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    Education Loan

    Education Loan

    An education loan is a type of financial assistance provided by banks and NBFCs (Non-Banking Financial Companies) to help students cover the costs associated with their higher education. These loans are designed to support students in paying for their tuition fees, study materials, living expenses, and other related educational costs. With the increasing expenses of pursuing higher education, relying solely on personal funds can be challenging for many individuals. That’s where education loans come into play.

    They offer a solution by providing financial support to students, enabling them to pursue their educational aspirations without burdening their own finances. At Dialabank, we understand the importance of education in achieving financial independence and living a dignified life. We are dedicated to assisting students in availing the best education loan offers to make their educational journey smooth and accessible.

    Education Loan: Features

    1. Offers loan amounts up to 1 crore.
    2. No margin money is required for loans up to 20 lakhs, i.e., you don’t need to pay anything from your own pocket.
    3. If you’re planning to study overseas, banks have an option of pre-visa disbursal.
    4. Travel Expenses, Hostel Charges, and Study Equipment, etc., are covered in Education loans. 
    5. Interest rates start from as low as 6.90%, but these are subject to variations from bank to bank.
    6. You can choose the loan tenure.
    7. Some banks even offer pre-admission sanctions.
    8. Most banks offer an attractive moratorium period for education loans
    9. Avail the tax rebate offered under section 80-E of the Income Tax Act 1961 for the entire interest amount paid towards your education loan.

    Courses Covered Under an Education Loan

    In India

    • Education loan for students from Nursery to class 12.
    • Graduation and Post-Graduation courses (technical/professional/diploma) approved universities or colleges under UGC/AICTE/government.
    • Professional/technical courses for Graduation/Post Graduation/Diploma such as MBA/MCA/MS offered by recognized educational institutions or any course offered by the Chartered Institute of Management Accountants.
    • Loans for any skill development.
    • Diploma courses administered by autonomous institutions.
    • Diploma professional courses such as pilot training, shipping, and more approved by the Director-General of Civil Aviation/Shipping/or any other respective regulatory authority

    In Abroad

    • Professional or technical courses for Graduation/Post Graduation/Diploma such as MBA/MCA/MS, etc., offered by recognized institutions.
    • Courses conducted by CIMA and CPA.

    Expenses Covered Under Education Loan

    An education loan covers the following expenses:

    • Entire academic fees
    • Hostel fees
    • Examination/laboratory/library fees, however applicable
    • Cost of a computer/laptop if required for course completion
    • Any expense required to complete the course, such as study tours/thesis/project work
    • Travel expenses for students studying abroad
    • Insurance expenses
    • Cost of books/equipment/instruments/uniform or any other essential requirement for the course completion

    Types of Education Loan

    1. Undergraduate education loans – are given for undergraduate courses, which are usually for 3 to 4 years. However, the applicants should be pursuing or have completed secondary education to avail of this loan.
    2. Graduate education loans – are for students who plan to apply for a postgraduate or any other professional course to get advanced degrees and increase their job opportunities. The applicants should have already finished an undergraduate course to apply for this loan.
    3. Career education Loans – Apart from undergraduate and postgraduate courses, loans are also offered for professional training courses for a particular field of career. People aiming for a particular job can avail of this loan.

    Loans Based on Location

    1. Domestic education loans – are available to students who aim to apply for a course within the territory of India. While some banks offer pre-admission loans, the applicant should have already secured a seat in the desired institution for easier availing of the loan.
    2. International education loan – is beneficial for the students aiming to study abroad. Like the domestic loan, in this too, the applicant should have already secured a seat in the institution.

    Loans Based on Collateral

    1. Loans against property such as agricultural land/residential land/ flat/house as collateral.
    2. Loans against fixed/ recurring/ or gold deposits.
    3. Loans against securities such as bonds, debentures, equities, etc.
    4. Loans through the third-party guarantee such as a certificate from an employer or a home loan.

    Loans for Parents

    Banks and NBFCs also have the option for parents to avail of education loans for their children. These are unsecured loans but help parents fund 100% of the education and can be used to cover even extra expenses. Even relatives can use this facility. Parents can also avail loans for their children studying in college. If the college student is studying and working, the loans have to be cosigned by the parents.

    Education Loan Eligibility Criteria

    Education Loan Schemes
    Interest Rate
    Loan Amount
    Processing Fees
    Up to 13.25%
    Up to 30 Lakh
    Up to 1.5%
    up to 8.65% p.a
    Above Rs. 1.5 Crore
    Rs.10,000 + tax
    13.70% to 15.20%
    Up to 1 Crore
    Nil to Rs.15,000 + tax (Refundable)
    Bank of Baroda
    7.85% to 9.85%
    Up to 30 Lakh
    1% of the loan amount up to Rs.10,000
    6.90% to 9.95%
    Up to 30 Lakh
    1% of the loan amount
    IDBI Bank
    6.90% to 8.90%
    Up to 30 Lakh
    Up to 1% of the loan amount

    Education Loan Eligibility Criteria

    1. In case the applicant is a major, the minimum age of the co-applicant or the guarantor should be 21, and the maximum age at loan maturity should be 70.
    2. In case the applicant is a minor, the criteria for the co-applicant is the same. However, the applicant would be liable to provide a letter of ratification to the banks upon attaining majority.
    3. The applicant should be an Indian national.
    4. The applicant/student must have already secured a seat in the desired course and the desired institution.
    5. The applicant/student must have applied to a course or its equivalent recognized internationally by the relevant bodies.

