How to Apply for an Education Loan in India

Understanding the Eligibility Criteria

Each and every bank has eligibility criteria that must be satisfied by the individual making a request for the educational loan. Some of the criteria include Indian citizenship, admission at a recognized institute, education history, entrance examination results, co-applicant’s credit history, and job prospects of the selected field of study.

In addition to this, students wishing to pursue their studies overseas would also have to furnish extra documentation like passport and visa details and test results for language proficiency.

Also read: Education Loans in India - The Complete Student Guide

Some of the factors required to apply for an education loan in India are as follows:

• Indian nationality: The general requirement for the applicant is to be an Indian citizen. There may be some banks which have provisions that are specific for NRIs/PIOs/OCIs.
• Admission to a recognized institution: It would be important for the candidate to have been admitted to a suitable course in a recognized or accredited institute in India or overseas. The admission might require the student to clear an entrance test based on merit.
• Eligible course or program: In general, banks finance all recognized undergraduate, postgraduate, professional and technical courses. For example, there may be different criteria of eligibility for management courses, engineering courses, medical courses, law courses and so on.
• Academic qualifications: Student should fulfill the admission and academic criteria of the educational institute and program. In most of the cases, the completion of Class 12 or equivalent will be important for the standard education loan scheme.
• Co-applicant or co-borrower: There should be one parent, guardian or any other person who qualifies as co-applicant/co-borrower. The bank might consider the income and financial standing of the co-borrower.
• Age Requirement: There are variations in terms of age restrictions among banks. For instance, the HDFC bank has an age limit of 16-35 years whereas the Kotak bank states that there is no restriction on student age but provides age criteria for the co-borrower/guarantor.
• Creditworthiness of the co-borrower: The banks may look into the capacity to repay of the co-borrower. The credit record may be affected during the evaluation of the loan application.
• Required documentation: The documents that are usually required by the applicants include Admission letter, academic documents, course fee structure, identity proof, address proof, and financial documents of co-applicant and bank statements.
• Collateral or security, where applicable: Collateral security or third-party guarantee is needed based on the amount of money loaned out under the particular scheme. As per the model framework of the IBA, some types of loans below a particular limit can be covered by credit guarantee without third-party guarantee/collateral security.

Understanding the Role of Collateral

If large amounts are to be borrowed, the lender may ask for some collateral security. This collateral security can take the form of residential/commercial property, fixed deposit, insurance policy, or government securities.

Before providing any collateral security, one must understand the terms and conditions that have been discussed in the loan agreement. The lenders also provide unsecured education loans to students studying in reputable institutions.

At an Institute of National Importance, we take it as a matter of principle that no student should be kept from higher education for want of money. Education loans, especially soft loans without collateral, have made this possible in practice: a two-year moratorium gives young people room to complete their studies before repayment even begins, so they can build their careers on merit and effort rather than family resources. It also helps that our banks maintain low NPAs on these loans, which in turn keeps interest rates among the lowest in the country. That combination of accessible credit, reasonable terms, and low risk for lenders is what lets talented students from all backgrounds pursue their ambitions,” says Vinita Sahay, Director, Indian Institute of Management Bodh Gaya