Education is the biggest wealth that is generated by investing hard work, and dedication. It is not just that education is important but quality education is the thing that matters. Education is one area where everybody is willing to spend a lot of money into. Last year’s data has revealed that the tuition and hostel fees spend by Indian to go abroad. For abroad studies have increased by 44%. As a large number of students are moving abroad in search of quality education. As education loans are one of the best sources to finance education, it is very important to perfectly analyze and interpret which bank or financial institution is best.

“Education: the path from cocky ignorance to miserable uncertainty.”Mark Twain

The basis of comparing the loans:

  • Interest rates:

The interest rate in India is governed by the MCLR. NBP’s would either provide a fixed interest rate or floating rate based on their cost of capital.

  • Processing fees:

Processing fees are the amount required by the financial institution to process the loan. It can be refundable, non-refundable, amortizable, or no processing fees.

  • Loan amount and concept of margin money:

The loan amount is the total amount of money that is raised by any financial institution. All financial institutions ensure that you have the complete amount to fund your education. You can use the amount only for the purpose of education loan.

  • Personal guarantees:

In availing or taking the loan facility there is some who gives a guarantee. If the borrower fails to pay the loan. Then the loan is recovered from the guarantor.

  • Security mortgage:

For taking loans there should be some collateral or primary security against it. If the loan is not paid by the borrower. Then, the loan is recovered from the submitted security.

 

  • Moratorium period and interest rate repayment:

The period in which the interest, as well as principle, is not to be repaid this is called the moratorium period. The complete interest waiver is when the bank does not ask for any amount during this period. The same is added to the principal outstanding in the loan.

  • 8OE Tax benefit:

If the service provider is registered as an educational service provider with the RBI. These benefits are provided to the applicant. The same is very helpful and reduces the interest cost for the parent.

  • Disbursal requirements:

Different financial institutions have different conditions during the time of the disbursal of loans. Please read the disbursal conditions very carefully to ascertain the availability of all the documents requested.

  • Additional charges:

There are many charges which are not accounted at its occurrence but it affects the financial budget. You should add the entire cost of incidental to the interest and then compare the loan options.

  • The complete amount for education

  • Ensuring end use of the funds

  • Security requested (physical and non-physical)

5 banks which provide education loans:

1. HDFC bank education loan:

This bank grants education loans to study in India and abroad. The maximum amount that you can avail is 10 lakh. The loan is approved as soon as you are found to be creditworthy. Especially, before you are granted admission to a university. HDFC Credila simplifies the quick completion of the formalities once the loan is approved. You can avail of an education loan from HDFC Credila. You realize your dream of studying abroad or in a premier institution in India. The rate of interest of education loan for Indian education as well as foreign education is 9.20% to 13.64%.

                 HDFC bank doesn’t have a dedicated education loan scheme for skill development courses. Hence you will find them recommending personal loans for skill development courses. But I think taking a personal loan for financing the educational expenses is a bad idea. This is due to the high rate of interest. 

 Advantages:
  • Lower rate of interest
  • Quick processing
Disadvantages:
  • High processing fee
  • Hidden charges
  • Less loan for study in India

2. Axis bank education loan:

This bank has only one scheme for education loan (loan amount from 50, 000 to 75 lakhs). This bank finances education loan only for the graduate or postgraduate courses for students. Students who have secured a minimum of 50% marks in HSC or Graduation.

           Axis bank gives more preference to parents’ profiles. The bank has made mandatory for parents to show a regular source of income.

Education loan amount Interest rate
Up to 4 lakhs 15.20%
Above Rs.4 lakhs to Rs. 7.5 lakhs 14.70%
Above Rs. 7.5 lakhs 13.70%

 

Advantages:
  • Quick processing of the loan application.
  • Higher loan limit.
  • NIL processing fee below Rs. 10 lakhs.
Disadvantages:
  • A high rate of interest.
  • No specialized education loan schemes.
  • High penal interest for late payments.

3. State bank of India education loan:

SBI student loan scheme is based on the IBA model. The SBI Scholar scheme is exclusively for merit students who want to pursue professional/technical courses in premier institutions like IIT, IIM, NIT, etc.

 

For foreign studies, SBI grants educational loans of Rs. 20.00 Lakhs to Rs. 1.50 Crores through the SBI Global ED Vantage scheme.

 

 

Education loan scheme Interest rate
SBI student loan scheme 10.8%
 scholar loan scheme 8.75%  to

10.05%

 SBI skill loan scheme 10.05%
Global Ed vantage scheme 10.80%

 

Moreover, SBI offers one of the lowest rates for education loans in India.

Advantages:
  • A low rate of interest
  • Low processing fees
  • Different loan schemes
  • No security required for up to 4 lakhs
Disadvantages:
  • High processing time

4. Punjab national bank education loan:

This bank understands the needs of the students and offers extremely competitive education loans at better interest rates. No upper limit, it depends on repayment capacity and margin.

           PNB Saraswathi is a normal IBA model education loan scheme for meritorious students. PNB Prathibha scheme is for the students who want to pursue higher education in premier colleges. PNB has an exclusive loan scheme for pursuing higher education abroad, called PNB Udaan. For vocational and skill development courses you will find the PNB Kaushal loan scheme.

Education loan scheme Interest rate
PNB Saraswathi scheme 10.55%
Udaan 10.40%
PNB Prathibha 8.55% to 9.20%
 Kaushal 10.05%
Loan to persons with disabilities Women-3.50%

 

Advantages:
  • Low ROI
  • Low processing fees
  • Wide range of education loan schemes
  • Faster disbursal
  • No prepayment charges
Disadvantages:
  • Tedious paperwork

5. ICICI Bank Education loan:

This bank offers education loans up to Rs.50 lakhs for

icici education loans

 studies in India and Rs. 1 crore for studies abroad.

     The main drawback of the ICICI education loan is that the repayment holiday period is restricted to 6 months after the completion of the course, irrespective of the employment status.

Education loan scheme Int-Rate
Education loan for domestic and international studies Starting at 11.5%

 

 ICICI bank provides education loans for no prepayment charges and no pre-closure charges. The repayment amount will be determined by your choice of interest. Students who have secured admission are eligible. The quantum of loan is up to 10 lakhs for studies in India. Moreover, up to 20 lakhs for studies overseas.

Advantages:
  • Less paperwork
  • High loan amount
  • No processing
  • Faster disbursal
Disadvantages:
  • The high rate of interest
  • Hidden charges

I hope that after reading this blog, you would have gained a lot of information. Especially, about which bank to adopt for financing educational expenses. To know more about education loans and eligibility, please read Education Loans- An introduction.