India now has 1,000 universities and 40,000 colleges, and the country’s higher education system is about to undergo a major transformation. In addition, the new National Education Policy (NEP) will have a significant impact on the overall system. In the next ten years, the new policy is expected to bring about revolutionary changes, with teaching and learning becoming more student-centered. Out of all the financing options available, student loans may be the best way for you to pursue your collegiate dreams without financial stress.
You can easily get a student loan in India (with no collateral) from Banks, NBFCs, or other financial institutions. Student loans will get you a step closer to your dream career, besides offering several other advantages that will allow you to focus on your studies without worrying about money. To make responsible, effective decisions about funding your education, you must fully understand what are the types of student loan, application process, disbursement, and repayment procedure.
Here’s everything you need to know about getting your first student loan in India.
1. Types of student loan in India:
Type of student loan based on courses:
- Higher secondary education Loan
- Graduation and post graduation study loan
- Loans for professional/certificate courses
2. Based on collateral security and/or guarantee:
- Secured Student Loans: A collateral or security is required for availing loans. Usually the loan amount is very high here. The security can be movable assets (FDs, LIC Insurance, etc.) or immovable assets (non-agricultural land, house, etc.)
- Unsecured Student Loans:
A loan amount that is offered without any security is called an unsecured student loan. Usually the loan tenure and loan amount is small compared to secured student loans.
3. Loan Tenure
The timeline for processing and disbursement of student loans varies as per Bank/NBFC/Financial Institution (lender) norms. However, in most cases, the lender will notify you of its decisions within a few days to weeks after receiving your application, assuming it is complete in all respects.
Loans for students are typically disbursed directly by the bank to the educational institution, either in full or in part, based on the institution’s fee schedule and requirement of the student.
4. Interest Rates
The interest rates depend from banks to banks, NBFCs and financial institutions you are choosing the student loan from. The interest rate depends on the loan tenure, CIBIL rating, repayment history, type of loan, with or without collateral offered, etc.
Typically all the lenders will check on the following criteria to approve the student loan:
- The applicant should be an Indian citizen
- The applicant should be of age 18-35 years
- The applicant should have a good academic record
- The applicant should have secured admission or seeking an admission to a recognised University/institution
- The courses eligible for education loan are generally provided by the lenders
6. Documents required
Following documents are generally required by the lenders:
- Duly filled loan application form
- Recent photograph of the applicant and the co-applicant
- Age proof
- Photo ID (PAN/Aadhar/Driving License/Voter ID)
- Address proof
- Admission proof (Admission letter with fee-break up)
- Marksheet (10th/12th/graduation/GRE/TOEFL/IELTS, whichever is applicable)
- Income proof (of co-applicant)
- Last 6 months bank statements
- Will be asked to furnish other supporting documents in some cases.
7. Repayment and Moratorium period
The student loan amount for higher education will be repaid to the lender through Easy Monthly Installments (EMIs) over the course of the loan’s term. The loan can be paid back using the Electronic National Automated Clearing House (e-NACH), or Post-Dated Cheques (PDCs).
Banks typically grant a moratorium period of 6 months to one year following successful course completion before a student is expected to start repaying the student loan in India.
NBFCs like Varthana Finance do not offer any moratorium period and instead parents/guardians will be repaying the amount so that students can focus on their studies.
8. Expenses covered
Traditionally, the student loan in India covers the total tuition fee as well as some of the additional costs.
Here are broad categories covered by the student loan in India:
- 100% College Tuition Fees payable
- Accommodation charges
- Exam and library fees
- Books and equipment including a computer
- Traveling expenses abroad
- Other reasonable expenses required to complete the course
Varthana funds to make education more accessible to Indian students. We offer an avenue to explore various student loans offered by leading banks and NBFCs. Our services ensure that the students get faster loans without any hassle, and can select a custom loan product as per their requirement. Click here if you are interested.