Everywhere, higher education costs more. Not all students can arrange funds for higher education on their own, especially when pursuing studies in reputable institutions. And the cost increases when you go abroad to complete your studies, as you pay tuition fees in foreign currency and take care of your accommodation, travel, food and other needs.
An education loan is a great solution for students who have earned honors but cannot manage sufficient finances to achieve their education and career goals. This is monetary aid granted to deserving students to meet the expenses of their studies. The student loan mainly covers the overall cost of education and provides a repayment holiday for a few months to help students find jobs before they start repaying their student loans.
Reimbursement usually begins 6-12 months after your study ends. However, this moratorium period may differ from one lender to another. An education loan helps parents pursue their financial goals without hampering existing savings to organize funds for their children’s education. Also, students have enough time to repay the loan when they start earning money.
It’s quick and easy to get a student loan these days. You can apply online or offline by visiting the nearest branch of your preferred bank. It is also advisable to do your due diligence on the interest rates and terms offered by the various banks. Compare multiple terms for different loan amounts and decide funds based on your needs.
You must go through the terms and conditions of the loan carefully and get clarity on all your doubts before applying for the loan. This is a long-term financial commitment, and you should have no confusion related to anything when applying for the loan. Experts often suggest applying for a loan from a bank you have an existing relationship with, but there’s no harm in checking out other options if you get a better deal.
The repayment period is often up to 15 years after the course period, plus the moratorium or repayment holiday if there is any on your loan. Some banks won’t charge you any processing fees for a specific loan amount, but a larger loan may incur a fee. Apart from your parents being co-borrowers, banks will not take any collateral or third party guarantees for a loan up to Rs 7.5 lakh. However, banks can ask for tangible collateral if the loan amount exceeds Rs 7.5 lakh. You should check these terms and conditions at a minimum, and the maximum amount usually varies between lenders, according to Bankbazaar.
One of the benefits of getting a student loan is that the interest on your loan is eligible for a refund of tax under Section 80E of the Income Tax Act 1961. However, the tax deduction applies to the interest portion of the EMI, not the principle. Remember to pay your EMIs on time and avoid defaulting on the loan. This can hamper parents’ credit scores and mess up students’ financial histories.
The table below will help you compare student loan interest rates for Rs 20 lakh for the loan term of 7 years. It also gives you EMIs which you will have to pay for the loan. You can check and decide according to your needs.
Interest Rate and EMI on Student Loan
Compiled by BankBazaar.com
Note: Student loan interest rates for all listed public and private banks (ESB) considered for data compilation; Banks whose data is not available on their website are not taken into account. Data collected from respective banks’ websites on June 21, 2022. Banks are listed in ascending order on the basis of interest rate, i.e. the bank offering the lowest interest rate on the student loan (regardless of loan amount and term) is placed at the top and the highest at the bottom. The EMI is calculated based on the interest rate mentioned in the table for a loan of Rs 20 lakh with a tenor of 7 years (processing fees and other charges are assumed to be zero for the calculation of EMI) .