What is an education loan, and how does it work?

The cost of education in India and abroad is rising each day. It has become difficult for students to afford quality education because of the ever-increasing college and school fees. The only way to cope with the rising cost is by applying for an Education Loan that has added benefits other than just paying the college fees. Let’s get to know how.

An education loan is a loan that students apply for, in order to fund their education in India or abroad. Different banks and financial institutions offer Education Loans to aspirants at competitive rates, to help them make quality education affordable. There are two key features of ICICI Bank Education Loans:

• Unlimited Income Tax benefits under Section 80(E) on full interest paid

• Collateral free loan, up to Rs lakh, for select institutes and courses.

What Are the Benefits Of Taking An Education Loan?

• The loan amount can vary from minimum Rs 1 lakh to Rs 1 crore, depending upon your area of study. ICICI Bank offers loan up to Rs 50 lakh for education in India and up to Rs 1 crore for education abroad. ICICI Bank offers education loans for both Undergraduate and Postgraduate courses

• In certain cases, even 100% financing is available

• The financing covers other expenses such as the cost of laptop or travel expenses

• The bank offers a flexible repayment option. The education loan repayment tenure can exceed up to 12 years, after the completion of the course

• Parents and siblings can be co-applicant(s) in an Education Loan

• Education Loans are easily available.

Documents Required For Applying For Education Loan

To be eligible for an Education Loan, students need to submit the following documents:

• Marksheet and passing certificate of 10th and 12th exams

• Admission Letter from the respective college/university

• Fee structure

• KYC document of the applicant and co-applicant

• Income proof in some cases.

Furthermore, in the case of an Education Loan below Rs 4 lakh, no collateral is required. For a loan above Rs 4 lakh to Rs 7.5 lakh, a third-party guarantor is required, while for loans above Rs 7.5 lakh, collateral becomes mandatory. When it comes to a loan for studying abroad, insurance is mandatory.

How Education loan works?

For those students who apply for an Education Loan, it is not necessary to pay the amount immediately; the repayment tenure starts from months or year, after the completion of the course. And in some cases, it can be extended from 5 to 7 years.

The interest rate varies as per the banks. The loan amount is directly paid to the institution/university at the start of the semester by the bank. Education Loans also include all other expenses, such as library fees, hostel fees, cost of books, laboratory fees etc., thus assuring that the student does not have to pay any expenses from their pocket.

Final word:

While an Educational Loan is a good way to finance education in case of a shortage, one should always weigh their financial capabilities before applying for the loan. Also, read all terms and conditions, before finalising a bank for your Education Loan.