Education Loan Interest Rate

FAQs:

• Can I get a student loan at a 0% interest rate?

  No, you cannot avail of a student loan at a 0% interest rate.

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• which bank has the lowest interest rate on education loan?

  The bank providing the lowest interest rate will depend on the kind of loan you are going for, secured or unsecured.  In general, public sector banks have lower interest rates than private sector banks because of some sort of government subsidy and policies and because they primarily offer secured education loans. For instance, banks like the State Bank of India often provide competitive rates concerning education loans, more so under schemes like the SBI Student Loan Scheme and SBI Global Ed Vantage Scheme. 

  Students would need to compare the rates of different banks, the terms and conditions attached, and check for any subsidies or special schemes available. Rates may also vary based on the co-applicant’s credit score, course of study, and educational institution. Request a callback and let your financial officer get the best deal for you. Get an ROI concession of upto 2% on going through with WeMakeScholars.

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• What is India's current interest rate on student loans?

  The average interest rate for an education loan offered by banks/ financial institutions in India is around 10 to 11%.

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• Is the interest on student loans yearly or monthly?

  The method used by each bank to determine interest during the moratorium period varies. Some banks compound the interest component by adding the accumulated interest to the principal each month, while others compound it annually.

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• Are student loan interest rates of 11% too high?

  No, 11% is the average interest rate offered by banks in India. Generally, the interest rate for an education loan ranges from 8.5% to 13.5%.

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• What is the education loan interest rate?

  Education loan interest rates are the percentage charged by lenders on the principal amount of the loan taken for higher education by students. The cost of borrowing and this rate can be changed and may vary according to the lender, type of loan, borrower's credit rating, and other factors. For example, most education loans offered by public banks in India offer education loans at cheaper interest rates, and the rates charged are complemented by government subsidy or through its schemes, such as the Central Scheme of Interest Subsidy (CSIS), for interest relief during the moratorium period. In general, these rates are lower than those from private lenders. On the other hand, private education loans offer fixed or variable rates and are determined by market conditions, a borrower's credit history, and other risk factors. 

  Students and families need to understand the rate of interest being charged on these loans because it impacts the cost of education and, accordingly, the repayment burden on graduation. 

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• How to calculate education loan interest?

  An interest amount on an education loan is generally calculated on the principal amount borrowed, the rate at which the interest is calculated, and the tenure of the loan. The interest amount generally has to be calculated using the formula for simple interest: Interest = Principal x Rate x Time. Most of the education loans operate on a compound-interest basis: interest is levied on the principal amount and all of the interest that has been previously accrued. The formulae for compound interests, which shall apply in the above calculations, are A = P(1 + r/n)^(nt), where A = amount of money accumulated after n years including interest. Where P is the principal amount, r is the annual interest rate, n is the number of times by which the interest is compounded in one year and t is time in years. Therefore, applying this formula gives a more accurate, exact amount of total repayment. Many banks and financial institutions provide online calculators so that borrowers can approximate both the amount of interest due to them and the repayment amounts, as per their loan details.

  Head on to the WeMakeScholars EMI calculator to get the most accurate EMI estimation according to the 2024 RBI guidelines. 

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• How to pay an education loan without interest?

  Education loans cannot be given without charging any interest because they draw their major source of income from interest; however, there are a few ways through which the burden of the interest can be reduced. One way is to start making interest payments during the moratorium period, which is the time the student is still in school and up to six months after graduation before regular loan payments begin. In such a case, interest can be capitalized as long as it is paid when accrued. That is to say, it minimizes the cost of interest repayment in total. On top of that, some governments offer various interest subsidies to weaker sections, where they pay the interest for the students both during the study period and moratorium. 

  Also, you can consider financial help in the form of scholarships, grants, and financial aid that does not need to be repaid to the provider. Some other options include refinancing to a lower interest rate, assuming the borrower's credit score has improved or market rates have dropped. Another perk of early repayment comes in the form of a reduction in paid interest over the loan's life, though some loans come with prepayment penalties.

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• Is Education loan interest-free?

  Education loans are not completely without charges as charges are the interest and interest is where the lenders make their profits from. However, some conditions and schemes can minimize or bring forward the interest cost. India’s government offers interest rate subvention for education loans availed by students belonging to economically weaker sections of the society especially during the moratorium period through the CSIS. Although they do not eliminate interest on the loan, they considerably minimize the interest that the student has to pay for the loan he or she is receiving. Contact your financial officer and get your education loan approved at the lowest interest rate and also with a deduction in ROI up to 2% only if you proceed through WeMakeScholars. 

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• What is part period interest in an education loan?

  Part-period interest on an education loan is interest collected on the loan amount during the moratorium period of the tenure of the loan, usually before the start of regular repayment or your EMIs start. This period usually includes the time when the student is in school and an additional grace period of six months to a year after graduation. During this period, the interest would accrue on the borrowed amount although the borrower may not be compelled to make full repayments. For instance, a student takes an education loan of 15 Lakhs with an interest rate of 9% per annum. The part period interest would be the interest accruing every year in their studies plus the grace period. By having the student be in school for four years and have a six-month grace period, the partial period interest that would have accrued during this period would be added to the loan balance, capitalizing, of course, unless the student opts to pay the interest associated with this partial period during this period. Get your moratorium period negotiated with WeMakeScholars and know about the best way to handle your repayment. Request a callback to get started. 

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• Is interest on education loans tax exempted?

  In the Income Tax Act under Section 80E, Students or parents of students can claim a deduction on the interest portion of the total amount of the education loans. You can get a deduction for a maximum of 8 years or up to the time the interest is fully paid whichever is the earliest. These tax benefits can go a long way in assisting the borrowers hence reducing their total tax burden. Under this Act, people can take this exemption on an education loan taken for himself or herself, their spouse, children, or someone they are the legal guardian of. Get familiar with all the tax privileges and subventions that apply to your loan by speaking with your financial officer. To get a callback and begin the process of getting the education loan, click on the ‘request a callback’

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• What is an interest subsidy on education loans?

  In the Income Tax Act under Section 80E, Students or parents of students can claim a deduction on the interest portion of the total amount of the education loans. You can get a deduction for a maximum of 8 years or up to the time the interest is fully paid whichever is the earliest. These tax benefits can go a long way in assisting the borrowers hence reducing their total tax burden. Under this Act, people can take this exemption on an education loan taken for himself or herself, their spouse, children, or someone they are the legal guardian of. Get familiar with all the tax exemptions that apply to your loan by speaking with your financial officer. To get a callback and begin the process of getting the education loan, click on the ‘request a callback’

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• How to reduce the interest rate on education loans?

  To reduce the interest rate in education loans borrowers can pay the interest during the moratorium period, which will also help in decreasing the principal amount, which later results in less impact on the interest rate over time. Some lenders offer discounted interest rates for auto-payments or customers who exhibit repayment activity at regular intervals. Other strategies include doing prior research and comparing the various offerings by different lenders before actually borrowing, as the rates of interest can vary a great deal. Finally, the borrower should also take advantage of all scholarship, grant, or employer-sponsored education benefits possible, which lower the amount that must be borrowed and therefore the size of the interest cost. Get your interest rates negotiated along with all the scholarships you are eligible for by going through your education loan with WeMakeScholars. 

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