As tuition fees, textbooks, and other academic expenses have been skyrocketing, financing studies has now become one of the major dilemmas for several students and their families.
In this regard, an education loan seems to be the most practical option when an individual plans to pursue higher studies in India or abroad. Major financial institutions and banks offer a variety of loans for education purposes, either on a collateral or non-collateral basis.
This blog covers all details on how to take education loan in India to help students make an informed decision.
What is an Education Loan?
An education loan is a form of financial aid given by banks and other financial institutions to help students pursue higher education.
Unlike scholarships or grants, it is a credit facility that students must repay with interest over a period of time.
An education loan is used to pay different kinds of educational costs such as tuition fees, examination fees, books, study materials, laptops, accommodation and other approved educational expenses.
Reasons to Apply for Education Loan
Education is a valuable asset for any individual who wants to pursue a career of their choice. However, the rising cost of quality education can be challenging for students from economically weaker backgrounds.
An education loan can help them pursue their dreams and fulfill their ambitions when finances are a roadblock. The reasons why students can apply for an education loan are as follows:
| Benefit |
Description |
| Lower interest rates |
Education loans generally carry lower interest rates than personal loans and many other borrowing options, making them a more affordable way to finance higher education. |
| Flexible repayment options |
Most lenders offer student-friendly repayment structures, including moratorium periods that allow repayment to begin after course completion or employment. |
| Collateral-free financing |
Some organizations offer education loan without collateral for smaller amounts, which can reduce the need to pledge assets and make funding more accessible. |
| Deferred repayment facility |
Borrowers may benefit from grace periods or payment deferment options, helping them manage finances until they complete their studies and start earning. |
| Tax benefits under Section 80E |
The interest paid on an education loan qualifies for tax deductions under Section 80E of the Income Tax Act, helping reduce the borrower’s overall tax liability. |
| Reduced financial burden on parents |
Education loans enable students to fund their studies independently and take responsibility for repayment after graduation, easing the financial pressure on their families. |
Types of Education Loans
There are several types of education loans offered in India by both national and private sector banks and financial institutions. Different types of education loan are discussed below:
| Type of education loan |
Description |
| Domestic education loan |
Designed for students pursuing higher education at recognised colleges, universities, or institutions within India. |
| Study abroad education loan |
Intended for students planning to study at recognized universities and educational institutions outside India. |
| Undergraduate education loan |
Offered to students enrolling in bachelor's degree programmes, typically lasting 3 to 4 years. Applicants are required to have completed Class 12. |
| Postgraduate education loan |
Available for students pursuing master's or other postgraduate programmes, usually after completing a Bachelor's degree. |
| Education loan against collateral |
Secured against financial assets and immovable assets or other approved securities |
| Education loan with third-party guarantee |
Offered based on a guarantee provided by a third party, such as a relative, guardian, or family friend, who agrees to support loan repayment if required. |
How to get Study Loan in India: Knowing the Basics
Before we explain the process of how to get education loan after 12th in India, it is important to understand the basics with respect to interest rates, eligibility criteria, education loan age limit, and the list of documents required for applying.
Financing and Interest Rates Offered for Student Loans in India
In India, various banks and financial institutions provide education loans with different interest rates, repayment terms, and borrowing limits.
| Particulars |
Details |
| Maximum loan amount for studies in India* |
Up to INR 1.25 crore, depending on the lender and eligibility criteria. |
| Maximum loan amount for overseas studies* |
Up to INR 1.50 crore for admission to recognised international institutions. |
| Financial coverage* |
Subject to the lender's assessment and loan terms, financing can cover up to 100% of the total education cost in eligible cases. |
| Margin requirement |
Generally, ranges between 0% and 15% of the total education cost, depending on the loan scheme and amount. |
| Interest rate range |
Typically, between 8% and 11.5% per annum. |
| Factors affecting interest rates |
Loan amount, course selected, institution, applicant profile, and lender policies. |
| Availability |
Offered by public sector banks, private banks, and non-banking financial companies (NBFCs). |
Please note: Loan amounts and coverage vary depending on lender policies and applicant profiles.
