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Education Loan
How An Education Loan Can Help You Pursue Higher Studies
Today, almost everyone––parents and children–––recognize the importance of a good education. And the more qualified or learned you are, the better it is. We live in a ‘knowledge economy’, where education and knowledge is power!
Higher education, in particular, enhances the prospect of securing a good job, earning a substantial income, living a respectable life, and providing the best for your family.
But higher education, where the focus is on specialisation and super-specialisation, is only getting dearer. Universities and colleges are levying high fees, apart from the additional expenses involved, viz. coaching class fees, accommodation, etc., if one pursues education in another city/state/country.
While parents are saving and investing money for their children’s education, many a times the corpus is not enough to counter the inflation we’ve seen with higher education. This is where an education loan comes as recourse.
An Education loan from Axis Bank can fuel the dream of higher education in India or abroad. The loan is available for a variety of career-oriented courses like medicine, engineering, management, etc. either at the graduate or post-graduate level in prime institutes in India and abroad.
The loan covers tuition fees, examination fees, library subscription, cost of books, needed lab tools/equipment, laptop/computer, hostel charges (if any), and so on.
The minimum loan one can avail is Rs 50,000 and can range up to Rs 75 lakh depending on case-to-case basis.*
Before you opt for an education loan, here are some factors to look at:
- List of eligible institutes
When you approach a bank for an education loan, first check whether the university/institute is `accredited by the concerned approving authority.
- Interest rate
The interest rate determines your EMI. Naturally, this has a bearing on your budget and long-term financial wellbeing. So, make sure you’re availing a loan at a competitive rate of interest. It makes sense to compare interest rates across lenders. Axis Bank India offers education loans at an attractive rate of interest.
To get a broad sense of how much the EMI on an education loan would be, use Axis Bank’s education loan EMI calculator –– it’s a comprehensive resource. All you have to do is input the relevant data in the required fields and it’ll produce the result in less than a minute.
- The charges levied
Most banks, including Axis Bank, do not levy a processing fee for an education loan. However, you need to keep an eye out for other charges such as, late payment charges, penal interest, and so on.
- Loan Tenure
The maximum tenure for an education loan is usually 10 to 15 years (including moratorium period). Remember, a higher tenure can reduce your EMIs, making repayments comfortable; while opting for a lower tenure increases your EMI.
- Customer service
Ensure the customer service department of the lender has high standards. This service can even help keep track of your loan and allow you to be in better control of your personal finances.
Remember, while lenders will have varying customer service standards, there are some basics of good service that are universal. The customer service team at Axis Bank, among few others, for instance, interacts with clients in a transparent and well-co-ordinated manner to and they respect the relationship.
- Terms & conditions
Take the time to read the terms & condition carefully, and make an informed choice. This will avoid issues later and ensure a pleasant, hassle-free experience.
Now, let’s discuss the eligibility criteria…
Students can directly apply for an education loan. However, their parent(s) or guardian will be treated as co-applicants, and their role will be akin to a primary debtor (a person who owes money).
- The applicant and co-applicant(s) need to be over 18 years of age
- The co-applicant, i.e. parent(s) or guardian, need to have a regular source of income
- You need to have secured certain marks during SSC, HSC, and graduation
- A confirmed admission from a recognised college/education institution (as per bank’s list) is a must
As regards to the documentation, the following need to be submitted along with the education application form:
The following need to be submitted along with the education loan application form:*
- Age proof (Birth Certificate, Passport, Aadhaar, PAN card, driving license)
- Address proof (Aadhaar, passport, latest electricity bill, latest telephone bill, ration card, existing house lease agreement, bank account statement)
- Photo identification proofs (Aadhaar, voter id, PAN card, passport, driving license)
- Mark sheets and/or pass certificates of SSC, HSC, Degree Courses, National level entrance test
- Copy of the admission letter of the Institute along with the ‘fee schedule’
- Income statements (Salary slip, Form 16, Income-Tax Returnsof the last 2 years, and Computation of income of last 2 years certified by a Chartered Accountant)
- Bank Statement/Pass Book of last 6 months
- Passport size photos of the applicant and co-applicants
At Axis Bank for loans up to Rs 4.0 lakh, there is no margin requirement. And usually, for a loan amount below Rs 4.0 lakh, a guarantor is not required, but this varies on a case-to-case basis.
For an education loan amount ranging between Rs 4.0 lakh and Rs 7.5 lakh, apart from co-applicant(s), a third-party guarantee is needed from a person who is not a blood-relation (an acquaintance, friend, or any other relative). At Axis Bank, education loans above Rs 4.0 lakh are subject to a margin, which is 5% for studies in India and 15% for higher studies overseas.
For education loans above Rs 7.5 lakh, banks insist on tangible collateral security of a suitable value.
After a thorough due diligence, the bank shall sanction the education loan. Axis Bank usually disburses loans within 15 days from the date of receipt of the complete application along with all documents required for a full appraisal.
The documents required for the first disbursement are*:
- Demand Letter from college or university
- Disbursement Request Form signed by applicant, Co-applicants
- Signed copy of Loan Agreement (which includes Demand Promissory Note, DP Note Delivery-cum-Waiver Letter, Standing Instruction Request, PDC (Post-dated Cheque)
- Sanction Letter signed by applicant, co-applicants
- Form A2 signed (for purchase of foreign exchange) by applicant or co-applicants in case abroad Institute cases
- Receipts of Margin Money paid to the college/university alongwith bank statement reflecting the transaction
- Documents for collateral security ( if applicable)
In addition to the above, for subsequent disbursement, i.e. in instalments as per fee schedule, Exam Progress Report or, Marksheet, or Bonafide Certificate is needed.
Do note that the education loan can be disbursed in full or in suitable instalments as per your requirements/fee schedule.
Tax benefit on education loan
When you avail of an education loan, the interest paid (which is a component of your EMI) on the education loan is eligible as a deduction under Section 80E of the Income Tax Act, 1961.The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. There is no limit on the interest amount that is allowed as deduction. To check the tax that you can save please check out our tax calculator by clicking here.
Note that only an individual can claim this deduction.The loan should be taken for the higher education (irrespective whether in India or abroad) of self, spouse, children, or the student for whom you are the legal guardian. Thus, parents can easily claim this deduction for the loan taken for the higher studies of their children.
Other Benefits of applying for an Education Loan with Axis Bank
Zero prepayment charges and zero pre-closure charges
Door step service
Funding for executive programs
Summary...
An education loan can be an efficient way to finance higher education for yourself or your children. Besides the tax benefit, your existing finances are not exhausted when you opt for an education loan. Plus, the loan can be worked out to suit your budget, facilitating you to save.
Moreover, you will not need to utilise your existing investments assigned for other important financial goals such children’s marriage needs, your own retirement, among a host of others.
Education is a vital personal and financial goal, an investment that has the potential to generate returns like no other.
Nelson Mandela has beautifully said, "Education is the most powerful weapon which you can use to change the world." And, indeed education can truly transform and empower individuals.
Happy Banking!
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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