What Is An Education Loan?

Education loans are the loans offered to students to finance their higher education in India and abroad. Financial institutions like Public sector banks, Private banks, and NBFCs offer education loans in India. The banks evaluate several factors, including the country(overseas, domestic), the course (undergraduate, postgraduate), the student's profile, and the co-applicant's income and creditworthiness, to provide student loans. These factors decide the loan terms, such as the Loan amount, interest rate, Moratorium period, and the education loan Repayment period.

Study loans in India offer various benefits, including higher loan amounts, lower interest rates, long repayment tenure, and an income tax rebate on education loans, etc. To know more about each of these aspects, keep on reading and comment if you have any further queries.

Types of Education Loans

Education Loans are primarily divided into 2 types based on the collateral involvement of the loan:

• Secured Education loan:

Secured or Collateralized Education Loan is an education loan where you have to pledge collateral (an asset or security) such as a house or land to receive the loan amount.

Immovable property : House, flat, or non-agricultural land.

Liquid security: Fixed deposits, Insurance policies (term insurance), or Government bonds.




• Education Loan without Collateral

An Unsecured education loan, or an education loan without collateral, is where the student can take an education loan without having to offer any security or collateral. These loans are given based on the income and creditworthiness of the applicant and the co-applicant.




• Comparison of Secured vs Unsecured Student Loans

Here is the comparison table containing the important education loan details of both secured and unsecured student loans. It helps you compare education loan interest rates, loan amount, collateral requirement, processing fee, moratorium period, and eligibility criteria of secured and unsecured student loans:

Parameter	Secured Education Loan	Unsecured Education Loan
Collateral requirement	Required minimum of 50% of the loan amount	Not required
Loan Amount	Up to 1.5 Cr for India Up to ₹3 Cr for Abroad (Depends on the collateral evaluation)	Up to ₹50 lacs for India Up to ₹1 Cr for Abroad
Processing fee	Zero to max 10,000 rupees + GST	1% to 2% of the Loan amount
Rate of interest	8.15% to 10.5%	10.5% to 12.5%
Moratorium period	Course duration + 6 to 12 months No payments are required in the moratorium period	Course duration + 6 to 12 months Partial interest or full simple interest can be charged during the moratorium period
Key parameters for loan eligibility	Legal and valuation of the collateral Student's profile	Co-applicant's income and Credit score Student's profile

What is the Best Bank for Education Loans in India?

Financial institutions like Public banks, Private banks, and NBFCs offer student loans in India. These banks offer student loans with varying terms to cater to the diverse needs and requirements of students

The best bank for education loans in India is not the same for every student, as each individual has a unique situation. You should assess various factors, such as the education loan interest rates, loan amounts, collateral requirements, and the education loan repayment terms, before choosing the best bank for education loans. The following table helps you compare education loan interest rates, processing fees, and loan amounts of prominent banks and NBFCs offering study loans in India.

Note: These interest rates are effective as of Jan 2025. The student loan interest rates may change with changes in the RBI repo rate and bank policies.

(Keep in mind that these are the applicable education loan interest rates on going through your education loan with WeMakeScholars, which can vary on a case-by-case basis)

Banks	Interest Rate	Processing Fees	Loan Amount
State Bank of India	Starts from 8.15%	Rs.10,000 + GST	Without collateral: ₹50 lakhs With collateral: Up to ₹3 Cr
Bank of Baroda	Starts from 9.15%	Rs 10,000 + GST or 1% of the loan amount, whichever is lower	Without collateral: ₹7.5 lakhs Higher amounts are possible for top universities in India With collateral: Up to ₹1.5 Cr
Canara Bank	Starts from 8.60%	Rs. 10,000 + GST	Without collateral: ₹7.5 lakhs Higher amounts are possible for top universities in India With collateral: Up to 100% of the loan amount
ICICI Bank	Starts from 10.85%	1 - 2% of the loan amount	Without collateral: ₹1 Cr With collateral: Up to ₹1.5 Cr
Credila	Starts from 9.75%	1 - 1.5% of the loan amount + GST	Without collateral: ₹50 lakhs With collateral: Up to ₹1 Cr
IDFC Bank	Starts from 10.75%	1 - 1.5% of the loan amount + GST	Without collateral: Up to ₹1.5 Cr With collateral: Up to ₹75 lakhs
Axis Bank	Starts from 11%	1% PF Loan amount + GST	Without collateral: ₹80 lakhs With collateral: Up to ₹1 Cr
Karur Vysya Bank	Starts from 9.99%	Rs. 10,000 + GST	Without collateral: ₹7.5 lakhs Higher amounts are possible for top universities in India With collateral: Up to ₹1.5 Cr
Avanse	Starts from 10%	1 - 1.5% of the loan amount + GST	Without collateral: ₹80 lakhs With collateral: Up to ₹1.25 Cr
Incred	Starts from 11%	1 - 1.5% of the loan amount + GST	Without collateral: ₹80 lakhs
Auxilo	Starts from 11%	1 - 1.5% of the loan amount + GST	Without collateral: ₹85 lakhs

Expenses Covered in an Education Loan

Here is the list of Expenses Covered in an Education Loan :

• Tuition fees-

The tuition fee is covered in all education loans, as it is the primary expense that students have to pay. The tuition fee is mentioned in your offer letter or admit card provided by your university. It is disbursed directly into the university's bank account.




