Your Guide to Education Loan Options in India

India is third globally in the number of students pursuing education abroad, with over 150,000 students enrolling in various undergraduate and postgraduate courses every year. The allure of practical learning and global exposure contributes significantly to the appeal of overseas education. However, the associated costs often raise concerns among students. 

While scholarships may have limitations, education loan options emerge as a more accessible avenue for studying abroad and pursuing degrees at desired universities. Let’s explore the options available for INR loan options to facilitate studying abroad.

Benefits of INR education loan option

 

• • Accessibility for All: Student education loan options bridge the monetary gap, permitting everyone the opportunity to pursue higher education, irrespective of their heritage or economic situation.

• • Diverse Course Coverage: These loan options are relevant to a huge range of  educational pursuits, from graduate and postgraduate levels to certificate and vocational  courses offered.

• • Streamlined Access: Obtaining a student loan option is relatively straightforward and prioritized by banks, following RBI guidelines.

• • Flexible Loan Option Amounts: Depending on the chosen course, college, and financial institution, loan options can range from Rs. 40,000 to Rs. 10 lakh, catering to diverse needs.

• • Uninterrupted Education: By providing monetary help, student loan options help college students overcome economic hurdles and keep away from disruptions of their educational journey.

• • Comprehensive Coverage: These loan options extend past tuition fees, encompassing various expenses like library and lab charges, books and devices, hostel lodging, tour prices, and more.

• • Convenient Repayment Options: Student loan options offer flexible repayment plans, making it easier for graduates to control their budget after completing their education.

Eligibility for INR Education Loan Options:

Securing a student loan option can pave the way for higher education. Here’s a breakdown of the general eligibility criteria for student loan options offered by banks and non-banking financial companies (NBFCs) in India:

1. Student Eligibility:

 

• • Citizenship: You must be an Indian citizen to begin the application process.

• • Admission: You must have secured confirmed admission in a recognized educational institution, either in India or abroad.

2. Co-signer Eligibility (if required):

 

• • Citizenship: Your co-signer(s) must also be Indian citizens.

• • Financial Standing: They should possess a bank account with chequewriting facilities in any Indian bank.

Additional Considerations:

 

• • Individual Lending Partner Requirements: Loan option eligibility criteria may vary between lending partners (banks and NBFCs). Always consult directly with your chosen lending partner to understand their specific requirements.

• • Admission Confirmation: Most lending partners require proof of confirmed admission before disbursing the loan amount.

 

• • Course Selection: While some banks may not have specific course restrictions, others may favor job-oriented, technical, or professional programs.

• • Underwriting Norms: Each bank establishes unique underwriting norms to assess their loan option application processes. These guidelines determine the loan option amount, interest rate, and approval/rejection decisions.

How is the Education loan option interest rate in India set?

 

• • Individual banks and NBFCs set interest fees on student loan options in India.

• • These rates are based on the RBI’s repo rate and reverse repo charge.

• • The repo rate is the price at which the RBI lends money from banks.

• • The reverse repo charge is the rate at which the RBI borrows money from banks.

• • Higher repo rates commonly lead to higher interest rates on loan options and vice versa.

What is the INR loan option disbursement process?

Understanding “disbursement” is crucial when navigating the world of student loan options. It refers to the transfer of loan option funds from the lending partner (bank or NBFC) to the borrower or an authorized recipient, typically the educational institution. This essentially makes the borrowed money available for covering your educational expenses.

Disbursement Processes in India:

While the core concept remains the same, the actual disbursement process in India can vary depending on the lending partner:

1. Government Banks:

 

• • Direct Credit: Loan option funds might be directly credited to the borrower’s account or the institution’s designated account.

• • Structured Payments: Disbursement can be staged based on semester fees or specific needs, ensuring responsible use of the funds.

• • Documentation: Typically involves more extensive documentation compared to NBFCs.

2. NBFCs (Non-Banking Financial Companies):

 

• • Simplified Process: NBFCs often offer a faster and more streamlined disbursement process.

• • Flexible Options: Disbursement may be offered in multiple installments or as a lump sum, depending on the agreement.

• • Documentation: The documentation requirements might be less stringent compared to government banks.

Tax benefit of education loan option

The interest paid on your student loan option is eligible for deduction under Section 80E of the Income Tax Act of 1961. This advantage is exclusively available to individual borrowers and is specifically intended for higher education purposes. The deduction is applicable to all fields of study, both domestic and international, encompassing vocational and academic courses.

It’s crucial to note that the tax deduction applies solely to the interest component of the EMI, not the principal. However, there is no limit on how many times you can claim this benefit. To qualify for this benefit, you’ll need a certificate from your bank or financial institution that delineates the principal and interest components of your EMIs.

This benefit remains accessible for eight years from the day you commence repaying your loan option or until the interest component is fully paid off, whichever occurs first.

What does it mean by INR study loan option processing fees?

The term “INR Study Loan Option Processing Fees” refers to the charges associated with the processing of an education loan option in Indian Rupees (INR). Financial establishments or lending partners charge processing fees while students search for a study loan option to assist with their education expenses. These charges cover the administrative and operational costs incurred at some stage in the loan option application and approval process.

