Step by Step Guide to Education Loans
Education Loans are seen as a reliable investment by many since they give assured returns. The entire process of education loan may seem daunting to students and their families since it requires a lot of time and efforts. However, the process 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. You can also contact India’s leading education loan providers through Shiksha Study Abroad.
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.
The following steps are involved in an education loan process –
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- Step1: Determining the cost of education and loan amount
Begin with determining the overall cost you expect to incur during your study period. This cost includes tuition fee, books, accommodation, food, transportation and personal expenses, etc. This information can be easily obtained from the university website or student office. Your admission offer letter may also include the amount you need to dispense for your course every year/semester. Once you have the complete cost of education, you can figure out the amount of education loan you will need.
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 requirement and enquire about their education loan products. Some 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.
- Step3: 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. It is advised to fill 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 student’s academic qualification, nature of course applied for, family income, co-borrower’s earnings and credit profile.
- Step4: 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-applicant’s 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.
- Step5: Disbursement and Repayment
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 a proof of funds for securing admissions in foreign universities and for applying to student visa. In cases of foreign education, banks pay in the receiving country’s currency and may charge you a remittance fee for the same.
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 principal and the interest amount.
The education loan process has become simple owing to a massive reserve of information available online and expert guidance of education loan specialists at every bank and financial institution.
Below are some other points that must be paid attention to during the loan process –
- Check if your course is eligible for 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.
- Education Loan 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 rebate in income tax.
- While some banks cover the complete cost of education including tuition fee, books and equipment cost, library and examination fee, one-time travel expense (in case of foreign education), personal expenses, etc., some banks cover only a part of it.
- Following types of collateral are accepted by most banks – Residential property (house/flat/bungalow), fixed deposit, life insurance, non-agricultural land.
- 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
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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!