Education Loan - Eligibility and Documents
If you dream of securing admission in one of the premier-league colleges, mere having talent and good academic record won't help today. The costs of education are going through the roof.
If you have talent and a decent academic record, the monetary constraints can be dealt with.
Wondering why and how?
Because these are one of the most primary eligibility criteria for getting an education loan approved from a financial institution.
Education loan has some salient features that set it apart from other loans. They are as follows:
- Deferred repayment option
- Lower interest rate
- Qualify for priority sector loans with lending institutions
However, almost every lending institution follows its set parameters to decide whether or not to approve a loan to an applicant. Nonetheless, a few criteria remain more or less same across all lenders.
Standard Eligibility Criteria for an Education Loan:
- Student's past academic record
- Quality and reputation of the institute from where the student wants to pursue the chosen course
- Probability of student getting a job after course completion
- Estimated salary a student might earn in future (an important determinant of one's loan-repayment capacity)
- Credit history of co-applicants
Things to know While Applying for an Education Loan:
- Recognition of courses: The lenders will typically check whether or not the college you want to apply with has a due government recognition. If you are applying to a college that ranks higher, you stand the best chance to get the student loan sanctioned.
- Loan Financing: You can expect banks and NBFCs to sanction education loans worth Rs 15 lacs for courses in India and Rs 30 lacs for overseas education. However, if the amount of the loan exceeds Rs 4 lakh, they may ask for collateral security.
- Margin Money: The difference between the study loan application amount and the approved amount is known as margin money. It typically ranges from 5% to 15%. Many financial institutions insist students (and co-borrowers) to contribute the margin money. Small education loans up to Rs 4 lacs do not require any margin money from the borrowers.
- Interest Rate: The interest rates vary from 11% to 15% depending on the evaluation of the student loan application. If lending institution sees greater risks involved in the proposal they commensurately charge the higher interest rate.
- Tenure of Education loan: Barring exceptions, typical loan tenure is 5-6 years.
- Moratorium period of loan: Since the loan is offered for the educational purpose, the repayment starts only when the student completes the program and starts earning.
Education loans can help fulfil your aspirations. However, don't forget to check the points mentioned above before you apply for a loan. You can check out more about the application process for education loan here.
The list of documents required to apply for an education loan:
- Invitation for admission from a college you applied with
- Proofs of academic accomplishments of the student
- Income proofs of co-applicant along with the record of existing loans
- Net-worth statements if the loan amount is high
- Papers of collateral
Please note: This list is not exhaustive and depending on the relevance in loan underwriting, the lending institution can ask for additional documents.
If you have an impeccable academic record and if you can produce necessary documents without delay, getting education loans approved at Tata Capital is incredibly easy.