Higher education is a dream of almost every student. However, it is usually associated with a hefty price tag, particularly for students looking to study in prestigious colleges and universities in India or overseas. Higher education often requires a significant amount, and not everyone might have the savings or income to meet these expenses. This is when an education loan might fill this gap. This article presents a well-structured guide for parents and students who need information about education loans. It highlights the eligibility criteria, application procedure, documents required, and a few do’s and don’ts to enable borrowers to make informed decisions.
What is an Education Loan?
An education loan is a form of financial support that may help students in financing their studies. It may include tuition fees, examination fees, transportation, accommodation fees, and other expenses. Financial institutions typically provide education loans for postgraduate, undergraduate, and professional courses in recognised institutions in India or overseas. The repayment of the loan generally starts after course completion, subject to a grace or moratorium period as per the lender’s policy.
Eligibility Conditions for Education Loan
Before submission, students need to be certain of their eligibility based on the common conditions. These may differ at different banks and NBFCs, but usually involve:
- The student needs to be an Indian national.
- Confirmation of admission to a recognised course/institute should have been obtained.
- There must be a co-applicant (commonly a parent/guardian).
- Academic progress and credibility of the course could be considered.
- The high credit score of co-applicants may also be given consideration.
Steps to Apply for an Education Loan
Understanding how to apply for an education loan may help simplify the education loan process. Here is a step-by-step explanation of the commonly used steps to secure an education loan with ease:
- Research and Compare: Begin by reading about various education loan schemes offered by banks and NBFCs. Compare their interest rate, loan tenure, moratorium period, and other aspects.
- Check Eligibility: You may visit the lender’s eligibility calculator or go through their terms to check whether you are eligible. Institute, course and co-applicant background are some key considerations when determining eligibility.
- Estimate Loan Amount: Add up your total education cost and determine the loan amount that you may need based on your savings and alternative sources of financing.
- Collect Documents: Collect all documents necessary for an education loan, such as admission letters, academic mark sheets, identification proofs, etc.
- Fill Application Form: Apply online or offline by visiting the lender’s official website or their closest branch. Fill in all details correctly and submit the form along with the necessary documents.
- Loan Assessment and Approval: The lender normally verifies your documents, checks for creditworthiness, and may contact you or your co-applicant to gather additional information before approving the loan.
- Loan Disbursal: Once sanctioned, the disbursal of the loan amount can be either to the institution itself or in stages as per the study calendar.
Education Loan Document Requirement
On-time submission of documents tends to make your loan processed on time, without any delay. Here is the list that indicates some commonly required documents:
- Loan Application Form: Properly filled form with recent passport-type photos.
- Proof of Identity (POI): Aadhaar card, PAN card, passport, or voter ID are some valid documents for POI.
- Address Proof: Passport, Aadhaar card, utility bill, and ration card.
- Academic Documents: Latest qualification mark sheet, 12th, and 10th mark sheets.
- Proof of Admission: Institution’s offer letter or admission letter.
- Course Fee Structure: Institution-issued document containing tuition and other fees.
- Co-applicant’s Income Proof: IT returns, salary slips, or Form 16, may be required.
- Bank Statements: The past 6 months’ bank statements can be required from co-applicants.
- Collateral Documents (if required): Property documents, valuation reports, etc, for loan amounts above a specified amount.
- Passport and Visa: Usually needed for foreign education loans.
Also, one must always find out from the lender whether any specific document required for education loan so that last-minute hassles may be avoided.
Do’s and Don’ts of an Education Loan
Before proceeding, understanding the practical do’s and don’ts associated with education loans may help prevent future uncertainties:
Do’s of Education Loan:
- Carefully read the loan agreement, including interest rate conditions and repayment terms.
- Have a strong credit history, particularly for the co-applicant.
- Take into account future earning potential from the selected course before deciding on the loan amount.
- Monitor your disbursements and instalments, particularly during the moratorium period.
- Keep copies of all communication and official documents of your loan.
Don’ts of Education Loan:
- Overlook repayment dates, even if the loan is under a moratorium period.
- Apply to several lenders simultaneously, as it may impact credit assessment.
- Overborrow, which usually increases liabilities in the future.
- Neglect reading the fine print regarding extra charges such as processing charges, prepayment penalties, or insurance premiums.
Conclusion
An education loan is a valuable financial tool that may support students in getting their higher education without an instant financial burden. This loan tends to become a reliable financial choice for students seeking quality education in India or overseas. An informed strategy, along with timely documentation and planning, can help in smooth execution. By understanding eligibility, application procedures, and documentation, students and parents can make informed decisions that cater to educational aspirations without undue financial pressures.
