How to avail an education loan

Indian banks provide education loans to students who are Indian nationals and are pursuing approved graduate, post-graduate and professional courses in the country and abroad. The repayment starts after a year of course completion or six months after the student gets a job, whichever is earlier. The maximum loan that a student can avail of for studying in India is Rs 10 lakh and Rs 20 lakh for education abroad.

Inclusions: An education loan can cover accommodation charges, expenses related to the purchase of books and equipment, examination and library fee, travel expenses, and insurance premium for the student.

Documents: The admission letter, along with the fee structure, KYC documents, proof of age, identity and address, income documents, such as bank statements, salary slips, and IT returns are to be submitted along with the application form.

Margin: While no margin is required for loans up to Rs 4 lakh, a 5% margin is applicable for amounts more than Rs 4 lakh for studies in India, and 15% in case the studies are pursued in a foreign country.

Collateral: For loans up to Rs 4 lakh, no collateral is required, while for those between Rs 4 lakh and Rs 7.5 lakh, a third-party guarantee for 100% of the value of loan is needed. In case the loan value is above Rs 7.5 lakh, a suitable collateral security would be required.

Points to note

> There are no loan processing charges for education loans.

> The rates are fixed by the banks as per their respective base rates, plus a certain mark-up, as decided by the bank. Women get a concession of at least 50 bps.

> The borrower or co-borrower can avail of tax benefit under Section 80(E) of the Income Tax Act of India.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.