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Education Loan
Education LoanYou can avail of education loan for study in India or abroad. The loan amount may range Rs. 50,000 to maximum of Rs. 25,00,000 depending on the institution and the course. It is available for tenure of up to 7 years including moratorium period. Usually repayment of the loan starts 1 year after course completion or 6 months after obtaining employment, whichever is earlier. This is called the moratorium period.
Banks offering education loan directly disburse the loan amount to the college/institute. Before offering the education loan banks independently verify the tenure of the course and determine its total cost.
Banks usually offer education loans for a period of 4 years for unsecured loans and 7 years for secured loans. Secured education loans use a residential property or some other assets as collateral.
You can opt either for floating interest rate or a fixed rate of interest on education loans. Banks charge a lower rate of interest if you start repaying the loan amount even in the moratorium period. Kindly note that you have to start repaying the loan if you are not able to complete the course. However, some banks may offer you a grace period, either to continue your studies or to start repaying the loan.

Eligibility Criteria

Banks have some eligibility criteria for education loans. The following are some of them:

    The applicant should be an Indian national

    He should be aged between 16 to 35 years of age

    All loans require a co-applicant.

    Collateral is required for all loans greater than Rs. 7.5 Lakhs.

    The applicant should have a good academic track record.

    He should have parents or guardians with stable source of income.

    Should have applied to a recognized university in India or abroad.


    The following are the courses eligible for a loan:

      Management Courses ( Full-Time + Part Time ) - Post Graduation

      Engineering Courses ( Government + Private ) – Graduation

      Medicine - Graduation + Post Graduation

      Masters in Computer Application ( MCA/MCM) - Post Graduation

      Distance Learning courses.

      Fine Arts and Designing - Graduation + Post Graduation

      Architecture - Graduation

      Hotel and Hospitality - Graduation + Post Graduation

      Agriculture - Post Graduation

      Pure Science - Graduation + Post Graduation

      B.A./B.Com/M.A./M.Com

      Professional courses like SAP, ERP, GNIIT, and Air Hostess Training programs.


      All educational loans require a co-applicant. The co-applicant can be a parent, sibling or relative. The following are the criteria for the salaried co-applicant:

        Minimum age of 21 years

        Maximum age of at loan maturity: 60 years

        Minimum employment of 2 years and minimum 1 year in the current organization

        Minimum Net Monthly Income : Rs. 10,000 p.m. for Tier 1 & Tier 2 cities (Rs. 8,000 in select cities)


        The following are the criteria for the co-applicant if he is self employed:

          Minimum age of 21 years

          Maximum age at loan maturity: 65 years

          Years in business: Minimum 3 years in current business and 5 years total business experience for professionals and 5 years continuous business experience for individuals.

          Minimum Annual Income: Rs. 1 lakh for doctors, CA , CS, architects.

          Business must be profit making for the last 2 years for companies and firms.

          Minimum Annual Income: Rs. 1,50,000 annually for Tier 1 & Tier 2 cities.



          Documents required

          The following are the documents you require to provide while applying for an education loan:

          Declaration confirming that no loan has been availed from other bank/institution

          Letter of admission from the Institute

          Letter from the Institute stating cost break up of the program

          Mark sheets of all exams SSC onwards

          Residence proof , ID proof , signature verification proof and age proof of applicant & co-applicant

          Income documents of the co-applicant

          Copies of foreign exchange permit, if applicable.

          The following are the further documents required for studies abroad:

          Letter from the Head of Department of the University

          Visa approval papers

          Travel papers

          GMAT/GRE/SAT score

          I-20 in case of applicant going to the USA


          Kindly note that you need to provide progress report at the time of every disbursement tranche. Progress report includes mark sheets or a letter from the institute, in case the mark sheets are not available while processing the fresh disbursement tranche.



        FAQs

        What expenses an education loan cover?
        It covers the following expenses:

        Fee payable to college/school/hostel

        Fees of exam/library/lab

        Caution deposit / Refundable deposit asked by the institution/Building fund - supported by Institution bills/receipts

        Expenses related to books, uniforms, equipments and instrument

        Expenses of travel in case of studies abroad

        Purchase of computers and other software necessary for completion of the course

        Any other expense required to complete the course.


        Do I need to spend money on paying some of the fees?
        Indian banks offer 100% loan on select courses. For other courses you may have to spend 5-15 % of the total fees. However, it depends on the terms and conditions of the banks.
        What is the moratorium period?
        Usually repayment of the loan starts 1 year after course completion or 6 months after obtaining employment, whichever is earlier. This is called the moratorium period.
        Do I need to repay anything during the moratorium period?
        It depends on the terms and conditions of the bank. In some cases, interest would have to be paid during the moratorium period. However, some banks also provide a moratorium on payment of interest. However, in that case the interest is compounded quarterly and added to the principal sum for repayment. You can go for this type of education loan if you do not want to repay anything during your course period.
        How I would make the repayment?
        You have to repay the loan amount in equated monthly installments(EMI). It can be done by giving standing instruction to the bank, having electronic clearing services (ECS) with the bank or by giving post dated cheques to the bank.
        You have to start repaying the loan if you are not able to complete the course. However, some banks may offer you a grace period, either to continue your studies or to start repaying the loan.
        What is the maximum tenure of the education loan?
        Maximum tenure of the education loan may be 7 years including moratorium period.
        Is a co-applicant needed for an education loan?
        Yes. A co-applicant is required for loan on all full-time courses. The co-applicant can be your parents, siblings, spouse or relative. Your loan eligibility is calculated on the basis of the co-applicant's income. For funding part time courses, no co-applicant is required. Kindly note that even in part-time course, having a co-applicant can enhance your loan eligibility.
        How is the loan amount disbursed?
        Banks normally disburse the loan amount directly to the college/institute. While applying for a loan, the bank will verify the tenure of the course and determine its total cost as applicable at that point of time. You have to submit a form to the bank every year detailing of the money required. After this process, the bank directly disburses the loan to the college or institute. In case of study overseas, banks pay in dollars to colleges directly. They charge a remittance fee in that case.

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