Everything You Need to Know About Education Loan

Banks and NBFC institutions offer educational loans to students to cover the cost of studying abroad. Before you start the application process for a student loan, it's important to understand the key factors that can impact your loan, such as interest rates, repayment options, and loan amount.

The easy application process for student loans has helped many students finance their higher education. Education loans help students to meet the financial requirements to complete their dream of studying abroad or in India. Loan providers, such as banks and NBFC institutions, offer students the opportunity to repay the loan after completing their overseas studies.

Some NBFCs, such as HDFC Credila, offer loans covering up to 100% of educational finance, while banks provide up to INR 3 crore for study abroad expenses. While getting student loans is undoubtedly easy, relatively few students are aware of this. It is important to understand every detail of student loans before applying for them. This article will help you to understand the basic details of student loans.

Also Read:

• Education Loan Interest Rates
• How to Repay Student Loans Faster?

Tenure of Education Loan

The average tenure for an education loan is between 5-7 years in case of most banks. However, some NBFCs can offer a longer tenure of up to 12 years in case of higher loan amounts. Since the tax benefits on interest paid on the education loan can be availed for a total of 8 years from the beginning of repayment, you are advised to repay your loan in a period of 8 years to maximise the tax benefit on your education loan.

Factors that Influence Education Loan

The maximum amount of loan an applicant is eligible for is determined by a variety of factors. These factors include, among others:

• Credit Worthiness: Credit worthiness is a factor determined by evaluating a person’s credit history. Lenders check an individual’s creditworthiness to determine his/her ability to repay the loan on time. This is done to minimise the risks associated with an education loan. Individuals with a clean credit history tend to get higher loan amounts and quicker approvals.
• Credit Score: Credit score plays a crucial role in determining your eligibility for loans, credit cards etc. Timely payment of credit card bills and EMIs on existing loans reflects positively on your credit score and help in improving your chances of getting an education loan.
• Value of Collateral: Education loan lenders generally ask for collateral for loans exceeding Rs. 7.5 Lakh to minimise their risk. In case a borrower fails to pay the loan, the collateral is used to recover the loan amount. Applicants who offer collateral of good value stand a better chance of getting high-value education loans.
• Academic History of Student: The academic track record of a student plays a very important role while sanctioning the education loan. Meritorious students with an exceptional academic background exhibit seriousness towards their education and career, and hence, have a better chance of getting well-paying jobs in the future.

Despite the specified limit, you must carefully calculate your expected expenses and apply for an appropriate amount that covers all your needs without becoming a financial burden in future. While contemplating the education loan amount, you must consider the salary you expect to draw after completing of course, since it will significantly impact your loan repayment capability.

Apply for an education loan through Shiksha Study Abroad partners

Related Articles:

• The A to Z of Study Abroad Loans: All Terms and Their Definitions
• How to choose your bank for Education Loan to Study Abroad
• Education Loan Vs. Self Funding to Study Abroad
• Collateral for Education Loan: Everything You Need to Know

About the Author

HDFC Credila, an HDFC Ltd. Company, is India's First Dedicated Education Loan Company. With specialized focus, in-depth understanding of the requirements of students who wish to pursue higher education, HDFC Credila offers Customized Education Loans Home Delivered! HDFC Credila has funded tens of thousands of students from India to over 2100 unique educational institutes across 35 countries!