    Essential Documents Required for Education Loan

    An education loan requires the following documents for salaried individuals (in public/ private/ cooperatives or start-ups) as well as others:

    • Basic KYC documents such as Identity Proof, Address Proof.
    • Banks statements of the last 6 months.
    • A guarantor form in case of a guarantor.
    • A copy of the admission certificate of the desired course from the desired institution as well as the fee schedule document. 
    • Some banks also require mark sheets of degree courses, especially in cases of pre-admission loans


    Documents required for the first disbursement:

    • Loan agreement signed by the applicant and co-applicant.
    • Sanction letter signed by applicant and co-applicant.
    • Disbursement request signed by applicant and co-applicant.
    • A demand letter from the institution.
    • Receipts of margin money paid to the institution.
    • In the case of collateral, documents for the collateral security.
    • In the case of overseas education, form A2 signed by the applicant or co-applicants


    Documents for subsequent disbursements:

    • A demand letter from the institution.
    • Disbursement request signed by applicant and co-applicant.
    • Receipts of margin money paid to the institution.
    • In the case of overseas education, form A2 is signed by the applicant or co-applicants.
    • An exam progress report or a mark sheet.

    Tax Benefits on an Education Loan

    If you take an education loan, you can get a tax deduction on the interest paid, as per Section 80E of the Income Tax Act, 1961. This benefit is available only to individuals who are borrowing money for higher education. The tax deduction applies only to the interest part of the monthly installment and not the principal amount. The best part is that there is no maximum limit on claiming this benefit. You can enjoy this deduction for a period of 8 years, starting from the year you begin repaying the loan or until the interest portion of the loan has been fully paid off, whichever comes first. To claim this deduction, you’ll need a document from your bank showing the principal amount and interest rate of the loan.

    FAQs for Education Loan

    ✅ What are the eligibility criteria for an education Loan?

    To avail of an education loan, there is no age bar for the applicant. However, the applicant should be above 18 years old and below 70 years old at the time of loan maturity. The applicant should be an Indian national and should have already secured a seat in the desired course and institution.


    ✅ What repayment options do I have for an education loan?

    To repay your education loan, you can either pay in the form of Equated Monthly Installments (EMIs), or you can choose the option of prepayment, wherein you can pay a part of the loan before the term ends, or foreclosure, wherein you can pay the entire amount in one go.


    ✅ What will happen if I fail to repay my education loan?

    In case you fail to repay your education loan, you will be added to the CIBIL’s defaulters list. Your credit score will decline considerably, making it very difficult for you to avail any loan in the future for a considerable period of time.


    ✅ Can I apply for an education loan without a co-applicant?

    It is not possible to avail of an education loan without a co-applicant. The co-applicant can be any close relative such as father, mother, sibling, or even spouse. The loan depends upon the income of the co-applicant.


    ✅ From when does my repayment period start?

    You will have to repay your loan from the time it is disbursed. However, if you opt for a moratorium period, you will have to repay after the moratorium period ends.


    ✅ Can I apply for an education loan in India if I want to apply for an institution abroad?

    Absolutely. Banks and NBFCs offer overseas education loans.


    ✅ Do I have the option of balance transfer in education loans?

    Yes, you do. The new lender might charge you a processing fee, but it will be financially beneficial for you. If you pay your EMIs on time, your loan balance is easily transferred.


    ✅ What is the moratorium period for my education loan?

    The moratorium period of a study loan is the period of time between getting the loan and paying your first EMI as a repayment. At DialaBank, we offer you a moratorium period also known as the holiday period of 6 months after you complete your course or 3 months after you have secured a job, whichever is earlier. During this time, you are excused from paying any EMIs for your study loan.


    ✅ What are the basic documents requirements?

    The basic documents required to avail a study loan include KYC documents, educational documents, the details of the cost of your course, the income documents of the co-borrower, and Collateral documents.


    ✅ What is the maximum limit that I can avail as a study loan?

    Depending on your loan worthiness, a study loan amount is decided by the lender. Generally, loan amounts easily go up to Rs. 50 lakh mark in case of premium institutes or study for abroad. However, lenders can provide even more than this amount. All banks provide a loan of up to 10 lakh easily.

    To get a better idea of the loan amount you can get, you should always check the education eligibility criteria and the EMI calculator.


    ✅ What is the current interest on study loan?

    The current interest rate for study loans in India generally ranges from 7.95% to 16.50%. However, it can vary from lender to lender. If you want to enjoy lower education loan interest rates, you can choose to provide some collateral to secure your loan.

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