Education Loan
Last Updated : April 20, 2020, 8:39 p.m.
Education Loan is offered to the students for their higher education. And the purpose of the loan is quite clear i.e. to meet the educational needs such as admission fees, purchase of books, and even travel expenses associated with overseas studies. Whether the student has a dream to study abroad or India, it can be true with the help of education loans. To find out the best loans among the wide range of schemes, you just have to compare their rate of interest. It is because the interest rate greatly impacts your loan journey. But the focus must not be solely on the interest rate. You also need to see which offers you the adequate loan, plus collateral norms and other stuff. Let’s read more about education loans provided by lenders in India.
Education Loan Interest Rates of Different Lenders
| Bank Name | Education Loan Interest Rate (per annum) |
|---|---|
| State Bank of India (SBI) | 6.90% - 9.30% |
| Punjab National Bank (PNB) | 6.90% - 9.55% |
| Canara Bank | 7.40% - 9.40% |
| Union Bank of India | 7.20% - 10.45% |
| Bank of Baroda | 6.85% - 9.95% |
| Axis Bank | 13.70% - 15.20% |
| ICICI Bank | 11.25% - 11.75% |
| HDFC Bank | 9.25% - 13.68% |
| Kotak Mahindra Bank | 12.33% - 16.00% |
| Tata Capital | 10.99% |
Moratorium Period on Education Loans
After knowing about the details of all banks’ education loan interest rates, you must know about the repayment period. The bank offers a repayment holiday to students so that they can manage their finances without any hassle after the course completion. In the repayment period of maximum 15 years, you probably get up to 12 months of moratorium. Why does it matter? It is important because the parent gets relief from 1-year loan payment and can focus on other financial issues in case you don’t get a job immediately after the completion of the course. .
During the repayment holiday, you don’t have to pay for your borrowed amount. But the interest rate to your outstanding balance is accumulated as per the bank fixed rates. The Moratorium is to give a break to the borrower from the regular payments. And it will be resumed after the period reaches its endpoint. For special skill development and institutional courses, the moratorium is based on the course duration. Suppose if the course duration is of 1-year maximum then the borrower gets up to 6 months moratorium period on their education loan. Take a look at the below-mentioned loan tenures of different banks for the education loan.
| Bank Name | Tenure |
|---|---|
| State Bank of India (SBI) | 3 to15 years |
| Punjab National Bank (PNB) | 15 years |
| Canara Bank | Up to 15 years |
| Union Bank of India | 10 to15 years |
| Bank of Baroda | 10 to 15 years |
| Axis Bank | 15 years |
| ICICI Bank | 7-10 years |
| HDFC Bank | 15 years |
| Kotak Mahindra Bank | 15 years |
| Tata Capital | 1 to 6 years |
EMI Calculator for Education Loan
After interest and tenure, the next step for your education loan is the calculation of how much you will pay to the lender. And, to make it smoother, the bank provides you with an online tool. The loan is to be paid in Equated Monthly Installments (EMI) over the tenure you choose to go with. To find out what could be your EMI after the loan sanction, you can take a little help from the online EMI calculator tool. Just enter a few details of your education loan to get a quick result. But, first, you must know that the calculator works in a mathematical formula which is [P x R x (1+R)^N]/[(1+R)^N-1].
Here – P indicates the loan amount, R is the rate of interest and N is the loan tenure. So now you must know how the online tool works. See the below example to know what benefits it could provide to the borrower.
Suppose, you borrow INR 25 lakh to get admission to a reputed university and the bank levies an interest rate of 12.33% per annum. Then, as per the EMI Calculator, the EMI would be INR 30,537 for 15 years. If the borrower is aware of the EMI, then it is easy to make a payment schedule as per his/her daily monthly expenses.
Tax savings from Education Loan
Not only do you get the best education with the help of education loans but, you can also save on your tax payment with the same Under the income tax act of 80(E), borrowers who pay their EMI regularly during the tenure with no default payment can claim this benefit. You can claim full tax deductions on interest payments in a financial year. The deductions can be claimed on the education loan up to 8 years, after that, the borrower doesn’t have the advantage. Whether the parent or student can claim the benefit whosoever is the primary debtor for the loan. The tax benefit is to provide relief to the borrower and give the right education to the student at an affordable price in India or abroad.
The tax claim would be violated if the student becomes a resident of abroad and gives up his Indian citizenship. In that case, both the parent and student are unable to claim the tax benefits. So make sure you read all the terms and conditions of your education loan before applying for it.
How to Apply for an Education Loan?
To apply for a loan, you can visit the official website of the lender and submit your details as sought. The bank will check the details and approve only if you meet the eligibility criteria for the education loan. After you receive the confirmation of the loan from the bank, you can pay the applicable fees required for the loan processing.
The next step for the loan is documentation, you can visit the bank branch to submit the essential documents required by the bank. Once the documents are verified and approved, your loan would be disbursed within a few weeks.
Education Loan Customer Care Services
You can contact the bank service provider and dial the customer care number to find a solution to your education loan problems. Just visit the bank website or dial the mentioned number or write in your queries and send them to the registered email address of the bank.
Now, you can find the answers to your loan queries without going anywhere with digital services. Your journey towards education doesn’t have a full stop when you have support from top banks in India in the form of education loans.
