Education is the one area that many people, especially Indians, are willing to spend on. Earning a good education is seen as one of the chief aspirations of millions, if not a billion, Indians and it is the one investment that an overwhelming majority of Indian families will agree on! However, a quality education, whether in India or overseas, can also be quite expensive and an education loan is one way of managing the cost.
Features of Education Loans in India
Eligibility: Most banks in India offer education loans to students for study either within the country or abroad. You can avail of a loan for pursuing undergraduate, graduate, vocational or even certificate courses. Any student, typically between ages 16-35, can apply for a loan.
Amount: The loan amount can vary depending on the cost of the education.
Interest rate: The interest rate also varies between banks and can typically range between 9-15%. There is a moratorium on the interest payment – usually between 6 months after you get a job to one year after completion of the course, whichever is earlier. The EMI is calculated once this moratorium period is over and the repayment starts. Female applicants can get a discount on the loan at some banks.
Guarantor: If you are planning to study abroad, then a co-applicant on your loan is mandatory, and it has to be an immediate family member. Some banks may ask for third party security as well. However, the good news is that many banks offer unsecured (without security) loans for up to Rs 7.5 lakhs. In some cases, you might need to offer additional security like an LIC policy or a fixed deposit with the bank for availing of the full loan amount.
Tax benefit: You can get a tax benefit under Section 80E of the Income Tax Act of India.
Some of the documents required when submitting the application form include attested mark sheets, proof of admission, details of expenditure, bank statements of the past six months, photographs, any scholarship offers and ID and address proof.
Central Scheme for Interest Subsidy
The Central Government has a scheme to pay the interest during the moratorium period for students from economically weaker Sections (gross annual family income of up to Rs 4.5 lakhs) availing of loans for technical or professional courses. Applicants must have an income certificate from the certifying authority to be eligible for this scheme.
How to apply for an Education Loan
Many banks will allow you to download the application form from their website or you can collect it at the branch. Once you decide on the best loan option, you can visit the branch to meet with a representative to get further details and submit the application with all the requisite documentation.