Education Loan

HDFC Credila:

• Up to 100% finance of i20 value
• Option of 100% collateral-free student loan
• Sanction before admission for i20
• Doorstep service

Avanse:

• 100% education finance
• There is no limit to the maximum amount
• Sanction within 1 day after logging the file
• Prefers meritorious students
• Can disburse in 1 installment
• Doorstep service

Incred:

• Accepts multi-city co-signers
• Can cover all the expenses of a student
• All charges are included in InCred's origination fees
• Can provide pre-visa disbursal if the situation demands
• Doorstep service

Auxilo:

• 1% processing fees
• 100% Finance
• Pre-admission student loan
• Pre-Visa study loan disbursement
• Fast-track student loan
• Competitive interest rates

Other NBFCs offering study loans are Aditya Birla Capital, Tata Capital, Bajaj Finserv.

Section 1: Study Loan Application form 

• Bank Application form with 2 passport-size photographs (online copy generated by WeMakeScholars is acceptable)

Section 2: Basic documents for Applicant (student) and co-applicant and/or Guarantor

1. Proof of identity –PAN Card (and Passport of the student if going abroad)
2. Proof of Residence – Voter ID Card/  Passport/ Electricity Bill/ Telephone Bill/ Ration card/ Bank account statement/ Aadhar. (2 different proofs if current and permanent residence are different)
3. Bank account statement for the last 6 months (Personal/ Salary). For co-applicants, it should show the salary credits if salaried or 1-year business transactions if self-employed.
4. Personal Asset & Liability Statement (assessed by the branch professional)
5. All the documents should be self-attested.

Section 3: Academic Documents for Applicant

1. Education mark sheets and certificates- 10th, 12th, Degree
2. Proof of admission for the course (should be evidencing total duration of the course)
3. Fee structure
4. Entrance exam scorecard

Section 4: Income Documents for Co-applicant

• If Salaried
  • Latest Salary slips (for the last 3 months)
  • Form 16 of the last 2 years.
  • Employers ID card
  • ITR of last 2 yrs
• If Self-employed
  • ITR of last 3 yrs
  • Last 3 years' Balance sheet and Profit & Loss account (only if self-employed)
  • Proof of Business address

Section 5: Other Documents

1. Letter stating that leftover expenses, apart from loan amount will be borne by the co-applicant (Format to be provided by WeMakeScholars Financial officer)
2. Notarised joint affidavit with the student and co-applicant in the Bank’s standard format (Format to be provided by WeMakeScholars Financial officer)

Section 6: Additional docs (if applicable)

1. Receipts of advance payments made if any.
2. All loan account statements (1 year) if any pending loans.
3. Letter explaining the gap if the students had a failure/break in studies on Rs. 100 stamp paper. (Format to be provided by WeMakeScholars Financial officer)

Section 7: Collateral Documents (Optional)

• It is only applicable for collateralized study loans. The list of documents for each state is different. 

When you process your student loan with WeMakeScholars, your financial officer will provide you with a detailed documents checklist, after analyzing your profile.

Types of Interest Rates

Let's understand simple interest and compound interest before learning how to calculate education loan EMI:

• Simple interest: It is the interest rate calculated on the original principal loan amount taken by the applicant 
  • Formula: (P × T × R) ⁄ 100
• Compound interest: It is the interest rate calculated on the principal loan amount taken by the applicant in addition to the interest accumulated over time.
  • Formula: P(1+R⁄100)^T − P

Where,

• P= Principal amount
• R= Rate of Interest
• T= Time

Note: For public banks, it is not required for students to pay simple interest in the moratorium period but, private banks may ask for interest payments during this period.
After the Moratorium period ends, students will have to pay the previously calculated EMI to repay their outstanding loan within the repayment period.

Example:

Let’s assume that you have taken a loan of Rs. 15 lakhs for a course period of 24 months. The interest rate is 10.50% per annum and the moratorium period is 12 months. You will not be paying during the study + moratorium period. With a loan tenure of 12 years. 

