Today, we will help you understand the basics of an education loan: what it is, its advantages, disadvantages, and how you can apply for it.
What is an Education Loan?
Education loans are dedicated loans for students who wish to pursue their higher education. These loans are usually offered by financial institutions, government organizations, and even by several universities. Students can apply for these loans to study in India or abroad. In India, several banks offer education loans at competitive rates. However, it is necessary to understand that every bank has its own interest rate.
Usually, students are not required to repay the amount immediately after finishing their studies. The process varies by institution, but repayment typically begins a few months after the completion of the program.
Are Student Loans and Education Loans the Same?
Yes, the terms “student loan” and “education loan” are the same. They are often used interchangeably. Both are loans specifically designed to help students pursue their higher education.
How to Apply for an Education Loan: Step-by-Step Guide
The application process for an education loan may vary from bank to bank, but there are some common steps followed by most banks:
Step 1: Select a Bank
In India, several private and public banks offer education loans. The first step for a student or parent is to select a bank from which they want to apply for the loan. Before finalizing the bank, make sure to check the terms and conditions, rate of interest, and other formalities of the bank.
Step 2: Check Eligibility Criteria
To get a loan, it is necessary to first check your eligibility. The eligibility criteria are crucial before filling out the application form.
Step 3: Application Form
While the application form differs from bank to bank, some common elements are required by every bank. When filling out the application form, you will be required to submit two passport-size photographs, your graduation certificate, secondary school certificate or high school certificate or marksheets, your Voter ID, PAN card, Aadhaar card for address and age proof, and details regarding your parents’ income.
If you are taking a student loan for pursuing your higher education abroad, the bank will also require proof of admission to the university and the course, the schedule of the course, a copy of the scholarship letter (if you have one), along with other documents.
Step 4: Discussion with the Bank
Once your application form is submitted, many banks will have a one-on-one discussion with the student along with their parents or guardians. The discussion is related to the course of the education loan, the programme, etc.
Step 5: Approval or Denial of the Educational Loan
The next step is carried out by the bank. Before the bank sanctions the loan, it requires a guarantor (a parent or guardian). The bank will conduct a thorough check of the guarantor’s credit history. This is a crucial step in the decision to approve or deny the loan, along with other details.
Step 6: Distribution of the Loan
Once all the formalities are completed, the bank approves the loan and will disburse it. The bank will pay out the programme fee directly to the concerned institute.
