Education loan is a huge boon for students looking to pursue higher education in prestigious institutions in India given that inflation has reached uncomfortably high levels. The cost of education is not only high, but they are also unpredictable, says Gayathri Subramanian who plans to send her 17-year-old daughter to one of the best colleges in Chennai.
While Pune-based Madhu and Vinay have planned for their 18-year-old son’s education till he turns 25. Their plans are fluid as they have kept an additional chunk of money for entire education expenses. But, is it sufficient?
As middle-class parents, it is wise to not be too rigid when it comes to planning for your child’s education. The Indian Institute of Technology (IIT) and all units in the country increased their fees by Rs 90,000 to Rs 2 lakh for all undergraduate courses in 2021, despite the devastating pandemic.
This is undoubtedly very expensive for parents who are not financially prepared. Not only the tuition fee but transportation fees and examination fees are also hiked periodically which affects parents’ overall budget.
Between 2012 and 2020, education costs climbed by 10%. See below:
Plus, there are hidden costs to education that one cannot escape from. For instance, exam registration fees have seen an approximate 6.7% hike in 2021. Additionally, rising transportation and accommodation costs also contribute significantly to the overall increase in education costs. And finally, food expenses are another major contributor that is not highlighted while planning for higher education.
With the cost of education increasing significantly in recent years, it is becoming a challenge for parents to maintain the expense and raise a second child. This is where education loans come into play.
These loans extend financial support to students to pursue higher education in India, without the burden of paying for it upfront. This allows them to focus on their studies and not worry about the financial aspect.
Banks, non-banking financial companies (NBFCs) and other financial institutes provide unsecured education loans in India. This article will provide all the information you need to choose the best unsecured education loans in India for your requirement.
Unsecured education loan in India
In a non collateral or unsecured education loan, the lender does not request collateral from the student or the co-borrower. This saves a lot of time in the loan processing and simplifies the documentation process. This is the biggest advantage of an unsecured education loan.
Students have to meet certain eligibility criteria set by the lender like course, university etc to avail the loan. However, loans without collateral may have a higher interest rate compared to a secured loan because the financial institution is taking higher risks.
A student cannot take an unsecured education loan in India without a co-borrower as the education loan without collateral is sanctioned on the basis of the income and CIBIL score of the co-borrower or the guardian.
There are other factors also which students and co-borrowers have to meet in order to avail an unsecured education loan.
Purpose of unsecured education loan
The purpose of this type of loan is to provide funding for students to pay for their education, including tuition, books, and other expenses. The loan is typically granted based on the borrower’s creditworthiness and ability to repay the loan. It can be used to finance a variety of educational expenses, including undergraduate and graduate degrees, professional certification programs, and vocational training.
How to apply for unsecured education loan
Aspirants can apply for education loans either online or in-person at a branch. The online process is very easy. Follow the steps to apply today:
- Visit the chosen financial company’s website and fill out the application form
- Enter your personal information and property details
- Fill out your/co-borrower’s income details to access a personalised offer
- After the submission of the required information, an authorised person will contact the student to provide additional loan processing instructions.
Unsecured education loan- Eligibility criteria for students
To approve educational loans, the lender will typically look at the following criteria. The applicant should:
- Be an Indian national
- Be 18-35 year-old
- Be looking to pursue skill development courses in India or full time regular courses at Indian colleges/universities
- Have a good academic record
- Have secured admission in select premier institutions through entrance test/selection process
Eligibility criteria for Co-borrowers
- Parent(s) must participate as a co-applicant.
- In case of a married person, a co-applicant can be spouse/parent(s)/parent(s)-in-law.
- In cases where both parents are not alive, a close relative or guardian will be considered a co-applicant.
- Co-applicant must be an Indian national.
Expenses covered
Traditionally, unsecured education loans in India cover the total tuition fee and some of the additional costs. Here are broad categories:
- 100% College tuition fees payable
- Accommodation charges
- Exam and library fees
- Books and equipment including a computer
- Traveling expenses abroad if any
- Other reasonable expenses required to complete the course
Documents required to avail unsecured education loan
Basic KYC documents, financial documents of the borrower and co-borrower are required. The loan assistant will give the student detailed and specific requirements at the time of application.
Also Read: 5 Best Tips To Get The Best Education Loan Interest Rate In India
How can unsecured education loans help students?
The biggest benefit of an unsecured education loan is that the funds are easily available to students coming from any background. Besides, students can:
- Achieve the dream of studying at a premier university
- Continue education and achieve goals without financial stress
- Pay for tuition fees, hostel, exam and other fees
- Repay the loan with the best interest rates available in market
- Build a good credit score and financial discipline
Education can aid students in landing a position at a reputable company, and even the university they choose to attend can affect their capacity to entice major corporations to review their applications. In conclusion, an education loan can be a great resource for students who are unable to finance their education on their own.
Unsecured education loans are available from a variety of lenders but finding the best loan providers in India is a challenging task. Varthana is driven to help students like you with financial assistance to make your educational journey as smooth as possible.
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