Education Loan Interest Rates

Education loans are the finest method to pursue higher education without jeopardizing your cash. You can get an education loan to study in India or abroad. Guarantors must be guardians or parents for unemployed students.

A plethora of factors come into play when selecting the right bank for availing of an education loan. First and foremost, one should check the EMIs payable once you successfully complete your education. You may check the EMI amount that you would have to pay each month by using an Education Loan EMI Calculator.

Features of Student Loans in India

  • Loans of up to Rs.1 crore are available.
  • Loan repayment terms of up to 15 years are available.
  • Apply for education loans to study in India and abroad.
  • Enjoy a one-year moratorium after completing the course. You are not required to make loan installments during this time.
  • Several banks provide female students with preferential interest rates.
  • Before applying for a Visa, certain lenders offer loan disbursement.
  • Collection of essential paperwork at your door.
  • Some banks offer favorable rates to children of bank employees.
  • Get tax breaks on interest payments for up to 8 years.

Education Loan Interest Rate in India

The education loan interest rate is mentioned in the table below:

Banks

Interest Rates

State Bank of India - SBI Educational Loan Interest Rate

8.55% p.a. 

IDBI Bank

10.60% p.a. to 11.10% p.a.

Punjab National Bank

8.55% p.a. 

Tamilnad Mercantile Bank

11.15% p.a. to 12.40% p.a.

Kotak Mahindra Bank

Up to 16% p.a.

Axis Bank Educational Loan Interest Rate

13.70% p.a. to 15.20% p.a.

Karnataka Bank

9.94% p.a. to 12.84% p.a. 

Federal Bank

12.55% p.a. 

Bank of Baroda

9.15% p.a. 

Bank of India

9.95% p.a. 

Canara Bank

9.25% p.a. 

Karur Vysya Bank

11.48% p.a. to 13.98% p.a.

Calculation of Student Loan Interest Rates

After the applicant has determined how much loan can be taken, the equivalent monthly installment (EMI) commences upon the conclusion of the course. These EMIs are the monthly sum of the principal and interest payments. Let's look at an example of EMI calculation on a home loan:

If a student files for an education loan to pursue a Master's degree from an institution abroad and requires INR 10 lakh at a 10% annual interest rate for a 10-year term, the EMI will be calculated using the following formula:

P x R x (1+R)^N / [(1+R)^N-1]

EMI= INR 10,00,000 x 10% x (1 + 10%)120 / ((1 + 10%)120 – 1) = INR 13,215.

Recall that a borrower pays more in interest during the first several years of making EMI payments. Lending institutions frequently use a loan amortization plan to help borrowers assess their EMI payments by breaking out the interest rates and principal components.

Given the aforementioned scenario, the table below depicts the amortization schedule of the applicant's first 12 EMI payments, as well as the breakdown of interest and principal components to be paid.

Tax Benefits Over the Education Loan Interest Rate of All Banks

Section 80E will let you deduct the interest you pay on your student loan. This benefit is only accessible to individual borrowers and is only available for higher education. All fields of study, both domestically and internationally, are eligible for the discount. It offers both vocational and academic programs.

Remember that the tax reduction only applies to the interest element of the EMI, not the principle. There is, however, no limit to the number of times you can use this benefit. To qualify for this benefit, you'll need a certificate from your bank or financial institution that separates the principle and interest components of your EMIs.

What is the Process of an Education Loan?

The education loan process is mentioned below:

a) Offline

Step 1: Go to a Branch: You can apply for a loan in person by going to your nearest branch with the required documents, discussing the loan terms with a representative, filling out the form, and applying in person.

Step 2: Contact the Lender: You can contact the lender directly or request a call back by expressing your interest. After that, you can discuss the loan terms and apply.

b) Online

Step 1: This is the simplest and most convenient method of applying. There are two options for submitting an online application. The first is a simple application form that you will fill out online, attach the required documents, and submit.

Step 2: In the second step, you apply by submitting all of the needed information, and the lender will contact you to negotiate the loan terms before advancing with the application.

Constituents of the Educational Loan

Other expenses covered by college loans include:

  • Hostel charges.
  • Travel expenses for international schooling.
  • Fees for exams, laboratories, and libraries.
  • The cost of books, uniforms, projects, and so on.
  • The educational institute requires deposits.
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