Fixed vs Floating Interest Rates on Education Loans
Before understanding how to get a student loan, students must be aware of how interest rates are calculated, as it can impact the total repayment amount.
Lenders can calculate interest by using different interest methods, depending on the loan scheme and repayment stage.
Therefore, knowing the difference between these interest rates is important to align financial requirements with the repayment capacity.
| Basis |
Fixed interest rate |
Floating interest rate |
| Meaning |
The interest rate remains unchanged throughout the loan tenure. |
The interest rate fluctuates based on market conditions and benchmark rates. |
| EMI stability |
Monthly instalments remain constant, making financial planning easier. |
EMIs may increase or decrease depending on changes in interest rates. |
| Risk factor |
Lower risk as borrowers are protected from market fluctuations. |
Higher risk due to the possibility of rising interest rates. |
| Initial interest rate |
Usually starts at a slightly higher rate. |
Often begins with a comparatively lower interest rate. |
| Benefit during rate cuts |
Borrowers do not benefit if market interest rates fall. |
Borrowers can benefit from lower EMIs or reduced interest costs when rates decline. |
| Suitable for |
Individuals who prefer predictable repayments and fixed budgets. |
Individuals who can accommodate some variation in their monthly repayments. |
| Long-term cost |
It may be higher if market rates decrease significantly over time. |
Can result in lower overall borrowing costs if rates remain stable or decline. |
Eligibility Criteria for an Education Loan
While some lenders may have slightly different requirements, a few general conditions that would determine eligibility for getting an education loan in India are as follows:
| Criteria |
Requirement |
| Residency |
The applicant must be an Indian citizen or resident. |
| Age |
Generally between 16 and 35 years, depending on the lender's policy. |
| Educational qualification |
The applicant should have completed Class 12/Bachelor’s degree or the qualifying examination required for the chosen course. |
| Admission status |
Admission must be secured in a recognized educational institution in India or abroad.
In India, the institution should be recognised by relevant authorities such as UGC, AICTE, the Government, or other approved regulatory bodies. |
| Co-applicant |
A parent, guardian, spouse, or parent-in-law (for married applicants) is generally required as a co-applicant. |
Can Students get an Education Loan Without Collateral?
Yes. Students can obtain an education loan without collateral.
It is also referred to as an “unsecured” education loan, and helps students pursue higher education without the need to pledge any assets like property, land, or fixed deposits as security.
The table below gives the eligibility criteria for individuals who want to know how to get a student loan without collateral:
| Criteria |
Requirement |
| Academic performance |
A strong academic record is generally preferred. Many lenders look for consistent scores, which may vary, depending on the lender’s terms and conditions. |
| Financial co-applicant |
Since no collateral is provided, lenders closely evaluate the income, financial stability, and credit score of the co-applicant, usually a parent or guardian. |
| Course selection |
Professional, career-oriented, and STEM-related undergraduate and postgraduate programmes are often viewed more favourably by lenders. |
| Country of study |
Students admitted to recognized institutions in countries such as the USA, UK, Canada, Australia, Ireland, and Germany may have higher approval chances. |
| University reputation |
Admission to recognized and reputed universities can strengthen the loan application, as some lenders maintain approved institution lists. |
| Creditworthiness |
The overall repayment capacity of the applicant and co-applicant is an important factor in the approval process. |
List of Education Loan Documents Required for Applying
When applying for an education loan, applicants must provide a list of academic, identity and financial documents. These documents are as follows, although the actual list may vary across lenders.
| Document category |
Details |
| Loan application form |
Duly completed the education loan application form along with recent passport-sized photographs. |
| Academic records |
Copies of Class 12 marksheets, along with other relevant academic certificates, if applicable. |
| Admission and fee details |
Admission letter and a detailed fee structure or estimated cost of the course from the institution. |
| Age proof |
Documents such as Aadhaar Card, Passport, Driving Licence, or any other government-issued proof of age. |
| Identity proof |
Valid identity documents such as Aadhaar Card, Passport, Voter ID, PAN Card, or Driving Licence. |
| Address proof |
Utility bills, rental agreement, Passport, Aadhaar Card, or other acceptable proof of residence. |
| Income proof of co-applicant/guarantor |
Recent salary slips, Form 16, Income Tax Returns (ITR), and bank statements, typically for the last six months. |
| Financial documents of co-applicant |
Additional documents related to employment, business income, or financial assets, if requested by the lender. |
How to get Education Loan After 12th in India?
