Every person places a high priority on receiving a quality education, thus students will do whatever it takes to get it. However, because of the rising expense of education, borrowing money for education seems to be the only viable option. Students can apply for an education loan to get the money they need to finish their studies. To assist in educating the next generation of innovators and leaders, many banks and NBFCs in India provide education loans at affordable rates.
What is an education loan?
Loans are defined as sums of money or other assets given to demandants or applicants with the promise of future repayment by a specific date. The fundamental principle is the same, even though the financial system has changed this straightforward statement into a more complex technical concept. In India, students who require a sizable sum of money to further their education sometimes turn to bank organizations for an education loan. Generally, candidates who want to study degrees that would lead to a career in business or employability can get these loans for their further education.
Types of education loan
As many different sorts of study loans as there are educational programs they support. Student loans for diploma courses, study abroad programs, and skill-based loans are just a few examples. They are categorized under the following headings:
- Domestic education loan
- Overseas education loan
Depending on the applicant’s educational background, these study loans might also be divided into additional categories. In addition, they are divided into secured and unsecured loans. This is based on whether or not the applicant is able to provide collateral or a guarantee. There are further categories, which are shown below.
Based on course
- Undergraduate loans: This kind of student loan is offered to help students with their educational costs so they can finish their undergraduate degrees. Typically, an undergraduate degree is a 3- to 4-year program with a variety of specializations. An undergraduate degree makes it easier for people to find quality employment and start making money.
- Post-graduate loan: Many undergraduate students want to continue their studies with a postgraduate study, which in India is often a 2-year program. To gain a deeper understanding of the selected field, an advanced degree is desired.
- Career development loans: Many professionals who spend a few years working in corporate positions decide to take a career break. Then they may enroll in professional training programs in order to increase their employment prospects. Such people would work extremely hard to obtain accepted into reputable technical and business schools in order to develop their talents and advance their careers.
Based on collateral type
- Loan against property/deposit/securities: To secure the funding you need to further your education, you can put up immovable assets. This includes equity shares, bonds, debentures, fixed deposit certificates, residential, commercial, and other types of real estate, as well as gold deposits.
- Third-party guarantee: The student may be able to obtain an education loan with the aid of a guarantee letter from a bank employee or a home bank.
How does it work?
Loans for education assist students in covering both academic and extracurricular costs during their studies. Like any other loan, it has repayment terms that include paying educational loan interest on the principal borrowed. The monthly payments are made against the loan. These are commonly referred to as Study Loan EMIs. This allows applicants to gradually return the loan amount borrowed.
Features and benefits of higher education loan
- To further your education, you can apply for loans for higher education both in India and overseas.
- Banks provide various sums for students in India and overseas.
- Benefit from lengthy loan payback terms for higher education.
- If you borrow a larger sum of money, the bank might want collateral.
- A co-applicant is required for a full-time course.
- Simple and easy documentation process.
- A variety of collateral choices are available to you. This includes residential property, fixed deposits, national savings certificates, LIC policies, etc. Collaterals, however, may vary from one bank to another.
- Under section 80E of the Indian Income Tax Act of 1981, taking out a higher education loan qualifies you for tax advantages.
- Direct loan payments are made to your educational institutions. It may be sent in full or in parts depending on your course’s requirements.
- You can pay off your college tuition, cover travel, and accommodation costs, buy books and computers, etc.
- Based on the student’s financial situation, banks may issue a financial capability certificate, which is needed while studying abroad.
- The availability of loans for additional students in the same family may be impacted by the existence of an education loan.
- There is no age restriction when applying for an education loan.
- If additional research begins while the moratorium is in effect, a top-up loan will be made available. Repayment will be processed once the completion of further study.
- The joint borrower will typically be the parent or a guardian. However, if the student is married, either the spouse or the parents or parents-in-law may be listed as a joint borrower.
Every student who plans to apply for an educational loan (together with their parents or guardians) must be aware of the fundamental characteristics of an education loan. The pupils would be better able to bargain with the bank(s) if they were aware of these fundamental truths.