Education loan: How to apply for an education loan

Loan amount

Education loans typically cover the course fees as well as charges that can be attributed to education which may include accommodation charges, study material and equipment, travel expenses. etc. The quantum of loan also depends upon the course fee and the total income of the family.

Who can avail?

A student can avail the loan with the parents or guardian taken as co-applicants. The repayment typically begins a year after the completion of the course or within six months of getting a job, whichever is earlier.

Documents required

• College admission letter and college fee structure
• KYC documents
• Income documents of the applicants including bank statements, salary slips and IT returns

A pre-admission sanction of loan can be availed for the purposes of application to foreign universities.

Margin percentage

Loans of up to Rs 4 lakh do not require any margin. For loans above Rs 4 lakh, a margin of 5% is applicable for studies in India and 15% for studies abroad.

Guarantee or collateral

The bank may ask for a third party guarantee or collateral depending upon the value of the loan. Collateral can be in the form of insurance policy in favour of the bank. Premium of the policy can be included in the loan amount.

Points to note

• In case of girl students, a concessional rate of interest can be availed.
• Once the loan is availed, the borrowers are eligible for income tax benefit under section 80(E).

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)