Most of the world’s best colleges and universities are outside of India. This is a reality that may change over the coming years with the Government of India inviting international universities to set up campuses in India. But until that manifests, Indian students will have to look beyond our borders for education.
One other thing that needs to be said about foreign universities, whether they are the best or not, is that tuition fees are exorbitant. For the average aspiring Indian student looking to go abroad, an education loan really the only option. Here’s how you can look at getting yourself an education loan
Before we proceed to the how to apply for student loans in India question, let’s look at the different types of lenders that offer such loans:
Government or state-regulated public sector banks are reliable lenders when it comes to student loans. This reliability, coupled with low-interest rates and processing fees, payment-free moratorium periods and longer tenures, make them favourable options for most.
Private banks are better-suited options for those who wish to side-step the hassle of delayed processing. While private banks do offer streamlined approvals, they also charge higher processing fees on the loan amount. Additionally, the prepayment charges on loans are often high, not to mention the minimum lock-in period before repayment can start.
Non-Banking Financial Companies also offer education loans with relaxed terms, super-fast approvals and disbursals and minimum documentation.
The Government of India also created the Vidya Lakshmi portal for students seeking education loans. Students can register on this web portal and fill up the Common Education Loan Application Form (CELAF) and apply to various banks and loan schemes. This one-stop portal has made the student loan application process much easier.
Performing your due diligence beforehand is always a prudent choice. Checking the eligibility criteria for the loan is extremely important as it can make or break your application.
Certain lenders have age caps in place, while others might offer loans for only affiliated institutions. To know if you qualify for the loan, it is essential to review these factors before submitting your application form.
If you meet the listed eligibility criteria, it's now time to fill up the loan application form. Now, you can do this in two ways.
You can either visit the lender’s office and fill out a physical application form or do so online via the forms available on the lender’s website. Remember to fill out this form carefully, as it will elicit details about your course, loan requirement and other such critical information.
Some lenders may call you in for a personal discussion or interview. Treat this as a counselling session, as you will be asked about the course you wish to pursue, your future goals and prospects and your chosen educational institution.
They may also ask you about the possible income you will generate from the proposed course once it's completed. This is an important question as it gives them an idea about your potential repayment capabilities.
Once the interview process is over, the lender will ask you to submit a set of documents verifying the details outlined in your form. This will include your course acceptance letter, KYC papers, mark sheets, and your co-signer’s income proof documents.
If the loan amount exceeds ₹7.5 Lakh, you will also need to submit valid collateral papers for the loan. Collateral security can include property deeds, land papers, fixed deposit receipts, insurance papers, etc.
After you’ve submitted the documents, the lender will assess them. As a student applying for a high-value loan, you must add a guarantor (parents, guardian or spouse) to the loan application to protect the lender against defaulting.
During the verification stage, the lender will also assess their credit scores and income eligibility to see if they qualify for the loan. Moreover, you will also have to submit a promissory note outlining your intentions to repay the loan within the stipulated time window.
After the verification stage, the lender can decide to either approve or deny the loan. If it goes with the former, the loan amount will be disbursed into the selected institution’s bank account. Note that disbursals can be made either in full or partial payments, depending upon your lender’s policies.
When you borrow money from a financial institution to fund your education, you also promise to repay it on time. This is a significant commitment. Defaulting on a student loan can affect your credit score, making it difficult to secure loans in the future. To ensure this doesn’t happen should keep the following things in mind:
While much like any loan, a student loan is a financial liability, it is also a form of self-investment. Ensure you compare the best student loan options that offer the best rates and don’t default on repaying them back.
Student loans need at least 2 to 5 weeks to be processed and sanctioned. If you wish to expedite this process, you can opt for a student loan from an NBFC. Since NBFCs have streamlined verification steps, the time taken to approve the loan is significantly shortened. Alternatively, you can also look at personal loans for educational purposes.
No. Once the loan is sanctioned, the amount is transferred to the bank account of your selected educational institution. However, that said, there might be some NBFCs that agree to disburse the amount to your account directly upon special request.
Most student loans take about 15 days to be sanctioned and disbursed. However, the disbursement time will vary from one lender to the next.
No, education loans in India are not interest-free. Interest is charged on education loans, typically at a subsidized rate for certain categories of students or up to a specified loan amount.
Yes, education loans are available for poor students in India. These loans often have provisions for lower interest rates, flexible repayment terms, and extended moratorium periods. Eligibility criteria and loan terms may vary among different lenders, so it's advisable to research and inquire with specific banks or financial institutions for detailed information.