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Education loan scheme – Eligibility, benefits & application process

Education loan scheme – Eligibility, benefits & application process

An education loan scheme helps students manage the cost of higher education in India or abroad. These loans usually cover tuition fees, living expenses, and other academic costs. Understanding the eligibility criteria, documents, and application process is important before applying. Choosing the right loan option can help students pursue their education goals with better financial planning.

Pursuing higher education is an important step in life, but it often comes with significant expenses. Tuition fees, hostel charges, study materials, and travel costs can make quality education difficult to afford for many families. To cover these expenses, several banks and financial institutions in India offer education loan schemes.

An education loan scheme in India allows students to pursue higher education in India or abroad without putting the entire financial burden on their parents. In this blog, you will learn about the education loan in detail, including its key features, benefits, eligibility criteria, and the application process. Continue reading.

Overview of education loan schemes in India

An education loan scheme in India is designed to help students finance the cost of higher education when their personal savings are insufficient. These loans can cover a range of academic expenses, including tuition fees, examination charges, hostel fees, books, and study materials. In some cases, the loan may also support travel and living expenses for students studying abroad.

An education loan can be secured or unsecured. A secured loan is one where the borrower provides collateral, such as property, fixed deposits, or other acceptable assets, as security. Unsecured loans, on the other hand, do not require any collateral and are generally offered for smaller loan amounts.

What are the different types of education loan schemes available?

Banks and financial institutions in India offer various types of education loan schemes to help students with different study plans and financial needs. The common types include:

  • Domestic education loans: These loans are designed for students who plan to pursue higher education within India. They usually cover tuition fees, hostel charges, books, and other academic expenses.
  • Overseas education loans: These loans are designed for students who wish to study abroad. In addition to tuition fees, accommodation, and other academic costs, these loans also cover travel and visa-related expenses.
  • Government-backed loans: The Government of India has introduced several education loan subsidy schemes for the overall development of eligible students. Common examples include the Vidya Lakshmi Scheme, the Padho Pradesh Scheme, and the Central Scheme of Interest Subsidy for Education Loan.

Can you use property as collateral for an education loan?

In some cases, lenders may ask for security or collateral to provide an education loan. This usually happens when the loan amount is high or if the course is perceived as risky. You can offer your real estate property, fixed deposit, or gold to avail of financing in such a situation.

When you take an education loan by providing your property as collateral, it is known as a loan against property. Offering collateral not only improves your chances of getting a loan but also helps you secure a lower interest rate.

What are the key features and benefits of a loan against property for education?

Taking a loan against property for education can offer several advantages for students planning higher studies. Since the loan is secured with an asset, lenders may offer a higher loan amount compared to unsecured options. Borrowers may also benefit from competitive interest rates and flexible repayment terms.

Other than these benefits, a loan against property for education allows students to get access to finances even if they fail to fulfill the lender’s eligibility criteria for an unsecured education loan.

Simple and hassle-free documentation

Many lenders follow a simple documentation process when offering a loan against property for education. Applicants generally need to submit identity proof, income details, academic documents, and property-related papers. Once these documents are verified, the loan application moves to the approval stage. Since the loan is secured, lenders do not worry about its repayment.

Higher loan eligibility and sanction amount

One of the major advantages of pledging property as collateral is the possibility of securing a higher loan amount. Since the loan is backed by a valuable asset, lenders may be more comfortable approving larger funding. This can help cover significant education expenses such as tuition fees, accommodation, travel, and other study-related costs comfortably.

Long and flexible repayment tenure

A loan against property for education often comes with a longer repayment tenure. You can choose to repay the amount in several years, which helps spread the financial burden over time. Some lenders may even offer a moratorium period before your regular EMIs begin. You can pay only the interest amount during this period.

Top-up loan and balance transfer facility

Many lenders provide the option of a top-up loan on a loan against property for education. It can come in handy should you need additional funds later for education-related expenses. You may also avail of the balance transfer facility to shift your education loan to another lender offering better repayment terms or a lower interest rate.

What are the documents required for an education loan scheme?

