever is earlier.
List of documents required for Bank Education Loan
Here is an indicative list of documents that most lenders ask for:
- Admission letter from educational institution
- Marksheet (Previous Education – School/college)
- age proof
- ID proof
- address proof
- signature proof
- Salary slip
- recent bank account statement
- ITR with Income Computation
- audited balance sheet
- recent bank statement
- Proof of Turnover (Service Tax Return / Sales Receipt)
- Filled application form with signature
- Latest passport size photograph
- Study Abroad Visa
Note: Documentation charges may be levied by the loan provider.
How to apply for Education Loan in Bank
There are several ways to apply for student loans:
how to apply online
This is the easiest and most convenient way to apply. There are two ways to apply online. The first is a direct application form which you will fill online, attach the required documents and submit the form.
The second is where you apply by providing all the requested details and the lender will get in touch with you to discuss the terms of the loan before going ahead with the application.
how to apply offline
Visit a branch of the bank: You can apply for the loan by visiting your nearest branch along with the required documents. Can discuss loan terms with a representative. You can fill the form and apply in person.
Call the Bank: You can either call the bank or request a call back by expressing your interest. You can then discuss the loan terms and proceed to apply.