In 2023, around 1.3 million Indian students ventured into global education, a number anticipated to climb in the coming years, fueled by the pursuit of high-quality learning. Meeting the financial demands of this academic expedition relies on education loans, recognized as invaluable resources. This Abroadin blog post discusses the diverse education loans in India for global academic excellence.
In this guide:
- How do Education Loans Work for Indian Students?
- Location-Specific Education Loans in India
- Course-Specific Education Loans in India
- Education Loans Based on Collateral Types in India
- Some Education Loans in India for Students
- Important Considerations Before Applying for an Education Loan
- Conclusion
How do Education Loans Work for Indian Students?
In India, pursuing quality education is a common goal, yet the financial limitations for students and their families can be a significant hurdle, especially for higher education. It is where education loans step in as a practical solution.
Education loans in India come in two main categories: those backed by the government and those offered by private institutions.
Government loans often have lower interest rates; sometimes, the government may even help with the interest. On the other hand, private loans follow a more standard application process but may have slightly higher interest rates.
The benefits of education loans are gaining recognition, leading to an increasing number of students and parents opting for them. These loans empower individuals to overcome financial barriers and confidently pursue higher education.
Responding to the demand, financial institutions and the government are expanding their offerings, making education loans in India more accessible to a broader audience.
Let’s explore all types of education loans for Indian students to provide a comprehensive guide for navigating the landscape of education financing.
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Location-Specific Education Loans in India
As students pursue their academic journeys, some choose to remain within the country, while others venture abroad for their studies.
Depending on the geographical location of your chosen course, you’ll encounter two distinct types of education loans in India:
Domestic Education Loans in India
For those aspiring to study in an Indian institution, domestic education loans come into play. To secure this loan, you must reserve a spot in an institute and meet all the lender’s eligibility criteria for loan approval.
Overseas Education Loans in India
Students planning courses outside the country’s borders are eligible for overseas education loans. To qualify, you must satisfy each eligibility criterion the lender sets, and your application to a foreign institution must be accepted.
After completing your studies, whether you return to India or stay abroad, you can commence repayments as predetermined in the loan documents.
Course-Specific Education Loans in India
Loans for specific courses are readily available from banks, non-banking financial companies (NBFCs), and other lenders.
They are course-based education loans and cater to various introductory degree programs and professional courses. Let’s explore the diverse types of course-based education loans in India:
Undergraduate Education Loans
Undergraduate education loans are for those completing secondary education and aspiring to pursue an undergraduate degree.
These loans support courses typically spanning three to four years, offering financial assistance for tuition and related expenses.
Completing undergraduate studies opens avenues for multiple job opportunities and serves as a foundation for further academic pursuits.
Postgraduate Education Loans
Many students pursue postgraduate degrees or professional courses instead of or alongside employment after graduation.
For those seeking financial support for postgraduate studies, postgraduate education loans in India are available, regardless of the duration of the chosen course.
Education Loans for Career Development
Lenders extend their offerings to include career development loans, covering professional courses and training programs.
These loans are designed to assist students in enhancing their skills and improving employment prospects.
If you are considering joining career development courses at colleges, technical institutions, or trade schools, you can apply for this loan to support your educational path.
Education Loans Based on Collateral Types in India
Utilizing assets as security to secure a loan is common, and the same applies to funding education in all countries, including India.
Education loans can be obtained by providing collateral, increasing the likelihood of approval due to the secured nature of these loans.
Here are the available education loans in the market based on the type of collateral you can offer.
Loans against Property
Also known as mortgage loans, these loans allow you to use residential, industrial, or commercial property as collateral.
Whether it’s a house, flat, or piece of land, you can mortgage it to secure a loan for educational expenses. Most of the time, the property should be under your name.
Loans against Securities
Investments in equity, bonds, and debentures can serve as collateral for education loans. Present your investment portfolio as collateral to a lender and quickly secure a loan.
