Monday, February 6, 2023

Latest Posts

What is an Education loan – About & Documents required

Quality education is one of the primary aspirations of individuals willing to prosper in their careers. However, alongside rising enrolment, the cost of education has gone up significantly over the recent years, leading to a financial burden. As a result, most individuals seek funding options like an education loan to finance such expenses.

What is an education loan?

Lending institutions offer different financial products to help students pursue higher education. The funds curated especially to help individuals finance advanced study courses are called education loans.

Individuals can utilize this amount to fund tuition, accommodation, stationery supplies, and even travel costs when availing of study loans for abroad.

However, potential borrowers must thoroughly know this funding mode’s various features before opting for the same.

Features of a student loan

Here is a list of prominent features of an education loan:

  1. Interest rate: The rates of interest vary across financial institutions. Therefore, applicants must compare different lenders before choosing the one offering the most suitable rates.
  2. Loan amount: This amount varies, depending on the course pursued. Lenders also take into consideration whether the applicant is seeking an education loan for abroad or in India.
  3. Collateral requirement: Most education loans are unsecured, i.e., borrowers need not mortgage any collateral to avail these funds.
  4. Co-borrower or guarantor: An additional requirement for collateral-free student loans is that applicants need to provide a guarantor or co-borrower as security. This guarantor has to be an immediate family member, such as a parent or a spouse. However, individuals willing to avoid this hassle can avail of an education loan against property.
  5. Repayment tenor: Student loans generally come with long tenors accompanied by a moratorium period.
  6. Availability: In India, individuals can avail an education loan scheme for post-secondary courses only.  However, school-level education is quite expensive as well. In that case, parents can opt for a property loan to finance their child’s education.

However, if you still wish to get an unsecured student loan, you must know its eligibility requirements.

Who can apply for an education loan?

Financial institutions generally prefer meritorious students meeting the following parameters for an education loan:

  • Age: Applicants must be at least 18 years of age. Although the RBI provides no upper age limit for student loans, specific financial institutions may have guidelines related to it.
  • Residence: Applying individuals must be resident citizens of India.
  • Educational Qualification: Students must have completed schooling of higher secondary level and must be pursuing an undergraduate or post-graduate course to avail of such funding.
  • Income: Whether earning themselves or having an earning parent, individuals must ensure they meet the minimum income requirement of their lending institution.
  • Admission status: Applicants must have confirmation of admission to their chosen institute.
  • Educational institute: Lenders offer such funds to students of specific colleges and universities only. Therefore, make sure the institute is affiliated with a competent authority, whether in India or abroad.
  • Courses: Individuals can avail funds only for specific educational courses. Here is a list of the standard courses funded by most lenders:
    • Undergraduate diploma and degree courses.
    • Post-graduate diploma and degree courses.
    • Professional courses, including Medical, Management, Law, Engineering, Agriculture, Computer Sciences, Veterinary, and Dental.
    • Certificate and training courses in Aeronautics, Shipping, Nursing, Teaching, and Pilot Training.
    • Vocational courses under-recognized government institutes.
    • Other courses under government programs, including State Skill Missions, State Skill Corporations, or National Skill Development Corporation.

The above list may differ from lender to lender.

Individuals unable to meet these requirements can qualify for a loan against property by meeting these simple eligibility criteria instead. However, those applying for a student loan must consider the documents required as well.

What are the documents required?

Applicants must submit the following documents to qualify for an education loan:

  • Recent passport-sized photographs.
  • ID proof, including Aadhaar card, passport, Voter’s ID, driving license, and passport.
  • Proof of residence.
  • Age proof.
  • Income proof, including Form 16, recent bank statements, salary slips, and ITR copies.
  • Copy of most recent educational certificate or marksheets of 10th and 12th standard examinations.
  • Letter of admission into the respective institute.
  • Proof of total course expenses.

Students failing to produce any of the above documents can apply for an education loan against property instead.

Although submitting required documents is one of the mandatory things to do for individuals applying for a loan against property for education, you can avail these loans without admission-related paperwork as well.

Note that several financial institutions pre-approve such financial products for their existing customers. In that case, they need not go through the elaborate documentation process. They can check their pre-approved loan offers by submitting their name and contact information before applying.

New applicants can simply visit their preferred lender’s website to fill in and submit the application form. Thereafter, they can quickly avail an education loan against property after submitting all mandatory documents with a representative.

Latest Posts

Don't Miss

Stay in touch

To be updated with all the latest news, offers and special announcements.