Understanding education loans in India
Education loans have emerged as a key financial instrument for Indian students aspiring to pursue higher education, both within the country and abroad. Amid the increasing cost of education, these loans provide an opportunity to realize one's academic ambitions without imposing significant financial burdens on families. In this article, we explore the different facets of education loans in India, shedding light on eligibility requirements, interest rates, repayment terms, and beyond.
Eligibility criteria explained
In order to qualify for an education loan in India, applicants must be Indian citizens who have secured admission to professional or technical courses through an entrance test or on merit. Student applicants should generally be between 18 and 35 years of age. Co-applicants, usually parents or guardians, are also required to fulfill certain conditions stipulated by the lending institution.
Interest rates demystified
The interest rates for education loans in India generally fall between 8.5% and 15%, depending on the lender and the loan amount. Government banks tend to have lower rates than private banks and NBFCs (Non-Banking Financial Companies). Certain banks also offer a concession of 0.5% to female students as an initiative to promote higher education among women.
Repayment terms simplified
The repayment of education loan commences after the course completion along with a grace period of six months to one year, called the moratorium period. The overall tenure for loan repayment can go up to 10 years following the conclusion of this period. It is crucial for borrowers to comprehend their repayment schedule to manage their finances effectively.
Tax benefits uncovered
Borrowers can avail tax benefits on the interest paid on education loans under Section 80E of the Income Tax Act. This deduction is available for 8 years, starting from the year you begin repayment, or until the interest is fully repaid, whichever is earlier. There is no upper limit on the amount of deduction.
Choosing the right lender tips
When choosing a lender for an education loan in India, make sure to compare not only interest rates but also processing fees (₹0-₹10,000), margin money requirements (the percentage of total expenses that you must finance), and prepayment conditions (some lenders may charge penalties). Also, take into account the quality of customer service and the flexibility offered in repayment options before finalizing your choice.