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Facts you need to know about Education Loan

Facts you need to know about Education Loan

With education prices sky-rocketing every year, funding higher education from your own pocket can leave a gaping hole in your savings. But, considering alternative college options due to a lack of funds should never be an option. Personal loans for students can help you get the education you deserve and fulfil your true potential. Before availing of a loan, it is essential that you know a few important things related to it.

Here are some student loan facts you should know before applying for one.

What is Education Loan?

If you’re wondering what is education loan, it is a type of financial support provided by banks and financial institutions to help students pay for academic expenses. Instead of paying everything upfront, the student can study now and repay later in instalments.

To be more specific, if you’re trying to understand what is education loan in India, it refers to a loan designed under Indian banking guidelines where students can study now and start repayment after completing their course. This usually includes a moratorium period (course duration plus 6 to 12 months) to ensure that repayment begins only when the student is financially stable.

Before applying, it is essential to know key education loan information so you are aware of what you’re agreeing to.

Types of Education Loans Available in India

  • Domestic Education Loan:

If you’re trying to understand what is education loan, this is the most basic type. It is offered for courses pursued within India, covering tuition fees, accommodation, books and other academic costs. The education loan conditions generally include confirmed admission to an Indian institution, co-applicant income proof and basic documentation.

  • Overseas Education Loan:

For students planning to study abroad, this category explains all about education loan in an international context. It covers travel, visa fees, tuition, living expenses and exam charges. The education loan information you must know here includes higher loan limits, stricter eligibility checks and credit evaluation. This is ideal for students who want to know the mechanism behind education loan when applying to foreign universities.

  • Secured (Collateral) Education Loan:

These loans require a financial asset like property, FD or insurance as security. This is most useful for those who need large loan amounts at lower interest rates. The education loan conditions involve asset valuation and legal verification, so the bank is assured of repayment. This type helps you understand all about education loan when collateral is involved.

  • Unsecured (Non-Collateral) Education Loan:

If you’re wondering what is education loan in India when you have no property is available, this is the best example. These loans are approved without collateral and are based on your academic profile, course reputation and co-applicant’s income. According to education loan information, interest rates can be higher and documentation stricter.

  • Government-Backed Education Loans:

These loans come with subsidies and benefits under schemes like Vidyalakshmi Portal and CSIS. If you need support to afford studies, this is where you learn all about education loan opportunities backed by government assistance. The education loan conditions depend on parental income limits, recognised courses and institution eligibility.

Who Can Apply for an Education Loan?

The student pursuing the degree is the main applicant for the loan, and hence, will be responsible for repaying the loan. A co-applicant is mandatory for full-time programs. Parents, spouses, or siblings can be co-applicants for the loan. If the student is incapable of making the loan repayments, the co-applicants will be responsible for repaying the loan.

What Does an Education Loan Cover?

Once you receive the admission letter from your desired college, you can get your loan amount approved. Personal loan not only cover your tuition, but also extra expenses such as hostel fees, cost of books, travel costs, and so on.

Education Loan Eligibility Criteria

The eligibility criteria for Tata Capital’s education loan are as follows:

  • Applicant must be an Indian national
  • Applicant must be between the age of 16-26 years
  • Should have a good past academic record
  • You or your parents should have a stable income
  • Should show security or present a guarantor. Your eligibility will also depend on the creditworthiness of your co-applicants

How Course and University Affect Loan Eligibility

Lenders want to ensure that borrowers have good employment prospects after finishing their degree so they can repay the loan. Thus, they will make sure that your course is accredited and your university has a high placement rate. All in all, lenders make sure that the course and university the applicant is studying at have a good reputation.

Documents Required for Applying Education Loan

The documents required for Tata Capital’s education loan are as follows:

  • Photo identity proof of student and parent. For eg – Aadhar card, voter ID, passport, etc.
  • Attested copies of school mark sheets and certificates
  • Admission letter from school/college you intend to study at
  • Salary slips from the past three months and ITR documents of the guarantor
  • Employment details (if employed)
  • Property documents if immovable property is offered as collateral
  • Income proof for the past six months

How to Apply for an Education Loan in India (Step-by-step Process)

If you’re planning to apply for funding and want clear education loan information before you begin, here’s a short guide using Tata Capital’s process as an example.

