Education loans are loans granted to students to cover the costs of their studies. There are various types of education loans, including funding loans, scholarships, financing loans, and rewards. All types of education loans are available in cash and must be repaid to the lender with an interest rate.
Students who want to take out education loans are encouraged to take out loans based on their needs, as repayment schedules for these loans can differ significantly depending on the lender and the student’s loan amount.
Most student loans in India are offered at a low interest rate and interest payments do not have to be made immediately. Usually, students are given a deferral period between the date they take out the loan and the date they begin making payments.
An education loan is an unsecured loan that you can use to pay for your education. You can use an education loan to pay for things like tuition, books, housing, and other things like transportation, etc. If you want to take out an education loan but are not employed or you are still in school, you may be required to get an education loan co-signer, i.e. an eligible adult, such as your friend, parent, or family member.
The loan can be repaid after the student has finished his/her studies. Because of the flexible repayment terms and conditions, repayment of an education loan is relatively easy.
Different Types Of Education Loan
Below are some of the types of education loans available. Depending on the level of education you plan to take, there are different types of student loans available, such as diploma and certificate student loans, skill-based student loans, student loans for study abroad, etc.
No matter what type of course you choose, there are two broad types of location-based education loans.
Domestic Education Loan: In the case of education courses within the national boundaries. There are different eligibility requirements for each borrower, and lenders will approve your loan if you have a guaranteed placement in an institution that meets the lender’s criteria.
Study Abroad Education Loan: In the case of educational programs that are not within the country’s geographical limits. As with a home equity line of credit, the borrower is expected to secure a full-scholarship position at one of the colleges or universities listed on the list of approved colleges and universities.
In addition to the above, education loans can also be broken down into a few more categories, including:
Based on the course of education
The financial institutions also offer loans based on the type of course chosen by the borrower. Here are some examples of course-based education loans:
Graduate Student Loans:
These loans will be offered to students who wish to pursue their studies in educational institutes in India. These loans are designed for postgraduate students. To qualify for this loan, students must have finished their undergraduate studies.
Undergraduate Education Loans:
Students can use these loans as financial aid to continue with their undergraduate degrees. The undergraduate program lasts between three and five years, after which students have plenty of job opportunities.
Professional Education Loans:
There are many banks and NBFCs that offer loans to students who want to pursue a career.
Based on the security of collaterals or guarantees:
Collaterals and guarantees are the following types of education loans that are backed by collaterals and guarantees:
Loan against deposits: You can use education loans against recurring deposits, fixed deposits, or gold deposits.
Loan against property: Education loans are also given by banks and NBFCs against immovable property such as residential land, agricultural land, houses/ flats, etc.
Loan against securities: Education loans can be used against debentures, bonds, or equity shares.
What is a Study Abroad Education Loan?
A study abroad loan is a type of loan that you can take out to finance your studies abroad. Depending on the course, there are several types of study-abroad education loans available.
Following are the Education Loans in India
Undergraduate Student Loans
Undergraduate student loans are available to those who have finished secondary education and want to pursue a three to four-year degree to improve their employment prospects.
Professional / Graduate Student Loans
If you want to go on to earn an advanced degree or higher education degree at any college in the United States, you can take out a Professional/graduate student loan. The student must complete an undergraduate program to be eligible to apply for the graduate student loan.
Career Education Loan
Career education loans are available to students who want to attend undergraduate career programs at trade and technical schools and universities nationwide.
Loans for Parents
These unsecured loans can be used by students’ parents to cover the costs of their child’s education, including tuition fees, living costs, textbooks, uniforms, and transportation costs. The loan can be used by parents and adult relatives who want to send their children to secondary schools, military basic schools, as well as religious, private, and non-public schools all over the country.
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A Few Things To Remember
Now that you know what education loans are, here are a few things to keep in mind before applying for a loan:
- You can only avail an education loan if you are an Indian national.
- In some instances, the loan can cover the entire cost of your studies.
- Apart from tuition, books, uniforms, hostels, and travel expenses, the loan can also be used for equipment such as laptops and student exchange travels.
- A grace period, also known as a moratorium period, allows you to begin making payments six months after completing your course. However, this period may differ from lender to lender.
- The duration of the loan can be extended to a maximum of 10 years.
- No matter which course you’re applying for, you’ll need to complete the previous course to be approved.
- To qualify for the loan, you need to be enrolled in a college, university, or another institution.
- You need to fulfill all the requirements set forth by the lender.
- Section 80E allows you to claim a tax credit on the interest you pay. However, this does not apply to principal payments.
