Education Loan

Moratorium Period:

The moratorium period is a distinctive aspect of education loans. This provision allows you to opt for a deferment of EMI payments for a maximum of 12 months after completing your studies or within 6 months of commencing employment, whichever comes earlier. However, the precise length of the moratorium period is subject to the policies of the respective bank.

Choosing the Right Time to Begin Education Loan Repayment:

While a moratorium period is available, it is advisable to initiate the repayment of your education loan at your earliest convenience. It's important to note that the moratorium period does not exempt you from interest charges. Particularly in India, education loan interest rates are notably high. 

Interest continues to accumulate during the moratorium period, even though you aren't required to repay the principal amount. This results in a higher burden of interest and an increased overall loan cost. Moreover, starting repayment early can contribute positively to building a favorable credit score.

Process for Repaying Education Loans:

The process for repaying an education loan is relatively straightforward. Contact your bank's manager to establish an arrangement for automatic deductions from your account. Additionally, you may want to explore the variety of education loan repayment options that are available in India.

Additional Points to Consider:

The repayment duration can vary between different banks and is often contingent upon the amount of the loan you've availed. For students pursuing education abroad, the repayment period can extend up to 15 years, affording them ample time to gradually settle the loan through smaller installments.

In regard to prepayment of education loans, it's worth noting that banks generally do not impose charges. However, it's typically not recommended to prepay or fully settle the education loan ahead of schedule. This is primarily due to the fact that education loans offer potential tax deductions on the interest paid, as outlined in Section 80E of relevant tax regulations.

• Age:   Most lenders have a minimum and maximum age requirement for loan applicants. Typically, you need to be of legal age (18 or older) to apply for a loan.
• Course/Program Eligibility:  Education loans are often tied to specific educational programs or courses. Lenders may have a list of eligible institutions and programs that qualify for loans.
• Admission Offer:  Many lenders require proof of admission to an eligible educational institution before approving a loan application.
• Academic Performance:  Some lenders might consider your academic performance as part of the eligibility criteria. This could include factors like your high school or previous education grades.
• Co-borrower or Guarantor:  If you have limited credit history or income, some lenders might require a co-borrower or guarantor (usually a parent or guardian) who will share the responsibility of repaying the loan if you are unable to do so.
• Credit History:  Student's as well as their co-borrower/guarantor's credit history and credit score can play a significant role in determining your eligibility for an education loan. A good credit history can improve your chances of approval and may lead to more favorable loan terms.
• Income/Financial Ability:  Some lenders may consider your ability to repay the loan based on your income or your co-borrower's income.
• Loan Amount:  The loan amount you're requesting in relation to the cost of the program might affect your eligibility. Lenders may have specific limits on the loan amount they are willing to offer.
• Collateral or Security:  In some cases, lenders might require collateral or security against the loan, especially for larger loan amounts. This could be in the form of property, investments, or other valuable assets.
• Documentation:  You will likely need to provide various documents as part of your loan application, such as proof of identity, proof of admission, income documents, and more.

Education Loan is a credit facility offered by Banks/NBFCs and various other financial institutions to meet the business requirements of individuals, self-employed customers, business owners, MSMEs, and other business entities. Loan against property can be availed by startups, entrepreneurs, retailers, traders, manufacturers, self-employed professionals (CAs/Doctors), existing businesses, and several other business entities. Education Loan is majorly classified into two types, such as Secured loan and Unsecured loan. Secured loans are types of loans that require collateral/security, that borrowers need to deposit with the lender to avail funds. However, in the case of unsecured loans, there is no need to submit any type of collateral/security with the Bank/NBFC, or any other financial institution. Banks/NBFCs offer a range of both Secured and Unsecured Education Loans that include Term Loans (Short-term/Intermediate-term/Long-term), Working Capital Loans, Cash Credit, Overdraft, Letter of Credit, Bill/Invoice Discounting, Equipment Finance, Machinery Loans, Point-of-Sale (POS) Loans/Merchant Cash Advance, Fleet Finance, Loans under Bank Guarantee (BG), and Loans under Govt. schemes, such as Mudra Loans (PMMY), SIDBI, PMEGP, CGTMSE, Stand Up India, PSB Loans in 59 minutes, PMRY, etc. Financial institutions also offer Startup Loans, Small Home Loans, Instant Loan against property and Micro Loans of loan amount up to Rs. 10 lakh or more depending upon personal requirements.