To get an education loan, students must evaluate their lending options, meet eligibility requirements, and complete the application process with the necessary documents.
Follow the steps given below to understand how to take education loan after 12th in India:
| Step |
Process |
| 1. Research loan options |
Compare education loan schemes offered by different banks and financial institutions based on interest rates, loan amounts, repayment tenure, moratorium periods, and eligibility criteria. |
| 2. Shortlist suitable lenders |
Identify lenders that best match your academic profile, funding requirements, preferred course, institution, and co-applicant eligibility. |
| 3. Gather required documents |
Prepare all necessary documents, including academic records, admission proof, identity and address proofs, and income documents of the co-applicant. |
| 4. Submit the application |
Complete the education loan application online through the lender's portal or submit it at a branch, depending on the lender's process. |
| 5. Verification and assessment |
The lender reviews the application, verifies the submitted documents, and evaluates eligibility based on academic and financial criteria. |
| 6. Loan sanction and disbursement |
Once approved, the lender issues a sanction letter outlining the loan terms, after which the approved amount is disbursed as per the agreed conditions. |
How to Repay an Education Loan?
Repayment terms vary across lenders and may include a moratorium period during and after the course. The different options for repayment of an education loan are as follows:
| Repayment option |
Description |
| EMI (Equated Monthly Instalments) |
The borrower repays the loan through fixed monthly instalments that include both the principal amount and the applicable interest. |
| Step-up repayment plan |
The repayment amount starts lower and gradually increases over time, typically in line with the borrower's expected career and income growth. |
| Interest-only payments |
During the course period, the borrower pays only the interest component of the loan, with principal repayment beginning later as per the loan terms. |
| Full payment post-graduation |
The borrower begins repaying the loan after completing the course, often following a moratorium period granted by the lender. |
Final Thoughts
Education loans can provide more opportunities to pursue higher education by alleviating financial pressures and allowing students to concentrate on their studies.
Students who understand the eligibility requirements, documentation requirements, and the options for repayment can make informed decisions that best suit their needs.
If you are planning to pursue an undergraduate degree after Class 12, you must explore programmes that align with your interests and career aspirations.
Getting into a reputed college such as JAIN (Deemed-to-be University) may be the first step towards getting the financial aid that you need to set a solid foundation for your future.
With access to quality education, students have a broad range of options to choose from for higher education studies that align well with their career aspirations.
FAQs
Q1: Can a student get education loan?
A1: Yes. Students can apply for an education loan to finance higher studies in India or abroad. Approval depends on factors such as admission status, academic performance, and the eligibility of the co-applicant.
Q2: Where to get education loan?
A2: Education loans are available through public sector banks, private banks, and non-banking financial companies (NBFCs). Students can compare lenders based on interest rates, loan amounts, and repayment terms before applying.
Q3: How much time it takes to get education loan?
A3: The processing time for an education loan generally ranges from a few days to several weeks. The timeline depends on the lender, loan amount, and completeness of the submitted documents.
Q4: What documents are required to apply for an education loan?
A4: Commonly required documents include academic records, admission proof, identity and address proofs, passport-sized photographs, and income documents of the co-applicant or guarantor.
Q5: How can I improve my chances of education loan approval?
A5: Maintaining a strong academic record, securing admission to a recognised institution, submitting complete documentation, and having a financially stable co-applicant can improve approval chances.
Q6: What is the difference between secured and unsecured education loans?
A6: A secured education loan requires collateral such as property, deposits, or securities, whereas an unsecured education loan does not require collateral and is approved based on academic and financial credentials.
Q7: Why take an education loan after 12th?
A7: An education loan helps students access quality higher education without immediate financial constraints. It can cover tuition fees, accommodation, study materials, and other education-related expenses.
Q8: What courses are eligible for education loan after 12th?
A8: Most recognized undergraduate programmes, including engineering, medicine, management, law, science, commerce, arts, and professional courses, are generally eligible for education loan funding.
