‘Education Loan Interest Rates’ become essential factor when opting for loans to study abroad. We are aware that education loans are a great way to pursue higher education if we lack financial means to do so. The education loan schemes are specially designed keeping in mind the needs and convenience of the students. The catch here is that since there are many institutions and banks that offer education loans it becomes difficult for a student to select the one which will best suit their requirements and also, prove to be less costly in the long run. This is where interest rates on education loan becomes our decisive factor for opting one of the presented options.
If you are also a student who is planning to take an education loan then this blog will help you greatly as it covers information like education loan interest rates of various banks, eligibility criteria, factors to be considered, etc. Keep reading further to know more!
Table of Contents
- What is Education Loan Interest Rate?
- Comparison of Education Loan Interest Rates
- Types of Interest Rates in Education Loan
- How to Get Concession in an Education Loan?
- Factors to Consider When Opting for an Education Loan
- How to Calculate EMIs on Education Loans?
- Eligibility Criteria to Get and Education Loan
- Documents Required
- FAQs on Education Loan Interest Rate
What is Education Loan Interest Rate?
A candidate wishing to apply for an education loan should always research the interest rates offered by various banks in order to find the right option for them. To ease things a little, we have created a table below that contains information about education loan interest rates and processing fees of various banks.
Comparison of Education Loan Interest Rates
|Education Loan Interest Rate
|Kotak Mahindra Bank
|Upto 16% p.a
|4% p.a to 12.5% p.a
|Refer to Bank’s website
|8.50% p.a to 11.10% p.a
|Contact the Bank
|12.55% p.a onwards
|Contact the Bank
|Bank of India
|9.25% p.a onwards
|Study in India – Nil
Study in Abroad – INR 5,000
|13.70% p.a to 15.20% p.a
|2% of the loan amounts plus GST
|Tamilnadu Merchantile Bank
|9.40% p.a to 16% p.a
|No processing charges for studies in India.
1% of the loan amount for studies abroad.
|Karur Vyasa Bank
|9.99% p.a to 13.98% p.a
|9.85% p.a to 15.50% p.a
|Upto 2% plus GST
|9.50% p.a onwards
|As per the criteria of the bank
|Indian Overseas Bank
|9.75% p.a onwards
|Contact the Bank
|9.84% p.a onwards
|Contact the Bank
|8.60% p.a onwards
|0.50% of the sanctioned limit (Max. INR 20,000)
|Bank of Maharashtra
|9.45% p.a onwards
|IDFC First Bank
|9.00% p.a to 15.00% p.a
|Upto 1.5% of the loan amount
|Bank of Baroda
|Upto 12.50% p.a
|No processing fee is charged for a loan amount Up to INR 7.50 Lakh
1% of the loan amount up to INR 10,000.
|Union Bank of India
|8.55% p.a onwards
|State Bank of India
|8.15% p.a onwards
|Nothing is charged on a loan amount below INR 20 Lakh
If the loan amount is above INR 20 Lakh: INR 10,000 (plus taxes)
|Punjab National Bank
|Upto 11.25% p.a
Also Read: Banks Giving Education Loan in India
Types of Interest Rates in Education Loan
The type of interest rate levied on the education loan is determined by the bank. Some banks provide education loans with already-set interest rates during the time of repayment. While other banks have interest rates that are connected to lending rates based on the one-year Marginal Cost of funds-based Lending Rate. If this were reset at regular intervals then interest rates of the education loan may change.
How to Get Concession in an Education Loan?
Mentioned below are some of the things that you should keep in mind while applying for a student loan that can help you get a concession in an education loan:
- If you have a good credit score then you can get a concession on the principal amount.
- Under section 80E borrowers are eligible for tax concessions.
- If you will pay the interest amount during the moratorium period then also you can get a concession on the principal amount.
- Central Government schemes like the Padho Pardesh Scheme, CGFSEL and Dr Ambedkar’s central scheme on education loans can help you get a subsidy on the education loan interest rate.
Factors to Consider When Opting for an Education Loan
While opting for an education education loan make sure that you consider the factors mentioned below:
- Repayment Tenure
- Interest Rate
- Guarantor required
- Courses for which the loan is applicable
- Eligibility criteria
- Collateral required (if any)
- Margin amount
- Loan amount
How to Calculate EMIs on Education Loans?
The three factors that affect EMIs on education loans are the interest rate on the loan, repayment tenure and loan amount. The formula that is used by banks to calculate EMIs on education loans is mentioned below:
EMI. Amount = [P x R x (1+R)^N]/[(1+R)^N-1]
Here P = Principal Amount, R = Rate of Interest and N = Number of Years for Repayment (calculated in months)
Also Read: Pro Tips for Managing Student Loans
Eligibility Criteria to Get and Education Loan
Mentioned below are the general eligibility criteria that a student needs to fulfil in order to apply for an education loan although it is important to note that they might differ from bank to bank.
- The applicant should be a citizen of India.
- Applicants’ age should not be more than 35 years who are not employed and in case the applicant is employed then their age should not be more than 45 years.
- The candidate has to provide an admission letter from the university they have applied to.
- The applicant should have a good academic record and for proof, they need to provide their academic transcripts.
- The applicant needs to provide the Guarantor’s credit history or income proof.
- If the applicant is planning to study abroad then they need to submit a passport/i20 form/visa.
An applicant needs to submit the general documents mentioned below with the education loan application:
- Duly filled application form with passport-size photograph affixed.
- Academic certificates of the applicant
- Admission letter on letterhead of the educational institute
- Scholarship document (if any)
- Marksheets of entrance examination (if any)
- Declaration that no loan has been availed from another lender
- Proof of age such as birth certificate or 10th standard certificate
- Address Proof (utility bill/passport/Aadhar card)
- Identity Proof (PAN card/ Aadhar card/ driving license/ passport)
Must Read: Student Loan – Refinance/Consolidation
FAQs on Education Loan Interest Rate
Education Loan Interest Rates are the cost of the loaned amount in terms of %. The % of interest is calculated on total education loan issued. It can be variable or fixed depending upon the policies of the loan issuer.
Yes, banks do cover 100% education-related expenses. However, there is a certain limit under which banks provide full coverage of expenses.
A candidate who has a good academic record and an admission letter from a university is generally eligible for an education loan. For detailed eligibility criteria go through the information above in the blog.
Without any proof of parental income, the most suitable alternative is to have a financial co-applicant.
Interest on education loan varies from 4% to 16% depending upon the bank or loan issuer. The interest rate is dependent on various factors such as inflation, credit risk, policies, period for which the loan is issued, etc.
We hope this blog helped you clear your doubts related to education loan interest rates, factors to consider, eligibility criteria and so much more! To know more about the loan application process, and the best bank accounts for students or international money transfers, subscribe to Fly.Finance or reach out to our experts to help ease your study abroad experience.