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Education Loan

Let’s say you are required to pay college fee of a few lakhs and you do not have sufficient savings. What is the first thing that comes to your mind? Yes, taking a education loan. But what exactly are education loans? Before stepping ahead to avail it, you must know these things about them.

The Basics

Education loan is the money borrowed to finance education related expenses. Generally repayment schedule is deferred while pursuing course and grace period from a month to a year is granted after graduation. One of the major benefits of this type of loan is that it comes with low interest rate and does not require collateral or a credit check.
We encourage students to apply for an education loan, undergo an evaluation process even before the admission process begins. This helps students plan their finances in advance and choose the colleges of their choice.The general amount of education loan sanctioned starts from Rs.50,000 to the following:
  • Study in India – a maximum amount of Rs 10 lakhs can be borrowed
  • Study Abroad – a maximum amount of Rs 20 lakhs can be borrowed

For amounts less than Rs 4 lakhs, there’s no need for security. Any amount between Rs 4 lakhs and upto Rs 7 lakhs requires a parent to be a co-applicant. For loans beyond Rs 7.5 lakhs, tangible collateral security (generally a house) required to be mortgaged. All loans are secured by parent of the student borrower. In case of married person, co-applicant can be either spouse or the parents/parents-in-law.

Who can take Education Loan?
Anyone who has secured an admission into an approved course in India or elsewhere is eligible for an Educational Loan. The Bank Manager has discretion in approving the loan based on the student’s academic performance and the expected employment opportunities for the course.

What is the disbursement process of Education Loan?

The loan is disbursed in stages as per requirement stated by the institutions. Generally, the Bank directly disburses the loan amount to the Educational Institute. The Bank / lending institution may also make a request with the educational institution for your progress reports and link disbursal to it.

What are the things to remember before taking an Education Loan?
-Whether interest rate offered is fixed or floating
-Whether certificates will be retained by bank during the period of the loan
-Processing fees and prepayment penalty.


Most banks give concession on interest paid on education loan by a women or a student pursuing professional course – Engineering/Medical or Management. Banks also grant concession for moratorium period (temporary prohibition of an activity). The following is the Interest Concession that the bank offers on Interest paid on education loan.

Women Beneficiaries: 0.5% p.a. for limits upto Rs.50,000 and 1.00 % p.a. for limits upto Rs. 1,00,000

Professional courses: 0.5% p.a. and if women: 1% p.a.

Moratorium period: 1% p.a.
*where repayment holiday is specified for interest/repayment under the scheme (concession available for moratorium period only). Simple interest during the repayment holiday/moratorium period. Penal interest @2% for loans above Rs.4 lakh for the overdue amount and overdue period.

Documents Required

The most beneficial thing about Education Loans is that you do not have to provide a plethora of documents. However, there is a little amount of it that you have to present to the bank while availing the loan and we have that sorted for you.


A general check list of documents required for education loan is as follows. Apart from the below mentioned documents, banks can ask for additional documents before granting education loan according to respective bank’s policy.

  1. Loan application form ( Completed and duly signed)
  2. Two Passport sized photographs of the applicant, guarantor, etc.
  3. Admission Letter from the University/College/Institution
  4. A detailed statement giving the Fee breakdown, tuition fees and other charges from the institution
  5. Certificate copies of highest educational qualification (degree/post-graduation, etc.)
  6. Mark-sheets, from class X to the last/highest qualifying exam cleared
  7. Photo ID proof and address proof of Student & Co-Applicant (Any one of the following)
    ·  Voter ID card
    ·  Passport
    ·  Aadhar Card
    ·  Driving License
    ·  Permanent Account Number (PAN) Card
  8. Photo ID proof and address proof of Student & Co-Applicant (Any one of the following)
    ·  Bank statement
    ·  Rent Agreement
    ·  Voter ID card
    ·  Ration card
    ·  Passport
    ·  Driving License
    ·  Telephone/Water/ Electricity/ credit card bill or Property tax
  9. Income of income proof (IT returns of parents/guarantor)
  10. Past six month’s bank statement for an account held by student and co-applicant
  11. A declaration/affidavit to confirm no other loan has been availed
Salaried individual
 -Latest salary slip along with Form 16
 -Bank statement for the last six months for salary account
Self-employed businessmen/professionals
 -Highest educational degree proof
 -Latest ITR, computation of income, Profit & Loss and Balance Sheet certified by a CA
 -Business continuity proof
If, Collateral – Immovable Property (Flat, House, Non-Agriculture Land) (All the Relevant Documents from the Following List)
  • Property Title Deed
  • 7 / 12 extracts in case of land
  • Registered Sale Agreement Along With Society Share Certificate
  • Original Registration receipt for the above agreement
  • Allotment Letter by Municipal Corporation / Authorized Govt. Authority like MHADA, CIDCO, etc. Please add HUDA, DDA, JDA, GIDC etc.,
  • Previous Chain of Sale Deed establishing title
  • Latest Maintenance bill along with Receipts issued by builder/ society,
  • Latest Property tax bill along with receipts,
  • NOC for mortgage from society/builder, Approved building plan
  • Encumbrance certificates as on date etc.,

Apart from the above mentioned documents, banks can ask for additional documents according to respective bank’s policy. It is in the interest of the applicant to see to it that the documents are submitted in the prescribed format for a hassle free application process.