Here is how you can calculate the EMI:

• Calculate the EMI using the following formula:
• EMI = [P x R x (1+R)N]/[(1+R)N-1]

Where,

• P = Principal amount (loan amount)
• R = Rate of interest (monthly)
• N = Tenure (in months)
• Monthly interest rate = Annual interest rate / 12

Monthly interest rate = 10.5 / 100/ 12 = 0.00875%

EMI = [15,00,000 x 0.00875% x (1+0.00875%)36]/[(1+0.00875%)144-1]

EMI = Rs. 18,362

You can also use our EMI calculator to calculate the EMI for your education loan 

Repayment is a structured action of repaying the loan that the borrower has taken and if not planned smartly can be an issue of concern for most students. Because of the unplanned approach, students regard the repayment as a major burden thus it is important to plan right from the choice of the bank to the repayment of the education loan. Through our example in this section, you will be able to visualize, how your repayment schedule can look along with the interest portion, principal portion, and EMI. 

Repayment Table

For instance, if you take a student loan of say Rs 40 lacs to pursue higher education at a 9% rate of interest, for a duration of say suppose 15 years, then your EMI repayment schedule will look like this:

Credit score or CIBIL score is the measure of the financial credibility of any individual. A person with a good CIBIL score has a greater chance of getting a student loan faster. 

What is a good CIBIL score? 

• 300-599: If your credit score is in the range of 300-590 it is not possible to get an education loan from any other bank except SBI. It would be better to improve your credit score before applying for an education loan.
• 600-749: For credit scores between 600-749, you might qualify for a student loan. However, be aware that the lender could charge a higher interest rate or offer a shorter repayment period.
• 750 and above: A credit score of 750 and above is highly favorable and can lead to instant loan approval with loan terms beneficial to the applicant.

Below are the minimum CIBIL scores accepted by Govt. Banks, Pvt. Banks and NBFCs 

• State Bank of India (SBI): 591
• Other Govt. Banks: 685
• Pvt. banks/NBFCs: 685

Request a callback from your financial officer at WeMakeScholars, to find a way to process your Student loan despite a lower CIBIL score.

Here is the List of Course Eligible for an Education Loan:

Graduation courses:

• BA
• B.Com
• B.Sc., etc

Post Graduation courses:

• Masters
• Ph.D.

Professional courses:

• Engineering
• Medical
• Agriculture
• Veterinary
• Law
• Dental
• Management
• Architecture
• Computer, etc.

Management courses:

• Hotel Mgt
• Hospitality Mgt
• Event Mgt
• Mass Communication, etc. 
• Computer certificate courses of reputed institutes accredited to Dept. of Electronics or institutes affiliated with an approved university.

Courses like:

• ICWA
• CA
• CFA, etc.

Courses conducted by:

• IIM
• IIT
• IISc
• XLRI
• NIFT etc.

Regular Degree / Diploma courses like:

• Aeronautical
• Pilot training
• Shipping etc.,

(approved by the Director General of Civil Aviation/shipping or equivalent foreign body)

• Evening courses of approved institutes.
• Other courses leading to diplomas/degrees etc. conducted by colleges/universities approved by UGC / Govt./ AICTE / AIBMS / ICMR etc.

Courses like:

• Teachers Training Course
• Nursing Course
• BEd 

For abroad studies:

• regular Graduate Degree
• Post-Graduate Degree
• Diploma/Certificate
• Doctorate courses in any discipline offered by abroad Institutes

Note: Universities in the USA, UK, Canada, Australia, Singapore, Japan, Hong Kong, New Zealand, and Europe [Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, United Kingdom] will be primarily considered for the education loan. Other countries are acceptable on a case-by-case basis.

Here is the list of expenses covered in an education loan :

• Tuition fees- The tuition fee is covered in all education loans as it is the primary expense that students have to pay. The tuition fee is mentioned in your offer letter or admit card provided by your university. It is disbursed directly into the university's bank account.  
• Living expenses- This includes the accommodation costs, food, and travel expenses that you would need while studying abroad. The student must carefully calculate their living costs and request the living expenses accordingly. The disbursement of living expenses is different in each financial institution.
• Health insurance- Many lenders include health insurance in the expenses as part of an education loan, but it has become an optional expense ever since the COVID-19 pandemic.
• Travel tickets- A two-way flight ticket once per year is provided for students. Banks don't automatically give you money for airplane tickets. If you can't afford to pay for your travel, you need to ask the bank to include the cost of air tickets in the list of expenses they cover for you. Most banks are willing to help with the cost of air tickets.

Pro tip: Getting a degree comes with costs like buying books, a laptop, course materials, project work, and study trips. These expenses are not part of the tuition fees and need extra money. Some banks include them when deciding how much loan you can get. If your study costs aren't covered by the loan, you can ask your bank to add them to the list.

