Parents strive to provide quality education to their children as it is deemed essential for a successful life. But the cost of education is ever-increasing and that further increases as a student apply for a reputed institution. Not every parent can afford these expenses and may have to rely on an education loan to make sure their wards can complete their studies. These loans also called student loans and are available to Indian citizens at low-interest rates and with payment flexibility. They can start repayments after a set period of time. For example, after completion of course. The education loans are unsecured loans or secured and can be used to cover education expenses like tuition fees, hostel fees, transportation, books, etc.
Types Of Education Loans in India
Education loans or student loans can fund many types of education programs. Broadly they are categorized as
Domestic education loans: These are loans that are meant for students who like to pursue an education in Indian educational institutions. There are many eligibility criteria that the lenders will have and the loan is approved only if the applicant has got admission to an institute that meets the lenders’ requirements.
Study abroad education loans: These loans are intended to help students pursue their education abroad. Like the domestic education loans, the applicant should have secured a seat in an institute that is in the lender’s list of eligible institutions for the loan approval.
Financial institutions offer loans based on the course type the borrower chooses. It can be for completing their basic degree or to study in prestigious institutions like IITs and IIMs.
Undergraduate education loans: These loans are offered to provide financial support to pursue and complete an undergraduate degree program. The undergraduate program can be a three or four-year course which will help the individual with ample job opportunities. The applicant should have completed or are pursuing secondary education to apply for this loan.
Graduate student loans: These loans can be availed by applicants who like to continue their education and obtain advanced degrees in colleges within the country. It is for a student who plans to get a postgraduate degree or complete any other professional course. The applicant should have completed the undergraduate course to apply for this loan.
Career education loans: Many banks and other financial institutions offers career education loans that pay for training and courses that help with career development or to become eligible for jobs. An applicant planning to attend career-oriented programs at colleges in India and technical and trade schools can apply for this loan.
Loans based on collateral types
While availing a secured loan there needs to be collateral as a guarantee that the loan will be repaid. Some of the loan types are
Loan against the property: An immovable asset like land agricultural land/residential land/ flat/house, etc has to be pledged to the bank
Loan against deposits: Loan can be availed against fixed deposits/recurring deposits or gold deposits
Loans against securities: Bonds/debentures/equity shares can be used as collateral
Third-party guarantee: A certificate of guarantee from an employee or a home bank can help get loans.
Additional Reading: State Bank Of India Education Loan
Loans for parents: Parents try to give the best possible education for their children but due to the cost of education rising, it has become difficult for the parents. To help such people some banks provide education loans for parents which can fund even up to 100% of the cost of education. It is an unsecured loan and can be used for expenses related to a child’s education like transport, books, tuition fees, etc. Not only parents but even relatives can use this facility.
College parent loans: These are loans availed to cover educational expenses like tuition fees, books, etc. These unsecured loans need no collateral but have to be co-signed by parents if the applicant is working and studying.
Repayment Of Education Loans in India
Education loans not only help to pay the academic fees but also its related expenses. Like all other loans, these loans also have payment terms where interest has to be paid on the principal amount. The start of repayment of these depends on the type of loan availed but when it starts it will be paid as EMIs for the tenure agreed.
Contrary to popular misconception, education loans are not just limited to studying abroad for higher education it can also be used for pursuing professional courses after completing 10th and 12th standard.