Education Loan Balance transfer: Feeling the interest burden of your existing home loan? Relax! Transfer your education loan to a lower interest rate with a Education Loan Balance Transfer. Further, you also have the option of a Top-Up loan over and above the balance you transfer.

Just by switching you existing personal loan from higher interest rates to lower interest rate lender can save you thousands or sometimes in lakhs. And it really don’t mean saving the interest. You can anyway use the same at anything. After all, securing a personal loan is not the end of journey.

Once the balance amount will be transferred to lower interest rates, the EMI will automatically gets lower. Here you go. A penny is saved is a penny earned.

To know how LoanUncle could help you in it. Quick Query – 9999-6636-04 or hi@LoanUncle.org


An education loan can not only fund your higher studies but also help save tax. The interest paid on the education loan can be claimed as deduction, as per Section 80E of the Income Tax Act, 1961.

Under Section 80 E, you will get the deduction for Interest paid on Education Loan taken for higher education of self or relative (spouse or children). Following are a few more things to know about the Tax Benefit:

  1. Only Interest part of the loan amount can be claimed
  2. No upper limit of deduction as interest paid
  3. Deduction can be claimed if Education Loan is taken by self, spouse, children or by the legal guardian of the student.
  4. Deduction can also be claimed for education loan availed to study abroad
  5. Education loan should be from any recognized financial institution or any approved charitable institution.
  6. Tax Benefit can also be claimed for availing education loan even for vocational or distant learning programs
  7. No Limit of availing this tax benefit. On can claim any amount of interest paid on educational loan.


The general eligibility condition for education loan is as follows:

1. A secured admission in the following:

  • Graduation, post-graduation, technical and professional courses conducted by colleges approved by UGC/  AICTE/ IMC/ Govt.
  • Courses conducted by autonomous institutions like IIT’s, IIM’s etc
  • Teacher training/ Nursing courses approved by Central/State Government
  • Regular Degree/Diploma Courses like Aeronautical, Pilot training, Shipping etc. approved by Director General of Civil Aviation/Shipping

2. Other requisite eligibility requirements are as follows:

  • Indian Resident
  • If NRI (Non- Resident of India), must hold an Indian Passport
  • Collateral/ Security (enforceable in India)


Generally, Bank covers the following expenses in Education Loan. However, we highly recommend that you must ask your lending bank about it clearly and prefer taking it in writing from the bank.

  • Tuition Fee
  • Examination
  • Books/Computer
  • Hostel
  • Insurance
  • Educational trips
  • Uniforms
  • Library/Laboratory
  • Passage Money for travel abroad
  • Two-wheeler (upto Rs. 50,000/-)


A co applicant for education loan can be anyone from the relative including your Father / Mother / Spouse / Brother / Sister (married). Where loan amount is high, bank considers co‐applicant’s income to determine the loan amount eligibility according to Bank’s credit and underwriting norms.

In certain cases, where the required collateral could not be provided by the above relative to the bank for education loan. Student can even provide it by one of the following relatives provided they are brought into the arrangement as Co‐applicant(s) viz: Father‐in‐law / Mother‐in‐law / Sister‐in‐law /Brother‐in‐law / Maternal or Paternal Uncle or Aunt / Grandparents & First Cousins.

Banks generally accept the following Collateral from the students for education loan:

  • Residential Flat
  • Residential House
  • Non‐Agricultural Land
  • A Fixed Deposit, assigned in favor of the Bank
Some other loans include:

Short Term Personal LoanGet it if you want to repay personal loan quickly;
Short Term Business LoanGet this loan for short term and repay within 1 Year;
Business Loan
 Get it if you want Unsecured loan to fund your business;
Home Loan Balance Transfer – for when you find a Home Loan with interest rates lower than your existing Home Loan, and use this new loan to pay off the previous one;
Home Improvement Loan
– for house renovation;
Home Extension Loan – for when you’re planning to expand your house by, for example, adding a new room or wing;
Land Purchase Loan – for when you want to invest in land, whether to build a structure on it in the future or not;
Loan Against Property – for when you need cash to invest in business or elsewhere against the property you have.

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