Step by Step Guide to Education Loans

Key steps of borrowing education loans in India include determining the cost of education, comparing loan options from various lenders, applying for the loan, and understanding the loan agreement. Any student should compare multiple loan schemes before selecting any. Do a thorough research and careful consideration of factors like interest rates, repayment terms, and eligibility criteria.

Education Loans are seen as a reliable investment by many since they give assured returns. The entire process of student loans may seem daunting to students and their families since it requires a lot of time and effort. However, the process of borrowing education loans has been remarkably simplified over the years for the ease and comfort of borrowers and their families. With basic guidance and care at every step, students can complete the loan process without any hassle or complication.

While the loan application, approval, disbursement and repayment process may differ among various financial institutions, most financial institutes follow a simple procedure with expert guidance on every step.

How to Apply for Education Loan to Study Abroad?

Securing a student loan to study abroad is a clear and easy process. To make sure your application of study loan is approved, focus on a few key steps and prepare your documents before actually applying for it. Below, we have mentioned some steps involved in study loan process:

• Determine Your Budget: Understand the overall budget you need to study abroad.
• Compare Loan Schemes: Explore and compare different education loan schemes offered by student loan providers.
• Submit Your Application: Officially apply for the student loan by the bank's website or Vidya Lakshmi Portal.
• Review Loan Terms: Read the terms and conditions of the loan documents carefully before signing.
• Take Your Fund: After carefully verifying your documents, the bank will approve your disbursements..

Check out the step-by-step process to apply for an Education loan.

Determining the Cost of Education and Loan Amount

Before you apply for an education loan, you need to have a clear idea of how much money you want. Start by calculating the total cost of your studies, including tuition fees, book costs, accommodation, and personal expenses. You have a figure.
Sometimes, top universities mention this information on their website too.  Your admission offer letter will also detail the amount required for your course each year or semester. Once you have the complete cost, you can determine exactly how much education loan you'll need.

Compare Education Loans from Different Lenders

The next step after determining your loan amount is to find the right lender. There are many banks and financial institutions in India that provide education loan to students studying in India and abroad. Approach them with your requirements and enquire about their education loan products. Top education loan providers even provide doorstep service and customized education loans to make the entire process simpler for students and their families. It is advised to base your decision on your unique needs and factors like interest rate, processing fee, income tax benefits, collateral, margin money, disbursement and repayment terms, etc.

Applying for an Education Loan

Once you have chosen your lender, they will ask you to fill out an application form. Most lenders have an online loan application form for students to fill out. It is advised to fill in correct information in these forms as discrepancies may be seen as wilful distortion of data and can lead to loan rejection. The loan application form covers the student’s academic qualification, nature of the course applied for, family income, co-borrower’s earnings and credit profile. Here is the correct way to apply for an education loan.

Related Read: Required Documents for Study Loan

Reading and Signing the Loan Document

Once, and if, your loan is approved, the lending bank/financial institution will issue a loan document which outlines the various elements of the education loan along with the terms and conditions associated with it. This document includes, among other details, the loan amount that has been approved after evaluation of the applicant’s and co-applicants profiles, the mode/amount/timeline of disbursement to the concerned university/college, the interest rate, the loan tenure, the duration of moratorium period, the amount to be repaid, the amount and number of EMIs and the repayment terms. It is highly recommended that you read this document in detail and get your queries/doubts cleared before signing it.

Related Read: Things You Should Know Before Applying for Education Loan

Education Loan Disbursement

Once you have signed the loan document, the bank disburses suitable instalments directly to the concerned educational institution according to the fee schedule of the same. The loan sanction letter can also be used as proof of funds for securing admissions in foreign universities and for applying to student visas. In cases of foreign education, banks pay in the receiving country’s currency and may charge you a remittance fee for the same.

Repayments of Education Loan

The repayment begins after the moratorium period which may differ among banks and can vary from six months to one year after the completion of the course. The repayments are made in EMIs which are constituted of a portion of both the principal and the interest amount. You can try some tried and tested tips to repay the Education Loan faster.

How to Select Education Loan?

The education loan process has become simple owing to a massive reserve of information available online and expert guidance from education loan specialists at every bank and financial institution. Below are some other points that must be paid attention to during the loan process:

1. Check if your course is eligible for an education loan. Courses that have a high employment probability have a better chance of approval for education loan. The reputation of the college/university also plays a vital role in loan approval. Also, not all banks extend financial aid for diplomas and vocational courses.
2. Education loans availed from gazetted banks and financial institutions are only eligible for tax benefits under Section 80E of the Income Tax Act of India, 1961. Ask for the Gazette Certificate of the financial institution to check eligibility for a rebate in income tax.
3. While some banks cover the complete cost of education including tuition fees, books and equipment costs, library and examination fees, one-time travel expenses (in case of foreign education), personal expenses, etc., some banks cover only a part of it.
4. The following types of collateral are accepted by most banks – Residential property (house/flat/bungalow), fixed deposit, life insurance, and non-agricultural land.
5. Give yourself ample time to research, analyze and compare different education loan products to avoid last-minute rush and resulting complications. It is advised to start early for a smoother experience.

Get in touch with India’s top-rated loan providers and apply for an education loan through Shiksha Study Abroad 

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!