The education loan process starts with the student applying online or at a bank by filling out the loan form and submitting the required documents. The bank verifies the documents and assesses the borrower’s financial background. The bank sanctions the loan with terms and conditions and disburses it in instalments directly to the institution. Repayment begins after the moratorium period, usually one year after course completion, with monthly instalments based on the loan agreement. Let’s explore the process of education loans in detail.
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Filling out the Education Loan Application Process
The first step in securing an education loan is the application process. It involves applying to a bank or financial institution that offers education loans. Students can ease the education loan process for application by applying either online through the bank’s website or at the bank’s branch.
It begins by choosing the right lender. Research various lenders to understand their eligibility criteria, interest rates, repayment options, and loan amounts. Some banks may offer loans for higher amounts or for students studying abroad, while others might specialize in domestic loans.
Once the lender is finalised, fill out the loan application form. The application form asks for personal, academic, and financial details. This includes your name, address, educational background, admission details, and family income.
Now, you must select the loan scheme based on your eligibility. Government schemes may offer lower interest rates and special provisions for economically weaker sections.
Also Read: Check out this blog to learn about the IDBI loan application filling process. Know what steps to follow to ensure you get the loan processed quickly.
Document Verification by the Lender
After you submit the loan application, the lender verifies the documents to proceed with the education loan process. The lender will review all the documents provided by the student to ensure they meet the requirements.
Banks may also require additional documents depending on the type of loan and collateral involved. The document verification process ensures that both the applicant and the co-applicant (usually the student’s parents) meet the eligibility criteria for the loan.
To speed up the process, make sure to stay in touch with the lender and respond immediately. This helps the bank verify all the details and approve your education loan as soon as possible. The approval process takes 7 to 10 working. However, Canara Bank’s education loan processing time is typically 2-3 working days after the application is sanctioned.
Release of Education Loan Sanction Letter
Once the documents are verified, the bank will initiate the loan sanction process. This is the phase where the loan is approved or rejected.
The lender will assess your financial background, academic performance, and the co-applicant’s ability to repay the loan. Banks also check the credit score and past repayment history (if any). Based on this evaluation, the bank decides whether to approve or reject the loan.
- If approved, the bank issues an education loan sanction letter. This is a crucial document that the borrower must read carefully before signing to keep the education loan process moving ahead.
- It details the terms of the loan, including the loan amount, interest rate, tenure, repayment schedule, and any special conditions.
Disbursement of Funds to the University
After the loan is sanctioned, the bank moves to the education loan disbursement process. The loan amount is disbursed based on the terms set in the sanction letter. The disbursement may happen in one of the following ways:
- Direct Payment to the Institution: In most cases, the bank will directly pay the loan amount to the educational institution in instalments, based on the tuition fees or as per the academic schedule.
- Partial Disbursement: If the loan covers both tuition and living expenses, the bank may disburse a portion of tuition fees and the remaining amount for other expenses like accommodation, books, and travel.
All you need to do is to confirm the date, amount, and mode of disbursement to your lender. Banks usually disburse the amount via demand drafts, electronic fund transfers, or directly into the student’s account, depending on the scheme and terms of the loan.
Also Read: This blog includes the details about the difference between a loan sanction letter and a loan disbursement letter. read the blog to know more.
Repayment of Education Loan
Once you complete the course and the loan is disbursed, repayment becomes the final stage of the education loan process. Education loans usually have a repayment period ranging from 5 to 15 years. The length of the repayment period can depend on the loan amount, income, and the bank’s policies. The repayment process can vary depending on the loan agreement, but it typically follows these general guidelines:
Moratorium Period: Most education loans offer a moratorium period, which is the time given after the course completion before repayment begins. This can be up to one year after completing the course or until the student secures a job (whichever is earlier).
Repayment Schedule: Repayment typically starts after the moratorium period. The loan repayment schedule is outlined in the sanction letter, which includes the number of instalments and the amount due each month. To make hassle-free payments, one must choose the best payment plan for student loans considering the existing loans and income.
Interest Repayment: During the moratorium period, the loan will still accrue interest. Some schemes like the Central Sector Interest Subsidy Scheme (CSIS) provide interest subsidies during this period for students from economically weaker sections.
Prepayment Option: Some banks allow students to repay the loan earlier than scheduled without penalties, while others might charge a fee for early settlement. It’s important to check the loan terms for prepayment options.
This was all about the education loan process. To learn more about education loans, the best bank accounts for students, forex, banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your experience with studying abroad.
FAQs
The process involves applying the required documents, verification by the bank, loan sanction, disbursement to the institution, and repayment after the moratorium period.
It typically takes 7-15 working days, depending on document completeness, loan amount, and bank policies. Faster processing may be available for premium institutions.
Start by filling out the loan application form online or offline and submitting it with required documents like admission proof and financial details.
Banks verify academic records, admission letters, income proof, and collateral documents. Ensure accuracy to avoid delays in processing.
Banks evaluate the course fee, borrower’s credit history, co-applicant’s financial stability, and the collateral provided. Approval depends on the institution’s reputation as well.
A sanction letter with terms, interest rate, and repayment schedule is issued. Funds are disbursed in instalments, usually directly to the institution.
Loan amounts are typically disbursed in phases, matching the institution’s fee payment schedule. The disbursal may also cover living expenses if applicable.
No, most banks allow online applications, tracking, and updates. However, document submission or verification might require physical visits in some cases.
Many banks provide provisional approval for loans based on expected admission to reputed institutions. Final approval depends on confirmed admission.
The bank will notify you to provide the missing documents. A delay in submission can prolong the loan approval process.
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