As the costs of higher education continue to rise, education loans are becoming a common financing option for students and parents. By securing the right education loan, you can invest in your future by accessing quality education. However, there are different types of education loans and the one you select can impact everything from the interest rates to repayment flexibility. With options like secured and unsecured loans, how do you decide the one that fits your needs the best?
This article will help you choose the right type of education loan for your needs so you can pursue your dreams without financial constraints.
What is an education loan?
Education loans are a form of monetary assistance provided by financial institutions to help you fund academic programs. You can take an education loan to pursue higher education in an institution located in your own or a foreign country. These loans cover the costs related to pursuing undergraduate, graduate or professional degree programs and empower you to realise your academic goals.
What are the different types of education loans?
In India, the two primary types of education loans offered are secured and unsecured loans, differentiated by their requirement or lack of collateral. Below is a breakdown of how these two types of education loans work:
1. Secured loans: A secured education loan requires the borrower to pledge collateral to secure the loan amount. Common types of collateral include real estate, vehicles, securities, inventory, equipment, and personal property. When applying for this type of education loan, the lender will evaluate the collateral pledged and determine its market value. If the borrower fails to repay the loan as agreed, the lender can seize the collateral in order to recover the loan amount. The main benefit of a secured loan is that it can help the borrower secure a higher loan amount, as opposed to an unsecured loan.
2. Unsecured loans: An unsecured loan is a type of loan that does not require the borrower to pledge any collateral. With unsecured loans, the lender relies entirely on the borrower's creditworthiness and ability to repay the loan amount. The main advantage of unsecured loans is convenience. There are fewer requirements compared to secured loans, making applications quicker and documentation simpler. Borrowers also avoid putting valuable assets at risk with this type of loan.
What are the benefits of an education loan?
An education loan offers numerous benefits, allowing you to enrol in quality education programs.
Versatile usage
Education loans make quality academic programs accessible regardless of a student's financial background. From tuition fees and accommodation to travel and stationery, these loans can be used for multiple purposes crucial to helping students pursue higher education.
Flexible repayment
The repayment of education loans usually begins after the course completion. This means students can focus on academics without worrying about immediate repayment. Moreover, financial institutions offer a grace or a moratorium period before the repayment of an education loan starts. This period allows students to search for a job after the completion of their study programme and before the first EMI of their loan, making it easier to manage finances.
Different loan types
Financial institutions today offer students all types of education loans, from secured to unsecured. This helps borrowers choose the type of loan that fits their needs the best. Even if a student is not able to pledge collateral to secure funding, they can choose an unsecured loan option and get access to timely financial assistance.
Tax benefits
With an education loan, students can not only finance their studies but also save tax. Section 80E of the Income Tax Act provides tax deductions on the interest paid on an education loan in a financial. While there is no upper limit on this amount, the tax benefit is available only on the interest paid, not the principal part of the loan.
Smooth application process
The application for student loans involves straightforward documentation requirements. Additionally, many lenders today offer digital application processes for a quick and smooth experience.
How to apply for an education loan
The education loan application process is simple and convenient:
1. Submit your personal details online through the lender's website or offline by filling out an application form.
2. Next, submit the required documents to the chosen financial institution.
3. The lender will then verify all submitted documents for authenticity.
4. After verification, the loan will be approved and the requested amount will be sanctioned.
5. Finally, the loan amount is disbursed directly into the bank account.
Documents required for an education loan
Below are the documents to be submitted for an education loan:
1. Basic documentation
- Identity proof (Driver's License, Voter ID, Aadhar Card, PAN Card)
- Age proof (Birth certificate, 10th standard certificate)
- Address proof (Aadhar card, Voter ID, electricity bill, rent agreement)
- Photographs (2 passport-sized photographs)
2. Academic documents
- 10th and 12th standard’s marksheets
- Undergraduate degree certificates and marksheets (for postgraduate loans)
- Admission offer letter from the chosen educational institution
- Chosen educational institution’s fee structure
3. Financial documents
- Last 3 months' salary slips
- Form 16 (the last 2 years)
- Income Tax Returns (the last 3 years)
- 6 Months Bank Statement
- Business proof documents (if self-employed)
Apply for easy education loans at Tata Capital
Education loans have a crucial role to play in making quality education accessible to students across backgrounds. They allow you to pursue your academic aspirations without financial constraints. You can opt for a secured or unsecured education loan for abroad or in India, depending on your needs and preferences. To make an informed decision, it is essential to explore different financial institutions and the types of education loans they offer. Additionally, read the lender’s loan terms carefully.
One trusted source to help you fund your education is Tata Capital. Tata Capital's education loans feature a 100% online application process, competitive interest rates, flexible repayment options, and no prepayment charges. Apply now for an education loan with Tata Capital and pave the way for a brighter future in your chosen field.
16 February 2024
6 mins read
Twitter
Facebook
Previous Post