  • Check eligibility: Tata Capital assesses basic education loan conditions like Indian citizenship, confirmed admission to a recognised course (India or abroad), and a co-applicant with stable income and clean credit.
  • Review loan features: Before applying, understand education loan information such as interest rates, repayment tenure, moratorium, collateral vs non-collateral options, and coverage (tuition, accommodation, books, travel).
  • Prepare documents: Admission letter, fee structure, KYC documents, academic records, and co-applicant financial proofs; additional documents may be required for higher loan amounts.
  • Apply online: Visit Tata Capital’s education loan portal, fill the form, upload documents, and complete verification. Additional papers or collateral details may be requested, if necessary.
  • Sanction and disbursement: Once approved, a sanction letter is issued; funds are typically transferred directly to the institute.

The education loan process is largely similar across lenders, but always review each lender’s specific terms, eligibility criteria, and documentation rules before proceeding.

Tax Benefits on Education Loan in India

According to section 80E of the IT Act, the borrower is eligible to claim tax deduction equal to the interest amount. While the entire interest amount can be deducted from your taxable income, this is only allowed for a maximum of 8 years. Note that the principal amount repaid does not qualify for any kind of tax deduction.

Top Mistakes to Avoid When Taking an Education Loan

There are some common mistakes students and parents unintentionally make during loan planning. The most common of them all is not researching lenders and comparing options properly.

Some other common mistakes are:  

  • Failing to understand basic education loan information like processing charges, insurance add-ons, and prepayment rules results in unexpected expenses during the tenure.
  • Applying without checking lender-specific education loan conditions such as co-applicant income criteria or collateral requirements risks rejection or long delays.
  • Not reading the sanction letter thoroughly leads to confusion about repayment start date, EMI structure, and interest type (fixed or floating), all of which affect long-term cost.
  • Overlooking subsidy schemes and tax benefits, especially those relevant to what is education loan in India, causing you to miss financial relief
  • Assuming verbal commitments made by executives; only written terms in the agreement or sanction letter should be relied upon.
  • Not understanding all about education loan basics before signing, such as how collateral is evaluated or enforced, leaves applicants unprepared for worst-case scenarios.

Conclusion

Looking for education loans to finance your higher education? Look no further. Tata Capital offers competitive education loan interest rates starting at 10.99%.

So what are you waiting for? Click here to check out Tata Capital’s education loan EMI calculator and formulate a repayment plan best suited to your needs.

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FAQs

What is an education loan and how does it work in India?

If you’re trying to understand “What is education loan?”, an education loan is money you borrow that helps funds tuition, accommodation, and study costs. Banks pay institutions directly, interest accrues, and repayment starts after course completion plus a moratorium (study period + 6 to 12 months).

What are the eligibility criteria for education loan in India?

Eligibility requires Indian citizenship, confirmed admission to a recognised course, academic merit, a co-applicant with income, and clean credit history. Requirements vary by lender and loan amount, especially for unsecured loans.

What expenses are covered under an education loan?

If you want to know all about education loan covered expenses, the loan typically covers tuition fees, hostel charges, books, equipment, travel, exam fees, lab expenses, insurance, and living costs. Coverage depends on lender policies and whether the course is in India or abroad.

How do I apply for an education loan for medical studies?

Secure admission to an MCI/NMC-recognised medical programme, gather documents, apply online or at a branch, complete verification, and submit fee structure. Higher loan amounts may need collateral or strong co-applicant income.

Can I get an education loan without collateral in India?

Yes. Unsecured loans are available up to lender-specific limits, depending on course, institution ranking, academic profile, and co-applicant’s income. Interest rates are generally higher than secured loans.

Are there special schemes or subsidies for education loans for economically weaker students?

Yes. Central Sector Interest Subsidy (CSIS), state schemes, and Vidyalakshmi Portal options provide reduced or subsidised interest for eligible families, based on income thresholds and recognised institutions.

What are the main terms and conditions to check before taking an education loan?

The main education loan conditions you must check include interest rate type, moratorium rules, processing fees, collateral requirements, prepayment charges, EMI schedule, repayment tenure, subsidy eligibility, and conditions that trigger penalty or rate revision.

 

Is tax benefit on education loan interest available for medical students?

Yes. Section 80E of the Income Tax Act allows deduction on education loan interest for eligible medical courses. The benefit applies for up to eight years or until repayment completion.

When does the repayment of education loan start?

Repayment begins after the moratorium, which includes course duration plus 6 to 12 months. Interest may accrue during this period, depending on lender policy and whether subsidies apply.

Can NRIs or Indian students studying abroad get education loans from Indian banks?

Yes. NRIs and students studying abroad can apply if they meet eligibility criteria, have an Indian co-applicant, and course recognition. Approval depends on credit profile, course prospects, and documentation.

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