These days, getting a college degree is a pretty expensive affair. An education loan can help you fund your kid’s educational aspirations if your savings fall short.
Unlike earlier times, getting a college degree these days is a pretty expensive affair. But, not to worry! An education loan can help you fund your kid’s educational aspirations, especially if your savings fall short. Plus, your kid can repay the loan once they start working, hence taking the burden off your shoulders. Ain’t it a great deal?
So, what’s the eligibility criteria for applying for an education loan? Does an education loan require collateral? Do you need co-applicants? Are all expenses covered? These are questions that you’re probably asking. Keep reading for the answers.
What does an education loan cover?
An education loan will cover tuition fees, exam and library fees, the cost of books, accommodation costs, travelling expenses for overseas study, equipment charges like the cost of a laptop, and any other education-related expenses.
- Any Indian national between the ages of 18 to 35 years who wish to pursue any graduate/postgraduate/diploma/technical course
- A co-applicant is mandatory for applying for an education loan for courses abroad. A co-applicant can be either the parents, spouse or sibling of the applicant
- For studies in India, confirmed admission in a college/university recognised by the UGC/Govt./AICTE is mandatory to get a loan. Sometimes, vocational training courses such as aviation and air-hostess training courses are also taken into account. For studies abroad, admission must be confirmed in a reputed college
Additional Reading: Education Loan – A Quick Overview
Quantum of finance
For studying within India, you can apply for a loan of up to Rs. 10 lakhs (can go up to 15 lakhs in certain cases) and for studying abroad, you can apply for an amount of up to Rs. 20 lakhs (can go up to Rs. 30 lakhs in certain cases). The final loan amount is at the sole discretion of the lending institution.
Education loans in India require some form of collateral security, depending on the chosen loan amount.
- Up to Rs. 4 lakhs loan: No collateral is required, but a co-applicant is needed
- Between Rs. 4 lakhs to Rs. 7.5 lakhs: A third-party guarantor is required
- Above Rs. 7.5 Lakhs: Tangible assets will be required as collateral
Examples of acceptable collateral security are:
- Fixed Deposits
- Life Insurance policies (sum assured should be at least 100% of the loan amount)
- Residential property (house/flat/apartment) documents
- Non-agricultural land documents
P.S. Usually parents are required to be joint borrowers for education loans.
Additional Reading: 5 Things To Know Before Taking An Education Loan
Documents required for education loans
- Admission letter from the concerned college/university
- A detailed break-up of the cost of the course
- Completed loan application and KYC documents as proof of identity and address
- Academic mark sheets
- PAN card of the student and parent/co-applicant
- IT Return documents of the co-applicant
- Salary slips and Form 16 of the co-applicant
- A brief statement of the assets and liabilities of the co-applicant
The parent or co-applicant shall be treated as the primary debtor, so it’s important that all their documents are in place.
Section 80E of the IT Act provides tax relief on the interest paid on the repayment of an education loan for a maximum of 8 years. This deduction is applicable to individuals paying the interest on behalf of self, spouse, children or any student for whom he/she is a legal guardian.
Additional Reading: 5 Popular Education Loans In India
Generally, education loans are disbursed within 15 days and the interest rate starts from 8.30%, depending upon the loan tenure, amount, institution, etc. The tenure varies between 5 to 7 years, though it can go up to 15 years for loans above Rs. 7.5 lakhs.
We hope that all this information about education loans come in handy. If you need any financial assistance, we’re always here to help you. Just click the link below to check out our range of products.