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About Student Loans
Student loan or education loan is much sought after today. Education has become a costly affair and quality education is definitely an expensive proposition. Most parents save up for their children’s education but that does not suffice especially for higher education. A student loan becomes very useful in such situations. The basic definition of an education loan is funds being offered to deserving students or meritorious students for them to pursue higher education either in India or abroad. Almost all banks in the country offer this loan due to increase in demand.One of the most important aspects of taking an education loan is that your savings are not affected and it can be put to better use. With many banks and financial institutions offering education loans, the borrowers have many choices.
Purpose of Student Loans
A student loan helps a deserving candidate to pursue further studies either in India or abroad. This helps many families achieve their dreams and personal goals. Education is expensive especially when one wants to study for higher degrees or a doctorate. A good education is expensive today and it makes sense to borrow finance for this purpose and use life savings for other personal goals. A comprehensive education loan covers all aspects of educational needs such as deposits, library fees, lab fees and so on. It is quite convenient to get a student loan as there are not many pre-requisites. Banks consider your repayment capacity before sanctioning this loan.Features of Student Loans
There are many lenders offering student loans and some of the main features are:
- An education loan is available for all studies in all academic fields, both in our country and abroad.
- Loan amounts vary from bank to bank and can start anywhere from Rs. 5 lakhs and goes up to Rs. 20 lakhs.
- The main criteria for sanctioning a student loan is assessment of family finance and regular source of income.
- It is available for any one who would like to pursue further studies.
- Some loans are made available for economically backward classes to help them progress.
- The repayment can begin after course completion and not immediately after disbursement.
- Most banks require a collateral for a certain loan amount and above only.
Eligibility Criteria for Student Loans
Most lenders/banks have a general eligibility criterion in place for student loans. The applicant should be an Indian resident and should have secured admission in one of the courses listed by the bank that is eligible for a loan. Most loans cover all expenses of the program such as fees, exam fee, lab charges, computer, deposits and insurance. This type of loan is available for both undergraduate and post graduate studies.Benefits of Student Loan
Being able to finance education needs is one of the most important needs of any family. A student loan helps a family not only financially but emotionally as well. The total needs of a family unit get a direction with the help of a loan like this. Some of the key benefits of a student loan are:
- Loan amounts can go up to Rs. 1 crore with some banks.
- There are no restrictions on pre-payment or part payment.
- Most loans are comprehensive in nature and cover all expenses including computer, lab fees, deposits etc.
- For studies abroad, loans are disbursed even before getting a visa.
- Loan tenures can be customized with the help of collaterals.
- Girl students get additional discount over the existing interest rate on student loans.
- The repayment period does not start soon after loan disbursement. It can be repaid once the study course is over and the applicant is able to secure a job.
Interest rates and other charges on Student Loans
Like other regular loans, interest rate is determined by the amount of loan taken and the tenure. If the tenure is longer, the interest rate will be lesser. Different banks offer different slabs of interest rates. This also varies from course to course and in same cases, with different institutions. One reason for this could be the prospects of getting a job after course completion and therefore, repayment capacity being higher, a competitive interest rate can be offered on that particular student loan.
Most banks offer rate of interest that varies from 8.5% to 12% depending on the principal amount and the tenure of the loan. Female students enjoy a concessional rate of interest over others up to 0.5%.
Some of the other details of this loan are:
| Tenure | Normally up to 10 years after course completion + 6 months |
| Loan Amount | Ranges from Rs. 10 lakhs and goes up to Rs. 1 crore |
| Collateral | Not Required up to Rs. 4 lakhs Residential property/land/Fixed Deposit to be given as guarantee for loans above Rs. 4 lacs |
| Margin | Nil up to Rs. 4 lacs or up to Rs. 20 lacs (depending on the bank) 5% to 15% depending on institute/course for loans above Rs. 4 lacs. |
How to Apply for a Student Loan
In order to get updated details of a student loan, it is advisable to visit the nearest bank branch and meet a bank representative. They will be able to guide you in regard to the details of the loan, required documents and application process. One can also submit an application then and there for a student loan.
An alternate method is submitting an application online. Most leading banks have updated information on their websites and applying online helps reduce waiting time and hassle-free process. The customer contact centre of many banks also can help with student loan application.
Documentation required by most banks to apply for a student loan :
- KYC
- Admission letter
- Cost of the course
- Mark sheets of 10th, 12th std. and graduate (if applicable)
- Collateral documents if required
- ID Proof
- Residence Proof
- Passport size photos
- Income Proof of co-applicant/guarantor
Top Banks Offering Student Loans
Some of the top lenders in the country who offer this type of loan are:
- ICICI Bank
- SBI
- Bank of Baroda
- Union Bank of India
- Kotak Mahindra Bank
- Axis Bank
- HDFC Bank
- Tata Capital
- IDBI Bank
- Bank of Maharashtra
FAQs: Student Loans
1. What type of interest is calculated on student loans?
Simple interest is calculated on student loans.
2. Can scholarship be treated as margin money?
Yes, scholarship received from the institute can be considered as margin money.
3. Is it possible to prepay my student loan?
Yes, it is possible to prepay your student loan. Most banks do not charge prepayment charges on it.
4. Who can be my co-applicant for a student loan?
Family members like father, mother, brother, sister, uncle, aunt or grandparents can be your co-applicants who have a source of income.
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