• Living expenses-

This includes the accommodation costs, food, and travel expenses that you would need while studying abroad. The student must carefully calculate their living costs and request the living expenses accordingly. The disbursement of living expenses is different in each financial institution.




• Health insurance-

Many lenders include health insurance in the expenses as part of an education loan, but it has become an optional expense ever since the COVID-19 pandemic.




• Travel tickets-

A two-way flight ticket once per year is provided for students. Banks don't automatically give you money for aeroplane tickets. If you can't afford to pay for your travel, you need to ask the bank to include the cost of air tickets in the list of expenses they cover for you. Most banks are willing to help with the cost of air tickets.




• Pro tip:

Getting a degree comes with costs like buying books, a laptop, course materials, project work, and study trips. These expenses are not part of the tuition fees and require extra money. Some banks include them when deciding how much loan you can get. If your study costs aren't covered by the loan, you can ask your bank to add them to the list.

Books & Stationery Books & stationery expenses incurred during the entire course of study.

Laptop & Computer cost If required for the course, students can use the money from their study loan to purchase a laptop or computer.

Cautionary Deposit The amount of up to 10% of the amount can be used as a cautionary deposit.

Miscellaneous Expenses Any other expenses incurred towards field visits or projects.

Note: Before applying for an education loan, it is crucial to consider various important points to avoid complications after approval. Once the loan is sanctioned, no changes can be made to the application, so accuracy is key.

. First, applicants should calculate the correct costs of accommodation and other expenses and make sure that the costs are accurate to avoid any future issues.

• Additionally, carefully reviewing the list of expenses covered by the chosen financial institution is important.

• If necessary, applicants should request adjustments to align with their specific requirements.

• Another important consideration is the availability of part-time job options in the country of relocation; if uncertain, it's advisable to factor in living expenses accordingly.

Important Education Loan Details: Fees & Charges

Here are the Important Education Loan Details, such as Processing Fees and Other Charges of Banks and NBFCs:

Government Banks: Rs 10,000 + GST

Private Banks: 1% to 2% of the loan amount + GST

NBFCs: 1% to 2% of the loan amount + GST

Government Banks include the State Bank of India (SBI), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI), Punjab National Bank (PNB), etc.

Whereas Private banks and NBFCs include institutions like Axis Bank, ICICI Bank, IDFC Bank, Credila, Incred, Avanse, and Auxilo.

The Collateral Legal and Valuation charges are between Rs. 7500 to Rs. 10,000. Only applicable to secured loans.

WeMakeScholars is a government-funded non-profit organization, supported by the Ministry of Electronics & Information Technology under the Digital India Campaign. We do not ask for any service charges or fees from students to process their loans. All our services are free of cost.

Education Loan Repayment

Education loan repayment is a structured process of repaying the loan that the borrower has taken. Not planning for the education loan repayment period can be an issue for most students. It causes a major financial burden on students during the education loan repayment period. Thus, students need to plan their education loan repayment right from the beginning of the loan process. Let's look at how your education loan repayment schedule can look, along with the interest portion, principal portion, and EMIs, through the following example.

Education Loan Repayment Table

For instance, if you take a student loan of Rs 40 lacs to pursue higher education at a 9% rate of interest, for a tenure of 15 years, then your EMI repayment schedule will look like this:

Repayment Cycle	EMI	Interest Portion	Principal Portion	Loan Outstanding
Start of loan EMI	45135	33375	11760	4438240
End of Year 1	45135	32368	12767	4302912
End of Year 2	45135	31170	13965	4142027
End of Year 3	45135	29860	15275	3966050
End of Year 4	45135	28427	16708	3773564
End of Year 5	45135	26860	18275	3563022
End of Year 6	45135	25145	19989	3332730
End of Year 7	45135	23270	21865	3080835
End of Year 8	45135	21219	23916	2805311
End of Year 9	45135	18976	26159	2503940
End of Year 10	45135	16522	28613	2174299
End of Year 11	45135	13838	31297	1813735
End of Year 12	45135	10902	34233	1419347
End of Year 13	45135	7691	37444	987964
End of Year 14	45135	4178	40957	516113
End of Year 15	45135	336	44799	0