Pursuing higher education can be a significant financial commitment, but the right type of education loan can ease the burden. Whether you're looking for a government-backed loan with lower interest rates or a private loan with flexible repayment options, understanding the available choices is crucial. The right loan can help fund your tuition, living expenses, and other academic costs, making your educational journey smoother.
What are Education Loans?
Higher education often comes with significant costs, and for many students, securing financial support is essential. An education loan serves as a financial aid option that helps students cover their tuition fees and other academic expenses. These loans enable students to pursue higher studies in India or abroad without financial constraints. Depending on the loan type, students may receive funding in the form of tuition fee coverage, scholarships, or financing options.
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What Expenses Do Education Loans Cover?
Education loans are designed to support students by covering a variety of academic expenses. Here are a few key details on the expenses covered by different types of education loan.
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Types of Education Loan in India
Pursuing higher education can be financially demanding, and many students rely on education loans to fund their academic aspirations. Various types of education loans are available in India, catering to different needs based on location, course type, and collateral security.
1. Education Loans Based on Location
Domestic Education Loans
These loans cater to students planning to continue their studies within India. They cover essential academic expenses such as tuition fees, accommodation, books, and other related costs. Domestic education loans usually offer lower interest rates as they are linked to the RBI’s repo rates, making repayment more manageable.
Overseas Education Loans
For students aspiring to study in foreign universities, overseas education loans provide financial assistance for tuition fees, travel, living expenses, and study materials. Since studying abroad is often more expensive, these loans may come with competitive education loan interest rates and flexible repayment plans. These loans are provided by banks and NBFCs, with collateral typically needed for larger loan amounts.
2. Education Loans Based on Collateral Security
Loan Against Deposits
Students or parents can avail of education loans by pledging fixed deposits or recurring deposits as security. Since these loans are backed by a financial asset, they may come with lower interest rates.
Loan Against Property
Some banks offer education loans against immovable assets like residential property, flats, or agricultural land. These loans typically allow higher loan amounts, making them ideal for students enrolling in premium institutions.
Loan Against Securities
Certain banks accept bonds, debentures, or shares as collateral for granting education loans. The loan amount depends on the value of the pledged security.
Third-Party Guarantee Loans
In cases where a student cannot provide collateral, banks may accept a third-party guarantee. A relative or a family friend can act as a guarantor to secure the loan.
3. Education Loans Based on Course Type
Undergraduate Education Loans
These loans help students finance their bachelor's degrees in various disciplines at recognised Indian and international universities. They generally cover tuition fees, hostel fees, and essential academic expenses, with repayment starting after course completion.
Postgraduate Education Loans
Postgraduate courses, including master's degrees and specialised professional programs, can be funded through these loans. They ensure students can focus on higher education without financial stress, covering tuition, living expenses, and project costs.
Career Development Loans
Designed for working professionals, career development loans help individuals upgrade their skills through certification courses, executive programs, or specialised training. These loans cater to those looking to advance in their careers by acquiring new expertise.
4. Loans for Parents
Some banks offer loans to parents to cover their children's education expenses. These loans help manage tuition fees, accommodation, and other related costs without burdening the student. Parents or guardians can take responsibility for repayment, ensuring financial stability for their children.
Many banks mandate collateral for loans exceeding a certain amount, particularly for overseas education. However, some banks and NBFCs offer education loans without collateral. Discover which banks provide collateral-free education loans for studying abroad.
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What Courses Are Covered Under Education Loans?
Most education loans support degree programs offered by recognised universities and institutions. Eligible courses include:
1. Undergraduate and Postgraduate Degrees
Engineering, medicine, management, law, arts, science, and commerce programs.
2. Professional and Technical Courses
Specialised programs in fields like finance, data science, artificial intelligence, and architecture.
3. Vocational and Skill-Based Training
Short-term certification programs, diploma courses, and job-oriented training sessions.
4. Doctoral and Research Studies
Ph.D. programs and research-based studies at reputed institutions.
5. International Education
Study programs at foreign universities cover tuition, accommodation, travel, and additional expenses.
6. Specialised Degree and Diploma Programs
Courses from reputed institutions like IIM, IIT, XLRI, NIFT, NID, ICWA, CA, CFA, etc.
Planning to pursue higher education abroad? Explore the range of SBI Education Loans for international studies, including interest rates and eligibility requirements!
Types of Education Loan: Key Benefits
Student loans offer crucial financial support for those aiming to further their education, both domestically and internationally. With adaptable repayment plans and attractive interest rates, these loans cover tuition, living expenses, and other academic costs, easing the financial burden. Below are some key benefits of choosing an education loan:
1. High Loan Amounts
Students pursuing education overseas can avail loans up to Rs. 1 crore, while those studying domestically can access up to Rs. 50 lakh.
2. Full Financial Coverage
100% financing is available under specific conditions.
3. Additional Expense Coverage
Includes student exchange programs, laptops, and study-related travel expenses.
4. Favorable Forex Rates
Preferential foreign exchange rates for international education payments.
5. Mandatory Co-Borrowers
Parents must be co-borrowers for most education loans.
6. Flexible Repayment Period
The repayment period extends up to 15 years for added flexibility.
7. Post-Graduation Moratorium
6-month to 1-year moratorium period after course completion.
8. Tax Benefits
Tax deductions on loan interest payments for up to 8 years under Section 80E of the Income Tax Act.
Before taking an education loan, it's essential to research the lending institution carefully. Explore education loans offered by NBFCs, including their distinct features and interest rates.
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Eligibility Criteria for Different Types of Education Loans
Securing an education loan requires meeting specific eligibility conditions. While requirements may vary across lenders, some fundamental factors determine a student's qualification for different types of education loans.
