A student loan is a prudent choice to fund your education independently without depending on your parents. Aspirants these days take pride in earning a self-made badge by opting for a student loan. If you also want to opt for an education loan, it is crucial to understand the nuances related to education loans. So, here’s what you must know about an education loan for students before you embark on the student loan journey.
Key highlights:
- What is an Education Loan?
- How Does a Student Loan Work?
- What are the Types of Education Loans
- Education Loan Benefits
- Atmanirbhar
- Quality Education
- Why Should You Liquidate Your Family Savings or Assets
- Credit Score
- Education Loan Eligibility
- Some Important Documents
- Student Loan Process – Application Process
What is an Education Loan?
An education loan is money that a student borrows from a bank or financial company to pay for their studies. It is specially designed to support students who want to continue higher education in India or abroad but may not have enough funds ready.
The loan covers a wide range of expenses such as tuition fees, hostel or accommodation charges, books, laptops, travel, and other study-related costs. Some education loans also include expenses for exam fees, study tours, or project work.
One of the biggest advantages of an education loan is that students don’t need to repay it immediately. Repayment usually starts after the course is completed or once the student begins earning. The amount is paid back in small, manageable parts known as EMIs (Equated Monthly Installments), which makes it easier for students and families.
By choosing an education loan, students can focus on their learning and career goals without financial pressure. It gives them the freedom to study at top universities and build a brighter future.
How Does a Student Loan Work?
When you borrow a student loan, it has to be repaid responsibly. It comes with a moratorium period, which is like a grace period where you are exempt from making payments for a short period of time. This period is around 6 months and can vary depending on the lender.
At Avanse Financial Services, we advise our student community to make small contributions in the form of simple interest (SI) or partial interest (PI) during the moratorium period. You must remember that this holiday period is not an interest-free period and interest will begin to accrue from day one. Therefore, it is crucial that you pay SI/PI during the moratorium period. Also, it will instill financially prudent habits early on in your life.
What are the Types of Education Loans
Two types of student loans are available - secured (with collateral) and unsecured (without collateral). You will have to provide residential property (apartment/house) or a fixed deposit as collateral when you opt for a secured student loan. An unsecured student loan does not require collateral. You can choose between the two based on your financial requirements and preferences.
Education Loan Benefits
Atmanirbhar
An education loan will enable you to take control of your higher education without being dependent on your parents or guardians. It will provide you with the financial independence to achieve your academic ambitions and handle your education costs wisely.
Quality Education
With an education loan, you can decide on your educational institution or course that is most suitable for you, regardless of the cost. You don’t have to settle for anything less because of your budget constraints, which will allow you to target the best universities or courses.
Why Should You Liquidate Your Family Savings or Assets
Rather than exhausting your family’s savings, long-term investments or assets, you can opt for an education loan. It will enable you to meet educational expenses without touching those funds. This guarantees financial security for both your current and future requirements in case of any emergency.
Credit Score
Repayment of your education loan in time creates a good credit history early on in life. A good credit score will enhance the likelihood of unlocking benefits when opting for other financial solutions, such as a car loan, home loan, or credit card.
Education Loan Eligibility
Students can apply if they
- Are Indian citizens who are 18 or older
- Have a confirmed admission before the final disbursal
- Have a co-borrower who earns in India
Co-borrowers also need to meet the following criteria
- Must be an Indian citizen and should be a parent, legal guardian, sibling or other blood relative
- Must have a bank account in India that allows them to sign cheques
- Must be the primary debtor
Please check your chosen lender’s education loan eligibility before applying.
Documents Required For Applying For Student Loan
Before applying for a student loan, ensure all your documents are in place. This will enable a seamless student loan process. Here are some essential documents:
- Student KYC and educational documents
- Document with the details regarding the course and fees
- Co-borrower KYC and income details
- Collateral documents (for secured student loan)
Also Read: Benefits of Taking an Education Loan
Student Loan Process – Application Process
These days, most student loan providers have moved the application process online so you can apply from the comfort of your home. At Avanse Financial Services, you can opt for an education loan in 4 easy steps:
- Fill out the online application form or visit the nearest branch office
- Speak to our education loan consultant
- Share all the necessary documents
- Student loans will be approved if you meet all the set criteria
Please remember, when you apply for an education loan, your chosen lender will also evaluate your student profile to determine your employability score. Therefore, parameters such as your academic performance, entrance exam scores, the pedigree of your university and continuity in your education, to name a few, will be analysed. Your co-applicant’s financial background will also be examined. If you tick all the boxes, the student loan will be approved.
These education loan benefits make student loans a popular choice among aspirants. At Avanse Financial Services, we offer both an abroad education loan and a student loan for studying in India. If you have any questions about a student loan, educational loan interest rate, or your academic journey, please remember we are just a call away.
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