An education loan is a financial product designed to help students and their families cover the cost of higher education. It provides the necessary funds to pay for tuition, books, living expenses, and other education-related expenses. With flexible repayment options and competitive interest rates, education loans make it easier for students to pursue their academic goals without facing immediate financial strain.
Features of Education Loan
Coverage of Expenses: Education loans cover a wide range of expenses, including tuition fees, accommodation, books and study materials, examination fees, travel expenses (in the case of international education), and other related costs.
Flexible Repayment Options: Many lenders offer flexible repayment options, including a grace period (moratorium period) where repayment starts after the completion of the course and a few months of job search.
Low-Interest Rates: Education loans often come with competitive interest rates, and some government-supported loans offer subsidized rates, particularly for students from economically weaker sections.
Tax Benefits: Under many jurisdictions, the interest paid on education loans is eligible for tax deductions, providing additional financial relief to the borrower.
Collateral and Non-Collateral Loans: Depending on the loan amount and the lender's policies, education loans may be secured (requiring collateral such as property or fixed deposits) or unsecured (not requiring collateral).
Loan Amount and Tenure: The loan amount can vary based on the course, institution, and country of study. Repayment tenure is typically between 5 to 15 years, depending on the loan amount and the borrower's financial situation.
Co-Applicant Requirement: Most education loans require a co-applicant, usually a parent or guardian, who is responsible for the loan repayment if the borrower defaults.
Prepayment Facility: Many education loans offer a prepayment option without any penalties, allowing borrowers to pay off the loan early and save on interest costs.
Documents Required for Education Loan
The documents required for an education loan application may vary depending on the lender, but the following are generally needed:
Identity Proof: Passport, Aadhar Card, Voter ID, PAN Card, or any government-issued ID.
Address Proof: Utility bills, Aadhar Card, Passport, Voter ID, or any other valid proof of residence.
Academic Documents:
Admission letter from the educational institution.
Academic records (mark sheets, certificates, etc.) of the qualifying exams (e.g., 10th, 12th, Bachelor's degree).
Entrance exam scorecards, if applicable (e.g., GRE, GMAT, SAT, etc.).
Income Proof of Co-Applicant:
Salary slips for the last 3 to 6 months.
Income tax returns (ITR) for the last 2 to 3 years.
Bank statements for the last 6 months to 1 year.
Collateral Documents (if applicable):
Property documents (if offering property as collateral).
Fixed deposit receipts (if offering FD as collateral).
Proof of insurance policies, if applicable.
Loan Application Form: Duly filled and signed loan application form as provided by the lender.
Photographs: Recent passport-sized photographs of the applicant and co-applicant(s).
Course Fee Structure: A detailed fee structure provided by the educational institution.
Proof of Admission: Confirmation of admission into the institution, such as a letter of acceptance or admission offer letter.
Rate of interest 5% Tenure 1 to 20 years.