Pursuing higher education is an investment in your future, but it often comes at a steep price. With tuition, housing, textbooks, and other expenses, the cost of pursuing higher education can quickly add up.
While scholarships, grants, and personal savings can help cover some of these costs, many students need to take out loans to fully fund their education. However, with multiple education loan offerings by different financial institutions, it can get challenging to choose the best student loan in India.
This article provides some tips and recommendations to make your search for the best loans for students easier.
What are education loans?
Education loans or student loans refer to the money borrowed to pay for educational expenses, such as college tuition, books, housing, and other related costs. Repayment of these loans does not begin until after the completion of the course for which the loan was borrowed. This allows the borrower time to find employment before the EMIs start. Choosing the best loans for students involves considering all the loan scheme offerings.
Key features of student loans
Here are the main features of a student loan:
1. The funds acquired can be utilised for educational expenses at universities globally.
2. Repayment periods usually span 10-15 years.
3. Interest rates for student loans typically commence around 7-8%, varying among lenders.
4. A moratorium period of 6-12 months post-graduation is provided before the commencement of repayments.
5. Female students may be eligible for reduced interest rates.
6. Collateral such as property or fixed deposits can be used to secure larger loan amounts.
7. Financial institutions provide students with flexible EMI structures.
Eligibility criteria to avail of a student loan
Below are the eligibility criteria to borrow a student loan in India:
1. The student must be an Indian citizen aged between 18-35 years old. If the student is under 18, parents can apply on their behalf.
2. The student must have a good academic record from 10th grade onwards.
3. Seek admission from an approved college/university abroad for further studies.
4. Show you have the means to repay the loan after completing your education. Banks will look at your family income, existing assets and other means.
5. Provide collateral or get a guarantor if required by the bank. Some banks may waive this for loans up to a certain amount.
6. Meet the bank's other eligibility criteria related to documents, income, existing loans etc.
Points to consider while applying for the best loans for students
Here are some tips you can use while finding the best loans for students in India:
1. Moratorium period
As discussed, the moratorium period is the time duration after graduation before loan repayment begins, usually 6-12 months. This allows the student time to find employment before starting to repay the loan. To select the best loans for students, consider the moratorium period offered by different financial institutions and choose the one that suits your long-term financial position.
2. Loan margin
If you are looking for the best education loan in India for study abroad, chances are that there will be a loan margin. The loan margin is the percentage of total fees that the student must pay themselves.
For example, a 15% margin means the student must arrange 15% of the total fees, while the loan covers the remaining 85%. Loan margin is an important consideration before availing of a loan. A high margin means you need to have significant savings or other sources to pay the required amount upfront.
3. Exchange rate fluctuation
For loans taken for study abroad, fluctuations in currency exchange rates can impact the effective loan amount and repayment instalments.
4. Interest rates
Compare the interest rates offered by different lenders and choose the student loans with low interest rates. This will help reduce the overall interest burden and lower the total repayment amount and help decide on the best loan for students.
5. Tie-ups between institutes and lenders
Many colleges partner with financial institutions to facilitate education loans for students. Such tie-ups can help accelerate the loan process and provide better terms.
6. Tax benefits
Borrowers can claim tax deductions on interest paid for education loans under section 80E of the Income Tax Act.
7. Collateral
Most lenders waive collateral for a certain loan amount. So, go through the terms and conditions of the loan carefully to understand collateral requirements.
8. Estimate future income
Analyse the placement records and average salaries of your target institution. Plan your EMI and loan tenure based on your estimated monthly income to avoid repayment issues.
Tips for getting your education loan approved
Getting approval for the best loans for students can be difficult. So, here are some tips to help you get a quick education loan approval:
1. Apply to recognised colleges for approved courses that have good career prospects.
2. Maintain an outstanding academic record across school and college. High achievement builds your profile.
3. Have a creditworthy co-applicant with a stable income.
4. Opt for lenders with tie-ups to your target college as tie-ups speed up loan processing.
5. Be organised with your paperwork by having all documents ready. Avoid any delays from your side.
6. Choose loans that require minimal or no collateral based on your profile.
Fulfil your academic goals with Tata Capital’s education loan!
Education loans are great financial aids to help you achieve academic and professional excellence. While choosing the best loans for students, ensure that they provide access to a high-quality education that enhances your skills and widens career prospects. The right student loan will be an invaluable investment in your future.
Tata Capital's education loans empower you to realise your full potential. Our online application makes financing your dreams simple. Competitive interest rates, flexible repayment terms, and an optimal moratorium period ensure you can pursue higher education anywhere, stress-free.
Count on us as your financial ally in the exciting journey ahead. Let nothing come between you and your dreams. Apply now for an education loan with Tata Capital and give your aspirations wings.
16 February 2024
5 mins read
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