Loans against Deposits
Fixed, recurring, or gold deposits can be used as loan collateral. The interest accumulated in your deposit can be leveraged as security to obtain loans for various purposes, including education.
Third-Party Guarantee Loans
For those without tangible collateral, third-party guarantees can secure a loan. A person with a good credit score and a history of timely repayments can act as a guarantor.
It means the guarantor takes responsibility for any outstanding debt if the borrower fails to repay the loan on time. The guarantor could be anyone you know, including your parents.
Some Education Loans in India for Students
These are some examples of domestic education loans in India:
- Buddy4Study-Propelld Domestic Education Loan Program: This loan offers up to INR 10 lakh for undergraduate and postgraduate students enrolled or seeking enrollment in recognized Indian institutions. The interest rate ranges from 12% to 18%, with a 6 to 84-month tenure. Repayment starts immediately after the loan is disbursed.
- SBI Education Loan for Higher Studies: This loan offers up to INR 15 lakh for undergraduate and postgraduate students in recognized Indian institutions. The interest rate is 8.70% to 10.55%, with 5 to 7 years tenure. Repayment starts after a moratorium period of one year or 6 months after completion of studies, whichever is earlier.
- ICICI Bank Education Loan: It offers up to INR 20 lakh for undergraduate and postgraduate students in recognized Indian institutions. The interest rate is 7.05% to 8.25%, with a 5 to 7-year tenure. Repayment starts after a moratorium period of one year or 6 months after completion of studies, whichever is earlier.
- HDFC Bank Education Loan: This loan offers up to INR 30 lakh for undergraduate and postgraduate students enrolled in recognized Indian institutions. The interest rate is 6.95% to 9.25%, with 5 to 7 years tenure. Repayment starts after a moratorium period of one year or 6 months after completion of studies, whichever is earlier.
- Axis Bank Education Loan: This loan offers up to INR 15 lakh for undergraduate and postgraduate students enrolled in recognized Indian institutions. The interest rate is 6.90% to 9.25%, with 5 to 7 years tenure. Repayment starts after a moratorium period of one year or 6 months after completion of studies, whichever is earlier.
These are just a few examples, and many other domestic education loans are available in India. The best loan for you will depend on your individual needs and circumstances.
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Important Considerations Before Applying for an Education Loan
Now that you are familiar with the various types of education loans, it’s crucial to keep these critical points in mind before proceeding with your loan application:
- Eligibility for Indian Nationals: Education loans are exclusively available for Indian nationals. Ensure you meet this criterion before applying.
- Comprehensive Funding: Depending on your circumstances, the loan might cover the entire cost of your education, including tuition fees, books, uniforms, hostel fees, transportation, and even essential equipment like laptops or expenses related to student exchange programs.
- Grace Period for Repayment: After completing your course, a grace period or moratorium period of six months is typically granted before you start repaying the loan. Keep in mind that this period may vary among different lenders.
- Loan Tenure: The loan tenure can extend to even 10 years, providing flexible repayment management.
- Course Completion Requirement: To be eligible for the loan, completion of the previous course is often a prerequisite, regardless of the course for which you are applying.
- Institutional Acceptance: Securing admission to the college, university, or institution of your choice is essential for loan approval.
- Criteria Adherence: Meeting all criteria outlined by the lender is crucial. Ensure you fulfill the requirements to enhance your chances of loan approval.
- Tax Rebate Opportunities: You may be eligible for a tax rebate on the interest amount paid. However, please note that this rebate does not apply to payments made toward the principal amount.
Considering these points before planning on your education loan application journey will help you navigate the process more smoothly and make informed decisions about your financial support for academic pursuits.
Conclusion
Understanding education loans in India is like unlocking doors to your dreams. Whether picking a course or using something valuable as a backup, these loans are like keys to making education happen. It’s not just about money; it’s about saying yes to what you want to learn.
So, as you start this journey, remember that Abroadin is here to help you along the path. Do you have any questions? Just leave a comment.
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