Essential Documents for Education Loan Approval
To process your education loan application, banks and financial institutions require specific documentation, including:
- Proof of identity and address (KYC documents).
- Academic records, including 10th, 12th, and graduation mark sheets, along with entrance exam scores.
- Official admission letters from the university or institution.
- Detailed fee structure provided by the college.
- Co-applicant details (if required), including KYC and proof of income.
- Additional documents may be requested based on lender requirements.
Key Factors Lenders Evaluate for Education Loan Approval
When applying for an education loan, banks and financial institutions assess various aspects to determine eligibility. Understanding these criteria can improve your chances of securing the best loan option. Whether opting for government-backed loans or private lenders, the approval process is influenced by the following factors:
1. Chosen Course & Institution
The reputation of the educational institute and the employability of the course play a significant role in approval.
2. Loan Amount Requirement
The total loan amount needed for tuition, living expenses, and other costs is carefully reviewed.
3. Academic Record
A strong academic history can positively impact the lender’s decision as it reflects a student’s potential.
4. Family’s Repayment Capability
Lenders assess the financial standing of the applicant's family to ensure smooth loan repayment.
5. Assets & Collateral (if applicable)
Depending on the type of education loan, secured loans may require collateral such as property or fixed deposits.
6. Annual Income of Co-Applicant
Most lenders consider the earnings of parents or guardians to gauge repayment feasibility.
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Maximising Tax Benefits on Education Loans
One of the biggest advantages of education loans is the ability to claim tax deductions under Section 80E of the Income Tax Act:
- The interest component of loan repayments qualifies for tax deductions, helping reduce the overall financial burden.
- There is no maximum cap on the loan amount eligible for tax deductions.
- This advantage remains valid for up to eight years from the beginning of loan repayment or until the complete interest amount is settled, whichever occurs first.
- A bank-issued interest certificate is required as proof to claim deductions.
How to Apply for an Education Loan?
Here’s a structured guide to applying for an education loan for students:
1. Research and Compare Loan Schemes
Start by exploring different types of education loan options offered by banks and financial institutions. Select a loan option that fits your academic goals and financial repayment ability.
2. Download the Application Form
Go to the lender’s official website, locate the education loan section, and access the application form. Certain lenders also offer a direct "Apply Now" feature for seamless online applications.
3. Fill in the Required Details & Attach Documents
Complete the loan application form and attach the necessary documents, such as academic certificates, admission letter, and fee structure provided by the institution.
4. Loan Assessment & Verification
Once submitted, the lender will evaluate your eligibility, review your documents, and assess factors like the course of study, institution, and collateral (if required).
5. Loan Disbursement
After approval, the loan amount is sanctioned and disbursed as per the lender’s policy. The financial aid is generally disbursed directly to the educational institution to cover tuition and related costs.
For those preferring offline applications, the process remains the same—visit a bank branch, submit the form along with the required documents, and proceed with verification.
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Education Loan Repayment & Grace Period
Repaying an education loan is structured to be student-friendly, ensuring a smooth transition from academics to employment.
1. Many lenders offer a grace period of 6 months to 1 year post-course completion, allowing students time to secure a job before starting EMI repayments.
2. Based on the borrower’s income and repayment capacity, banks provide flexible EMI options. If needed, students can negotiate the loan amount or tenure with the bank.
3. The maximum repayment tenure for most education loan schemes is 8 years, though this may vary by lender.
Planning repayments early ensures financial stability while benefiting from tax deductions on education loan interest under Section 80E of the Income Tax Act.
Best Banks and NBFCs in India Offering Different Types of Education Loans
A range of education loans is available from banks and NBFCs in India, catering to students pursuing studies both within the country and abroad. Below is a detailed comparison of financial institutions providing education loans with different interest rates, processing fees, and loan conditions.
If you're considering an SBI Education Loan for a premier institute, ensure your college is on the approved list. Explore the SBI Education Loan College List here.
Choosing the Right Type of Education Loan for Your Needs
Selecting the ideal education loan requires careful consideration of multiple factors, including your financial situation, repayment capacity, and study destination. Here’s how you can make the best decision:
1. Identify Your Study Destination
For Domestic Education
Public sector banks often offer lower interest rates and government-backed subsidies for students studying in India.
For International Education
Private banks and NBFCs provide high-value loans to cover tuition fees, living expenses, and additional costs like travel and insurance.
2. Evaluate Your Financial Needs
Low-Interest Options
Government banks generally have lower interest rates, but they may require collateral for higher amounts.
Quick Approval and Minimal Paperwork
NBFCs and private banks offer faster processing but often come with slightly higher interest rates.
3. Collateral vs. Non-Collateral Loans
Collateral-Based Loans
If you have assets to pledge, you can secure a lower interest rate and better repayment terms.
Unsecured Loans
These are best for students who don’t have collateral, but they may come with higher interest rates and shorter repayment periods.
4. Compare Interest Rates and Processing Fees
Always check the annual percentage rate (APR), processing fees, and additional charges before finalising a lender.
5. Look for Additional Benefits
Some lenders provide flexible repayment options, tax benefits, and moratorium periods to ease financial stress while studying.
Education loans help students finance their higher education in India and abroad. With different types of education loans available, it’s important to compare interest rates, repayment terms, and eligibility criteria before choosing one. The right loan can ease financial stress, allowing students to focus on their studies.
Understanding loan terms and repayment options helps students and their families plan better. A well-structured education loan covers key expenses and ensures a smooth repayment process, making quality education more accessible.
Why Propelld?
The Propelld education loan has the following main benefits.
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