Higher education is getting costlier everywhere. Not all students can arrange funds on their own for higher education, especially when they are pursuing studies in reputed institutions. And the cost jumps when you go abroad to complete your education as you pay the college fee in foreign currency and take care of your accommodation, travel, food and other requirements.
An education loan is an excellent solution for students who have achieved distinctions but cannot manage sufficient finances to achieve their education and career goals. It is monetary assistance given to deserving students to meet the expenses of their studies. The student loan mostly covers the overall cost of education and gives a repayment holiday of a few months to help students obtain a job before they start paying back their education loans.
The repayment typically begins 6-12 months after you complete your study. However, this moratorium period may differ from lender to lender. An education loan helps parents continue with their financial goals without hampering existing savings to arrange funds for their children’s studies. Also, students get sufficient time to pay back the loan when they start earning.
Nowadays, it is quick and easy to get an education loan. You can apply online or offline by visiting the nearest branch of your preferred bank. It is also advisable to do some due diligence on the interest rates and tenures offered by different banks. Compare multiple tenures for the different loan amounts and decide on the funds based on your requirement.
You must thoroughly go through the terms and conditions of the loan and get clarity of all your doubts before applying for the loan. It is a long-term financial commitment, and you should not have any confusion related to anything when you apply for the loan. Experts often suggest applying for a loan at a bank where you have an existing relationship, but there is no harm in checking other options if you are getting a better deal.
The repayment period is often up to 15 years after the course period, plus the moratorium or repayment holiday if applicable on your loan. Some banks will not charge you any processing fee for a specific loan amount, but a higher loan may attract charges. Besides your parent/parents being co-borrowers, banks won’t take any collateral security or third-party guarantee for a loan up to Rs 7.5 lakh. However, banks may ask for tangible collateral security if the loan amount exceeds Rs 7.5 lakh. You must check these terms and conditions as the minimum, and the maximum amount generally varies between lenders, according to Bankbazaar.
One of the benefits of getting an education loan is that the interest on your loan is eligible for a tax rebate under Section 80E of the Income Tax Act 1961. However, the tax deduction applies to the interest portion of the EMI, not the principle. Remember to pay your EMIs on time and avoid defaulting on the loan. It may hamper parents’ credit scores and spoil students’ financial track records.
The table below will help you compare the interest rates on education loans for Rs 20 lakh for the 7-year loan tenure. It also gives you EMIs you will have to pay for the loan. You can check and decide based on your requirement.
Interest Rates & EMI on Education Loan
Compiled by BankBazaar.com
Note: Interest rate on Education Loan for all listed (BSE) Public & Pvt Banks considered for data compilation; Banks for which data is not available on their website are not considered. Data collected from respective bank’s websiteas on 21 June 2022. Banks are listed in ascending order on the basis of interest rate i.e. bank offering lowest interest rate on education loan (irrespective of loan amount and tenure) is placed at top and highest at the bottom. EMI is calculated on the basis of interest rate mentioned in the table for Rs 20 lakh loan with a tenure of 7 years (processing and other charges are assumed to be zero for EMI calculation).