Education loans are essentially a type of financial aid that students use to cover the costs of their educational expenses. Education loans are given in cash and must be repaid to the lender with interest. They are attainable through scholarships, prizes, funding, and finance. The repayment terms for education loans can vary greatly depending on different factors. This include the lender and the amount borrowed by the student, therefore students who intend to take out loans are encouraged to borrow only what they need.
The majority of student loans offered to people in India have comparatively low interest rates and don’t require quick repayment. The interval between when students take out loans and when they begin making repayments is typically given to them.
Education loans are unsecured loans that can be used to pay for expenditures associated with pursuing an education. This include tuition, books, living expenses, and other similar charges like transportation, etc. You could need a co-signer, such as an eligible adult like a friend, parent, or family, if you want to apply for an education loan but are unemployed or still in school. Once the student has finished their school, they can begin repaying their loan. An education loan can be obtained with relative ease and simplicity due to the flexible terms and conditions attached to repayment.
Types of education loan
For various sorts of educational programmes, there are numerous different educational loans available. There are student loans for diploma and certificate programmes, student loans for skill-based programmes, student loans for studying abroad, and other options depending on the type of education a person wants to pursue.
There are two substantial kinds of education loans based on location regardless of the course.
Domestic education loan: For academic programmes offered within the nation’s boundaries. The lenders will sanction the loan if the student has a guaranteed seat in an institution that satisfies the lenders’ requirements after the borrower meets a variety of education loan eligibility requirements.
Study abroad education loan: For educational programmes offered outside the nation’s borders. Similar to domestic education loans, the borrower must have a guaranteed spot in a college or university on the list of approved educational institutions in order for the loan to be approved.
In addition to this, there are a few additional categories on which the student loan debt can be further split. They consist of the following:
Course based loans
Depending on the type of course the borrower chooses, financial institutions will issue loans. It can be to finish their undergraduate degree or to enroll in prominent colleges like IITs and IIMs.
Graduate student loans: These student loans will be made available to those who wish to continue their study in Indian colleges. Students who want to pursue postgraduate degrees are expressly eligible for these loans. The students must have finished their undergraduate degree in order to qualify for this loan.
Undergraduate education loans: These loans give students the resources they need to complete their undergraduate degree programmes. An undergraduate course can last three to five years, after which the students have many work prospects.
Professional education loans: Many financial organizations, including banks and NBFCs, offered loans to students who wanted to pursue careers education.
Based on collateral type
An assurance that the loan will be repaid is required when applying for a secured loan. Various loan kinds include
Loan against the property: It is necessary to pledge an immovable asset to the bank. This include land, agricultural property, residential land, a flat, a house, etc.
Loans against deposits: Loans against fixed deposits, recurring deposits, or gold deposits are available.
Loan against securities: The borrower may use education loans secured by debentures, bonds, or stock.
Third party guarantee: Loans can be obtained with the use of a certificate of guarantee from an employee or a home bank.
Study Abroad Education Loan
A study abroad education loan is, as the name implies, a loan that can be used to pursue an educational programme overseas. There are a variety of possibilities accessible under the study abroad education loans depending on the type of course.
Loan for parents: Although parents make every effort to provide their children with the greatest education possible, doing so has grown more challenging as a result of rising school costs. To assist these folks, several banks provide parent education loans that can cover 100% of the cost of a child’s education. It is an unsecured loan. It can be used for tuition, books, transportation costs, and other costs associated with a child’s education. This facility is accessible to relatives in addition to parents.
College parent loans: These are loans that can be used to pay for things like tuition and books. If the borrower is working while attending school, parents must co-sign for these unsecured loans because there is no requirement for collateral.
Repayment of education loans
Education loans assist in covering both the academic costs and their associated expenses. These loans have payment terms where interest must be paid on the principal amount, just like all other loans. The length of the agreed-upon repayment period and the sort of loan taken out determine when these obligations must be paid back.