The significant milestone of pursuing higher education is often accompanied by financial commitments. These commitments can be met with the help of an education loan since it covers tuition fees, accommodation, books, and other education-related expenses. However, before applying for an education loan in 2025, there are some things you should consider. This article explains those factors, allowing you to understand the important factors of the education loan application process.
Calculate the Total Cost of Education
Individuals must calculate the entire cost of education before approaching various lenders. Make sure to include various costs like tuition fees, exam charges, hostel fees, travel expenses, study material and other miscellaneous costs. This calculation allows you to apply for a loan amount that is required and is within your repayment capacity.
Check the Lender’s Loan Eligibility Criteria
While the exact eligibility criteria may differ among various lenders, commonly, lenders require their applicants to:
- Be an Indian citizen
- Have secured admission to a recognised institute
- Chosen a course that is eligible under the lender’s loan criteria
Some lenders may require a co-applicant if the loan amount is higher. It can be the applicant’s parent or legal guardian. Also, make sure that all the essential academic documents, such as your entrance score cards and admission letter, are in order.
Types of Courses and Institutions Covered by the Lender
Lenders may not fund all courses and institutes under their ed loans. Commonly, lenders may fund:
- Full-time courses in India or overseas
- Professional, technical, or graduate/postgraduate programs
- Institutions that are approved by the government or government authorities.
Make sure to check the lender’s approved list of courses and institutes before applying.
Understand the Repayment Structure
Lenders may offer a moratorium period in the case of education loans. During this period, students don’t have to start repayment of the loan. This period may last anywhere between 6 to 12 months after the student completes their course. Post-moratorium period, the repayment cycle begins. To ensure that repayment is within your financial abilities, make sure to consider:
- The total repayment tenure
- Availability of the prepayment option without having to pay extra charges
- Exact amount of Equated Monthly Instalments (EMI).
Check Interest Rates and Other Fees
The education loan interest rates can either be fixed or floating but it can also differ based on a few factors such as:
- Total Loan Amount
- Type of Institution, whether domestic or international
- Course
- Guarantor’s (or Applicant’s) Credit Profile
Also take other processing fees, prepayment charges or late payment fees into account in your calculation of the overall cost of the loan. You can also compare the various features of each lender’s loan and choose one that aligns with your repayment capacity.
Co-applicant Requirements
Lenders may require a co-applicant if the loan is above the lender’s limit. The co-applicant may be a parent or guardian, and they must also have a steady income. Borrowers need to consider their co-applicant’s income and credit history because those factors impact the overall potential for loan approval. Make sure you know what your co-applicant is committing to especially when it comes to repayments.
Understand Collateral Requirement and Tax Benefits
Depending on the institute and the total loan amount, the lender may ask for collateral such as FD, property or insurance policies. It is therefore essential for applicants to keep property documents or other security-related documents ready.
Additionally, under Section 80E of the Income Tax Act, the interest you pay on an education loan is eligible for tax deductions. It is, however, necessary to understand that these deductions are not applicable to the principal amount.
Reading Terms and Conditions Thoroughly
Before you sign the loan agreement, make sure to check the terms and conditions related to:
- The moratorium period
- Interest calculation
- Starting date of EMIs
- Prepayment option
- Missed payments.
Explore Other Alternatives
An education loan application may be rejected due to various reasons such as low academic score, insufficient documentation, low credit score or other lender’s eligibility criteria. In such cases, you may explore other options such as an instant personal loan app, scholarships, or financial aid.
Conclusion
Applicants must carefully plan and understand multiple factors while applying for an education loan in 2025. Some of the factors that must be considered are the total cost, eligibility, interest rates and repayment terms. While this loan can provide access to higher education, it also results in long-term financial responsibilities. Make sure to compare various lenders, understand various conditions, and prepare all the documents required. Knowing these factors can help you make informed borrowing decisions.