education loan

As of June 2020, education loan disbursal has seen a steady decline. A report claims that this decline amounts to around 8.43% between 2016 and 2020. While many factors contributed to such a slump, the stringent eligibility criteria and documentation process are some of the major points that are to blame.

Unrestricted access to good education can open the door of opportunities for your child. That said, one cannot oversee the rising cost of higher education, both in India and overseas. A far-sighted step that you can take in such a scenario is to find the right education loan so that you don’t drain your savings while financing your child’s education. 

Besides covering the course fees, an education loan offers a lump sum that can help you pay for accommodation, tuition fees and other associated expenses like travel, books, and more. Most lenders and financial institutions provide an education loan specially designed for professional courses, making it the most convenient financing option available. 

Thus, if you are currently considering such a debt, ensure you understand the intricacies involved with an education loan beforehand to avoid complications later.

Education loan eligibility criteria

One of the first things to consider for any loan before applying is whether you meet its eligibility parameters. While the exact requirements tend to differ from one lender to the next, listed below are some of the common ones – 

  • Applicants must be Indian citizens
  • The student must have enjoyed an exemplary academic background
  • The borrower should already have secured admission to one of the approved universities/colleges/institutions/courses before loan application.
  • Also, the student or his/her parents must show sufficient monthly income at the time of loan application.

These stringent criteria have discouraged potential borrowers from availing an education loan. It is also a major reason why lenders must choose a loan against property for education instead of opting for such unsecured credit.

Education loan documentation

Unlike an education loan against property, a standard study loan also requires one to undergo a comprehensive documentation process. Besides KYC and personal documents, students would need to provide admission certificates, mark sheets and complete academic history.

On the other hand, a mortgage loan simply needs a borrower to submit KYC, income and property-related documents. This ensures a faster and streamlined process. Such distinctions contribute to why a loan against property is often considered a better way to finance a child’s education.

End-use restrictions on education loans

An education loan completely restricts a borrower’s ability to use this quantum. The money is handed over by a financial institution to the college or university in question. Also, it does not factor in additional expenses, such as lodging, fooding and others.

In this regard, a LAP loan is a perfect option since it comes with no such restrictions. Upon loan sanction, the specified amount reaches the borrower’s account. He/she is free to spend the same anyway they please. Thus, one can finance both the course fees, along with other liabilities, such as rent and similar cost of livelihood.

Limited principal availability

Education loans are unsecured credit, which is why the maximum principal amount is often limited to around Rs.30 lakh. While this is enough to pursue most courses domestically, admission to foreign colleges would mean requirement of additional funds. A loan against property for education, on the other hand, can provide a significant amount to borrowers, based on the market value of the mortgaged property.

However, before opting for a big-ticket debt, make sure to utilise a LAP EMI calculator. Doing so should help one prepare his/her financial state accordingly to afford repayment easily.

Apart from such benefits, renowned housing finance companies also provide pre-approved offers to ease and accelerate the lending process. These offers are available on a host of products, including home loans, loan against property and more. You can check your pre-approved offer by providing your name and contact details.

Eligible candidates can also take advantage of affordable property loan interest rates, which are often more reasonable compared to unsecured study loans. Combined with the longer tenor options, such rates can reduce repayment burden significantly.

This is another area, where a loan against property is more beneficial when funding higher education. Such a mortgage debt allows borrowers to claim tax benefits under two specific sections of the ITA, namely, Section 37(1) and Section 24. Still, one would need to meet specific criteria to avail of such benefits.

A LAP is often a preferred alternative, especially for individuals owning immovable property. The secured nature of such debt benefits borrowers significantly, reducing financial strain considerably.

Nevertheless, keep in mind that mortgage loan rates also depend on your eligibility. If you exceed the listed parameters of a particular lender, you can negotiate with the company for better terms. So, consider the available option and choose wisely.

Additional Read : Best Ways to Apply for A Medical Professional Loan