• Books & Stationery cost - Books & stationery expenses incurred during the entire course of study.
• Laptop & Computer cost -  If required for the course, students can use the money from their study loan to purchase a laptop or computer.
• Cautionary deposit- The amount of up to 10% of the amount can be used as a cautionary deposit.
• Miscellaneous expenses- Any other expenses incurred towards field visits or projects.

Note:  Before applying for an education loan, it is crucial to consider various important points to avoid complications after approval. Once the loan is sanctioned, no changes can be made to the application, so accuracy is key.

• First, applicants should calculate the correct costs of accommodation and other expenses, and make sure that the costs are accurate to avoid any future issues.
• Additionally, carefully reviewing the list of expenses covered by the chosen financial institution is important.
• If necessary, applicants should request adjustments to align with their specific requirements.
• Another important consideration is the availability of part-time job options in the country of relocation; if uncertain, it's advisable to factor in living expenses accordingly. 

Immovable Property:

An immovable property is something that cannot be moved or shifted from its original place and whose quality, quantity, or shape would change on moving. A few examples of immovable property would be Houses, Flats, and Land. 

Liquid Security:

Liquid Security or assets are a type of property that can easily be converted into cash while still retaining its market value. A few examples of liquid assets would be government bonds, FD, LIC policies, etc.

Central Scheme for Interest Subsidy (CSIS)

The scheme was announced by the MHRD, now the Ministry of Education, to grant interest subsidies on study loans to students belonging to the EWS section of society. 

Eligibility criteria for CSIS 

• The annual family income of the student should not exceed Rs 4.5 lacs per annum.
• Students should have mandatory proof of belonging from the EWS section of society.
• Students must secure admission in approved courses of study in India only

Benefit: Under the scheme, in the moratorium period, eligible students need not pay any interest for their student loans taken to study in India.

Padho Pardesh Scheme

The interest subsidy scheme was launched by the Ministry Of Minority Affairs, GOI to benefit meritorious study-abroad aspirants belonging to economically weaker sections of notified minority communities.

Note: The Padho Pardesh scheme has been discontinued from 2022-2023 

Dr. Ambedkar Interest Subsidy Scheme for OBC and EWS Students

The interest subsidy scheme was launched by the Ministry of Social Justice and Empowerment, for students belonging to OBC and EBC sections of the society, on the interest payable within the moratorium period. This scheme is for eligible abroad study aspirants.

Note: Dr. Ambedkar Interest Subsidy Scheme for OBC and EWS Students scheme has been discontinued from 2022-2023 

Follow the following tips to effectively manage your education loan 

Choose the right repayment plan:

1. Your lender will provide various repayment options, so pick the one that aligns with your budget.
2. Consider the length of your moratorium period.
3. Also, think about your expected income from your first job.
4. Without proper planning, you may end up with a higher EMI that could strain your finances.

Opt for a shorter loan tenure:

1. An effective strategy for handling student loans is opting for a shorter repayment tenure.
2. While shorter tenures may mean higher monthly payments, they also result in significant interest savings over the loan's duration.
3. Be mindful not to choose unaffordable EMIs, but rather select the shortest tenure you can manage.
4. Use an education loan EMI calculator to understand the monthly payments within your means.

Set up automatic payments:

1. It's crucial to avoid missing loan payments as it can affect your CIBIL significantly.
2. Late payments can impact your credit score and lead to additional fees.
3. Prevent this by setting up automatic debits from your savings account.
4. Regular, on-time payments contribute to maintaining a healthy credit report, which proves beneficial for future loan applications.

Pay off interest during the moratorium:

1. Initiate payments toward the interest on your education loan during the moratorium period, even though the full repayments begin after this phase.
2. The moratorium typically lasts for 6 months or 1 year after completing your course.
3. Starting early payments on the interest accrued while studying can result in substantial savings overall.
4. Consider securing a part-time job during college to contribute to paying off this interest, potentially turning a hobby into a source of income.

Make extra payments towards your loan:

1. If you come into extra cash, whether through a work bonus or a gift, consider making larger payments toward your student loan.
2. This approach helps alleviate the overall repayment burden and may even lead to early loan closure.
3. However, check with your lender for any pre-payment penalties before proceeding.

Education Loan Repayment Tips:

1. Check your outstanding loan amount through Internet banking in your student loan account
2. Issue a cheque to your bank for the due amount.
3. Fill out the study loan closure form via online or offline mode
4. While issuing a cheque for the outstanding amount, keep a little extra amount, in case the manager closes your loan the next day, there shouldn’t be an additional outstanding amount.