When you apply for a higher education loan scheme, lenders typically ask for a specific set of documents to check your eligibility and repayment capacity. The exact requirements may slightly vary from one lender to another, but the following documents are commonly required:

  • KYC documents: Identity and address proof such as Aadhaar card, PAN card, or passport.
  • Income proof: Bank statements, salary slips, or Income Tax Return (ITR).
  • Admission letter: A copy of the admission letter from a recognized university/college.
  • Course fee details: A detailed breakdown of the course fee and other expenses.
  • Property documents: Required for a loan against property for education.

What are the eligibility criteria for education loan scheme?

Several banks and financial institutions offer education loan schemes in India for pursuing graduation, post-graduation, and diploma courses. However, to apply for these schemes, both students and co-applicants must fulfill certain eligibility conditions.

  • The student should be an Indian citizen, aged between 18 and 35 years.
  • They must have secured admission to a recognized college or university through a valid admission process.
  • They must have completed at least 10+2 or a diploma.
  • The university must be listed, recognized, and accredited in India or abroad.
  • The co-applicant can be the student’s parent, sibling, guardian, or spouse.
  • Collateral or security may be required in some cases.

Note that these are generic criteria. The exact eligibility criteria may vary from one lending institution to another.

Step-by-step application process for the education loan scheme

You can apply for an education loan scheme online or offline. To apply offline, you can visit the lender’s branch and get in touch with a representative. For the online application, you can follow these steps:

  1. Go to the lender’s website and fill out an online loan application form.
  2. Upload the required documents.
  3. Wait for the lender to verify your loan application and submitted documents.
  4. Upon successful verification, the lender provides approval for the loan.
  5. Once approved, the loan amount is sanctioned and disbursed.

How to apply for an education loan against property?

You can apply for an education loan against property through a similar process. However, it includes a few additional steps. After submitting the loan application and the required documents, you must provide property-related papers to the lender.

The lender then carries out a property valuation to determine its market value. This helps them determine the loan amount that can be sanctioned. In addition, legal verification of the property documents is conducted to confirm clear ownership and ensure there are no disputes.

Once the property valuation and legal checks are completed, the lender can proceed with loan approval and disbursal. Before applying, it is wise to compare lenders, review the terms carefully, and choose an education loan scheme that suits your precise financial requirements.

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FAQs

What is an education loan scheme?

An education loan scheme is designed to help students pay for the expenses related to their higher education. It typically covers tuition fees, hostel charges, study materials, and travel costs, among other academic-related expenses. The loan is usually repaid in installments after the course is completed.

Who is eligible to apply for an education loan?

Students who are Indian citizens and have secured admission to a recognized college or university can usually apply for an education loan scheme. Most lenders also require a co-applicant, such as a parent or guardian, who has a stable income and agrees to support the loan repayment.  

Can I get an education loan without collateral?

Most lenders in India provide an education loan without collateral. In such cases, the loan is approved based on the student’s admission details and the co-applicant’s credit profile. However, larger loan amounts may still require collateral or security.

How does an education loan against property work?

An education loan against property is a secured loan where the borrower pledges a residential or commercial property as collateral. The lender evaluates the property’s market value and sanctions a loan amount based on that. The sanctioned amount can then be used to pay for tuition fees and other higher education expenses.

What documents are required for an education loan application?

To apply for an education loan, you may need to submit your basic KYC documents, including your PAN card, Aadhaar card, and/or Passport. Lenders may also ask for the admission letter from the institution, academic records of the student, and income proof of the co-applicant. Property documents are required if collateral is provided.

What is the maximum loan amount I can avail?

The maximum loan amount under an education loan scheme depends on the lender, the course, and the institution. For example, with lenders such as Tata Capital, you can get an education loan of up to Rs. 2 crore to pursue higher education in India or abroad.

What is the repayment tenure for an education loan?

The repayment tenure for an education loan scheme generally ranges from 5 to 15 years, depending on the lender and loan amount. Many lenders also provide a moratorium period, which allows students to begin repayment after completing their course or after securing employment.
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