Students are part of a dynamic community of millennials. They are not only involved into studies; we can see many of them founding start-ups, volunteering at NGOs, interning and partaking in thousand different activities. Moreover, students often have to stay away from homes for education.
And as everyone else, they need to meet their day to day expenses. There are Student Credit Cards which help them during small funds requirement or they might use mobile wallets for those purposes.
But what can they do about instances where they require a larger amount of money?
How can students get loans? This might be a relevant question that may be bugging many of you.
We aim to bring clarity on what options of loans can be available to students and how they can go about getting a loan.
Before getting into specifics of loans available to students, let us try and understand the basic eligibility criteria for availing any loan.
Be over 18 years of age
Require Proof of Identity and Residence & PAN
Have an income to support the loan
Have a Credit History
When it comes to students, we see that out of the 4 main criteria, they are able to check only one or two criteria. That is the age and proof of identity. But lenders also look at repaying capacity before lending any amount, which students would not have, since in majority of the cases they don’t have a job. So, what are the options available in that case?
As students do not earn, all loans that they can avail would be on the basis of a co-applicant or guarantor, which means that someone else (parents or siblings) stands guarantee on behalf of the student for repayment. There are also certain loans that are available on the basis of future earnings like education loan. However, these loans also require a co-applicant and guarantor and sometimes a collateral too.
Loans Available for Students
This is the most popular loan available for students. Any student in the age group of 18-35 (Or even higher on a case-to-case basis) desirous of pursuing education in India or abroad can avail an educational loan. The course which is aimed to be pursued needs to be an approved course by the appropriate agency.
As students do not have income or credit history, they are required to have co-applicants in the form of parents, siblings, or even spouse. This is the requirement for those individuals who are doing their basic graduation or post-graduation courses. However, for those individuals who are getting back into colleges after a period of working, a co-applicant may not be required if they have sufficient income/assets to back the loan.
Quantum and Loan to Course Fee Ratio
There is no strict upper limit set to the quantum of finance that can be availed. This is mainly decided based on the country of studies, field of education and employment prospects expected after the completion of the course. The loan to fee ratio is also decided on a case to case basis with instances of 100% finance also being made available.
Completed application form with photographs and signature
Proof of Address
Academic Documents: Marksheet/Certificate of 12th Exam Marksheet/Certificate of Subsequent Years of Education e.g. BE, B. Com, BSc, etc. Marksheet of Any Entrance Exam Taken e.g. CAT, CET, etc. (If applicable) GRE/GMAT/TOEFL/IELTS, etc. Marksheets (If applicable) Scholarship Documents (if applicable)
Proof of Admission
Income proof of co-applicant
Collateral security proof/documents
In addition, lenders also insist on a life insurance policy for the loan applicant.
Education Loans come with a moratorium period, unlike other loans which start repayment immediately after the loan is disbursed. The moratorium period for education loan extends till 1 year after the course completion or 6 months of employment post the course whichever is earlier. During this period, a simple interest is chargeable on the loan.
Income Tax Benefits
The primary applicant (student) and the Co-applicant (in case he/she is involved in repayment of the loan) are eligible for deduction for the amount paid as interest on educational loan in any particular year under Sec 80E of the Income Tax Act.
Personal Loans for Students
The reasons for need of credit could be many, which might not be covered under the purview of an educational loan as it is exclusively granted for the purpose of meeting educational needs. Or you might not be qualifying for an educational loan due to some reason. For such occasions, certain banks like HDFC Bank have come up with Personal Loans for students which could be used for purposes related to education too.
The features of the loan are:
Set at an Upper Limit of Rs 40 lakhs*
Flexible tenure options between 12-60 months
However, you won't be able to claim the Income Tax benefits or avail a moratorium on these personal loans. They are considered like any other normal personal loan. The rate of interest charged is also higher than an educational loan which is a part of priority sector lending.
Loans from Fintech Lenders for Online Courses
You need not always attend a regular college to get a qualification. Since practically everything gets done over the internet, learning is also possible. There are a number of courses online from reputed universities and institutes all over available as Massive Online Open Courses (MOOC). Some of these courses may require a payment of anywhere between Rs 5000- Rs 50000. Though these may seem like small amounts, it may be difficult for a student to come up with the amount.
Students can now avail loans from fintech lenders like SlicePay, etc. to fund for fees at all leading MOOC providers like Udacity, Coursera, Edx, Manipal, and Alison. The fintech lenders also have a tie-up with Byjus Learning for payment for their courses. Online coaching for IELTS, SAT, GMAT, etc. can also be paid by their loans. Their services are available in certain cities only for now.
* This figure is only HDFC Bank and may differ among banks.