An education loan is the most cost-effective way to obtain higher education without jeopardising the financial situation. You can finance your courses in India or abroad through an education loan. Education loans are available from banks for completing pre-specified courses at some institutions in India and overseas. Banks publish a list of certified courses and institutions to which they can lend money for education. If the course you want to take and the organization you want to attend are also on the bank's database, you can apply for an education loan conveniently based on your eligibility criteria. Before going to apply for an education loan it is always considered to check for the best available rates in the market. Hence, taking this into consideration we have listed here the top 10 banks that are currently offering the cheapest rates on education loans starting from 6.8% only.
Documents required to apply for an education loan
While applying for an education loan, make sure that you have kept the below-listed documents ready:
- Statement of admission from the educational establishment
- Marksheets from past educational experiences
- Age proof, ID Proof, address proof of the student
- Salary slip of the last 3 months
- Bank account statement of the last 6 months
- Recent passport size photographs
- Valid VISA for students going to study abroad
Factors to consider while applying for an education loan
Students who wish to finish their studies and seek further education have a wide demand for educational loans. Banks provide these loans to eligible students who need financial assistance to pursue their studies. These loans have boosted student's careers and encouraged them to seek higher education that they otherwise would not have been able to finance. However, not everyone is suitable for a student loan. Before lending money for whatever reason, banks set certain conditions for borrowers to follow. When a bank receives an application for an educational loan, the following are the major considerations one must need to know:
- The student's academic experience and credentials. The track record of grades, credits, and attainments will be taken into account.
- Accredited courses should be worthwhile to learn. They must have a high likelihood of placement and career structure in order for the borrower to be able to repay the loan.
- The organization where the course will be administered must also have importance. The university, college, or college you want should be certified and well-known.
- The applicant's ability to provide collateral for the loan, which makes the bank consider the type of collateral provided as well as its value.
- You can use the Education Loan EMI Calculator to figure out how much your monthly payments will be if you apply for an education loan and how much the overall amount of the loan will be. You will get an estimation of your equated monthly installment (EMI) by inserting a few loan-related specifics such as the loan amount, tenure, and interest rate.
- Once you've settled on a bank, read all the terms & conditions as well as the specifics on the loan application form.
- In most cases, you should select a bank that allows you to extend the repayment period in the event of a pause due to unexpected scenarios.
- You do not receive the loan amount. At the start of each semester, it is forwarded directly to the organization where you want to study. As a result, it must comprise all the perks and services provided so that you don't have to pay more.
If you have availed an education loan and are repaying it, you can subtract the interest accrued as a deduction from your net income under Section 80E. The exemption, though, is only available for the interest portion of the EMI. The principal component of the EMI is not tax-free. This is a one-time deduction that can only be claimed by an individual. It does not apply to HUFs or other types of taxpayers. The loan must be used to fund the higher education of the borrower, his or her spouse or children, or a student for whom the borrower is the legal guardian, in order to claim this deduction. This deduction is conveniently claimed by parents for loans taken for their children's higher education. The cumulative interest component of the EMI reimbursed during the financial year is deducted. There is no upper limit on the amount that can be deducted. The entire amount of interest paid can be claimed as an exemption. This exemption is valid for up to eight years, or until the debt is paid off, whichever comes first.
Education Loan Interest Rates
Currently, public sector banks provide the most affordable loans, with rates starting from 6.8%, for a loan amount of Rs 20 lakh loan with a tenure period of 7 years. Check out the top ten public sector banks below that are currently offering the best education loan rates for the same loan amount and tenure.
|Sr No.||Banks||ROI in %|
|1||Union Bank of India||6.80|
|2||Central Bank of India||6.85|
|3||Bank of India||6.85|
|4||Bank of Baroda||6.85|
|5||State Bank of India||6.85|
|6||Punjab National Bank||6.90|
|9||Bank of Maharashtra||7.05|