Student Loan: 8 Things To Check Before Availing Loan For Education

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Studying abroad in a reputed college is a dream for many students and parents. Education loan plays a vital role and comes to the rescue for funding college fees and other things.

Aspiring students and parents despite high interest rates and cost of living can pursue graduate and undergraduate courses abroad with the help of student loan.

There are many banks including private and public sector banks offering education loan for eligible students.

The loan amount varies with the bank and eligibility of the student. Students can avail up to a maximum of Rs 15 lakhs. For students looking to study abroad, the amount can be up to Rs 20 lakhs. While some banks offer loan upto 1 crore also.

Things to consider before availing loan for education:

Interest rates

Interest rates offered by banks vary and a small difference can also make an impact as it has to be paid for a longer duration.

Students should check whether interest rates charged is fixed or floating which will also impact in the long run.

Interest rates also depend on the amount of the loan required and note that there is a concession of 0.50% on interest for girl students.

Banks like SBI, offer 1% concession for full tenure of the loan, if interest is serviced promptly as and when applied during the moratorium period, including course duration.

Waiver period

Banks and institutions offering student loan don't expect the student to pay the loan until his employment after completion of the course.

Make sure to check this point with your loan provider. Longer the duration, will allow you pay at your own pace.

Various banks provide repayment terms based on the size of your loan. You need to see the best one that is suited for you.

Fees and other charges

Applicants should check the fees associated with the education loan such as processing fees, administrative fees, documentation costs etc should not be huge and burn your pocket.

Students should also check for fee charged for early closure of the loan.


Collateral is required for loan amount which exceeds Rs 4 lakhs. In such cases parents can be joint borrowers for the higher loan amount where tangible assets are required.

Collateral can be fixed deposits, flat, house, bungalow, land, shop, etc. Banks asks for security to mitigate the risk involved in the credit in case of default.

While, Credila can offer up to Rs 20 Lakhs without surety for talented and deserving applicants.

Down payment

Note that banks will not pay the entire amount, some amount which is called as down payment has to be paid by the applicant.

The down payment differs with bank and eligibility and it can range between 5%-20% of the loan amount depending on banks.


Individuals can claim tax benefits on the interest repayment part, not on the principal amount of education loan. This deduction is over and above the 80C limit and there is no maximum limit on claiming deduction under 80E.

Vidyalakshmi portal

Now aspiring students can get details of education loans schemes of bank by visiting the

This website was launched recently to benefit students and provide a single window for students to access all information on Educational Loans provided by Banks and Govt Scholarships.


Generally, PSU banks offer lower interest rates when compared to private banks. However, you may have to do some running around to get your loan sanctioned on time.

Read more about: education loan
Story first published: Friday, October 14, 2016, 11:46 [IST]
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