 The processing charges are usually calculated as a percent of the loan option amount and are a one-time price paid by the borrower during the loan option application process. It’s important for borrowers to be aware of the fees and operational costs incurred throughout the loan option application and approval process. 

INR Student Loan Option Repayment Process

Moratorium Period Explained

The moratorium period is a different aspect of education loan options. It offers borrowers the option to defer EMI payments for as much as 365 days after completing studies or 6 months after ceasing employment, whichever occurs earlier. It’s important to note that the length of the moratorium is subject to the policies of the respective bank.

Choosing the Right Time to Begin Repayment

While the moratorium period provides temporary relief from EMI payments, it is advisable to initiate loan option repayment at the earliest. This period is not interest-free, and considering the relatively high education loan option interest rates in India, interest continues to accumulate. Even during the moratorium period, interest accrual persists, contributing to an increased overall loan option burden. Initiating repayment early not only reduces the outstanding amount but also facilitates the building of a positive credit score.

Education Loan Option Repayment Process

Repaying an education loan option is straightforward. Contact your bank manager, provide your account details, and set up repayment through an auto-deduction mode. Additionally, explore the various education loan repayment schemes available in India to choose the one that aligns with your financial preferences.

Highlights of INR loan options for different banks

Financing solutions are tailored for students pursuing education abroad while paying in Indian Rupees (INR). Banks under INR:

Lending Partner Name	Indian NBFCs	Private Indian Bank	Public Sector Banks
Category of Loan Option	INR Loan option	INR Loan option	INR Loan option
Processing fees	1%	1%	Rs 10000
Insurance Cover	Yes costing 1%-2% of Loan Option Amount	Yes costing 1% of Loan Option Amount	Yes costing 1% of Loan Option Amount
Enrollment Requirements	Must be enrolled full-time	Must be enrolled full-time	Must be enrolled full-time
Satisfactory Progress Requirements	Yes	Yes	Yes
Degree Seeking Requirements	Must be in a STEM degree-seeking program.	Must be in a STEM degree-seeking program.	Must be in a STEM degree-seeking program.
Index Type	Floating	Floating	Floating
Index Rate	HDFC Credila’s current CBLR is 13.55% per annum, Avanse’s current Base Rate is 14.25%, Auxilo’s current Base Lending Rate is 14.85% &	Current Rapo rate 6.50%	Current Rapo rate 6.50%
Disbursements To	Cosigner s Account	Cosigner s Account	Cosigner s Account
Forex required	Yes	Yes	Yes
Repayment Length	Full 10, 12 & 15 year repayment period begins after nine-month grace period.	Full 10, 12 & 15-year repayment period begins after  nine month grace period.	Full 10, 12 & 15 year repayment period begins after  nine month grace period.
Grace Period	9	9	9
Cosigner requirements	Students must have an Indian cosigner, preferably their parents, who possess a good income and a strong credit score. Additionally, they need to have a permanent residence in city locations for secured proposals. This residence should ideally be their own house, with its valuation equal to or surpassing the desired loan option amount. It’s essential that the property title is clear and the property is situated in or near metro cities.	Students must have an Indian cosigner, preferably their parents, who possess a good income and a strong credit score. Additionally, they need to have a permanent residence in city locations for secured proposals. This residence should ideally be their own house, with its valuation equal to or surpassing the desired loan option amount. It’s essential that the property title is clear and the property is situated in or near metro cities.	Students must have an Indian cosigner, preferably their parents, who possess a good income and a strong credit score. Additionally, they need to have a permanent residence in city locations for secured proposals. This residence should ideally be their own house, with its valuation equal to or surpassing the desired loan option amount. It’s essential that the property title is clear and the property is situated in or near metro cities.
Exemption for Cosigner Income	Yes	No	No
Repayment Options	a. Immediate: The student must pay the full principal and interest.b. Interest Only: The student must pay the interest charges each month.c. Fixed Pay: The student must pay INR 2000 a month.d. Deferred: No payments are required while in school.	a. Immediate: The student must pay the full principal and interest.b. Interest Only: The student must pay the interest charges each month.c. Deferred: No payments are required while in school.	a. Immediate: The student must pay the full principal and interest.b. Interest Only: The student must pay the interest charges each month.c. Deferred: No payments are required while in school.

Frequently Asked Questions

What expenses are covered by an INR education loan option?

INR education loan options typically cover training fees, examination costs, accommodation, the cost of books, and other associated charges essential for the course.

Is collateral required for an INR education loan option?

Collateral requirements vary among lending partners. Some loan options may be secured, requiring collateral, while others may offer unsecured options based on factors like the loan option amount and course.

How can I start the application process for an INR education loan option?

Students can go through the application process online or visit the nearest branch of the lending institution. The application process includes offering necessary documents such as admission letters, KYC documents, and income evidence.

Can I get a tax benefit on the interest paid for an INR education loan option?

Yes, under Section 80E of the Income Tax Act, interest paid on training loan options is eligible for tax deductions, providing financial comfort to borrowers.