Factors to consider before taking an education loan

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Factors to consider before taking an education loan
If higher studies is your main priority and you are looking at an education loan to fund them, here are a few factors which you have to look at before applying for an education loan.

Click to know on tax exemption on education loan.

There are many private and public sector bank offering education loan, but one has to choose accordingly.

Interest rates

Interest rates are affordable on education loan as the competion makes bank keep interest rates attractive. But, you need to compare the interest rates between different banks.

The other factor which is to be considered is fixed and floating rate of interest. While, one can go for floating rate when the interest rates are low, a borrower should consider fixed rates, if he believes that interest rates are likely to trend upwards.

What are the documents needed for an education loan?

Waiver period

Before applying check for waiver period. Banks usually do not expect the person to repay loan until he is employed. So, see that you have enough waiver period to start your repayment.

Fees and other costs

The other factors to be checked are fees and other costs such as processing fees, administrative fees, documentation costs etc., which should be minimal.


If you are applying for a loan which is more than Rs 4 lacs then you have to keep your collateral security may be asked by some banks.

Down payment

Banks look for a down payment if the loan amount exceeds Rs 4 lacs. Down payment may vary from 5% to 20%.
Interest rate calculation.

Check out for the interest rate calculation, as this will determine the interest you pay. Know whether it is charged on a daily reducing balance, or on a quarterly reducing balance.

Know the benefits of taking an education loan?


Read more about: education loan, interest rates
Story first published: Monday, April 15, 2013, 11:32 [IST]
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