Best Education Loans In India For 2024
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Education loans, also referred to as student loans, are best used to cover financial obligations to study in colleges, either in India or abroad. Loans are provided by public and private sector banks, and unlike other retail lending, education loans come with a moratorium period plus one to two years extension for repayment of loans.
While undergrads need not go through a credit check, parents and guardians have to qualify to obtain credit based on their income and collateral kept as security. Education loans are expensive, however, public and private sector banks offer lower rates as compared to those disbursed by non-banking financial companies.
Forbes Advisor India has analyzed 43 education loan products offered by major public and private sector banks. However, we do not have a five-star lender on our list. Here’s our list of top banks offering the best education loan, along with how you can secure the lowest rates in 2023, eligibility and their lending criteria.
The interest rate and account details are accurate as of Jan. 13, 2023.
- Best Education Loan in 2024
- State Bank of India
- Punjab National Bank
- Bank of Baroda
- ICICI Bank
- Bank of India
- Bank of Maharashtra
- Central Bank of India
- Summary: Best Education Loan in 2024
- Methodology
- Education Loan Interest Rates in 2024
- How do Banks Calculate Interest Rate on Education Loan?
- Features and Benefits of Student Loan
- Documents Required for Student Loan
- Things to Consider Before Applying for Education Loan
- How to Apply Education Loan Online
Best Education Loan in 2024
State Bank of India: Best customized education loan with low interest rates.
Punjab National Bank: Best for students in the OCI category, or born abroad but studying in India.
ICICI Bank: Best for studies in reputed colleges and universities in Canada.
Bank of Baroda: Best in loans for child’s studies pursuing schooling from nursery to class XII.
Bank of India: Best in loans with nil processing fees and lower interest rates.
Bank of Maharashtra: Best in loans to get concessions on rate of interest for meritorious students.
Central Bank of India: Best education loan for executives pursuing MBA from reputed management institutes.
State Bank of India
Interest Rate Range
8.30% to 11.50%
Purpose
Studies in India and foreign institutions.
Loan Type
Need-based term loan up to 15 years.
Interest Rate Range
8.30% to 11.50%
Purpose
Studies in India and foreign institutions.
Loan Type
Need-based term loan up to 15 years.
The State Bank of India is a public sector bank that lends need-based loan facilities to students and professionals of Indian origin who aspire to study further. It offers four different loan types for pursuing higher education as well as skill-based courses and training, either in domestic or foreign colleges, which each come with their own floating rate of interest.
Students who have already got admission in premier institutions are provided a lower rate of interest (8.30% to 9.80%) with 100% financing. All loans, except for a takeover of loans from other banks, allow borrowers to avail of a moratorium period of six to 12 months, then EMI starts with a repayment tenure for up to 15 years. If the student is unable to complete the course on time, the bank allows a deferment period of up to two years to help candidates complete the course.
Extra Details
Processing fee: Up to INR 10,000 on loan for abroad studies. Similar charges applicable for all loans above INR 20 lakh. Loans to scholars, upgradation of skills, and takeover of education loans from other banks are exempt from processing fees.
Security: Tangible collateral security is required on loans above INR 7.5 lakh.
Co-borrower: Parents or guardians.
Margin: 5% for studies in India for loan amount above INR 4 lakh. 15% for abroad studies.
Collateral: Applicable on takeover of education loan only.
Concession: Up to 0.50% concession on RoI is applicable to a girl applicant.
SBI Education Loan Interest Rate Range
- Low interest rates
- Women applicants get 0.50% lower rates
- Up to two years deferment of EMI extension allowed for students to complete the course.
- Not available for international students.
Punjab National Bank
Interest Rate Range
8.55% to 11.25%
Purpose
For studies in India and abroad institutions.
Loan Type
Need-based term loan up to 15 years.
Interest Rate Range
8.55% to 11.25%
Purpose
For studies in India and abroad institutions.
Loan Type
Need-based term loan up to 15 years.
Punjab National Bank offers education loans for applicants in both domestic and international colleges, with co-borrowers and more funding options. We scored the public sector bank based on its student loan for undergraduate and postgraduate studies.
PNB stands out for its range of education loan products for meritorious students who are of Indian origin as well as students who belong to overseas citizens in India (OCI), or born abroad but pursuing higher education in India, rare among lending institutions.
Borrowers can avail of need-based finance with a repayment tenure up to 15 years, and up to one year of moratorium period. That can be useful for borrowers who opt to pay the interest amount accrued during the course period, and lessen the burden when the EMI begins.
PNB also offers loans up to INR 50 lakh to meritorious students living with disabilities for studies in both domestic and foreign colleges. It offers a 0.50% lower interest rate for women borrowers. The bank’s education loans come with zero prepayment option, or close the loan before the scheduled repayment tenure.
Extra Details
Processing fee: Up to 1% for studies in foreign institutions.
Security: Guarantors have to pledge a tangible collateral security in case of loans applied for abroad studies.
Co-borrower: Parents or guardians.
Margin: 5% for studies in India on loan amount above INR 4 lakh, and 15% to 20% for abroad studies.
Concession: Up to 0.50% concession on RoI to a girl applicant. Concessions are also available for students with disabilities.
PNB Education Loan Interest Rate Range
- Available for students in the OCI category, or born abroad but studying in India
- Low interest rates
- Women applicants get 0.50% lower rates
- Includes documentation charges
Bank of Baroda
Interest Rate Range
9.10% to 12.45%
Purpose
For studies in recognised schools, colleges and universities.
Loan Type
Term loan need-based funding.
Interest Rate Range
9.10% to 12.45%
Purpose
For studies in recognised schools, colleges and universities.
Loan Type
Term loan need-based funding.
Bank of Baroda offers a set of wide-ranging education loans with a few unique features. Borrowers, who are parents or guardians in this case, can even obtain an education loan for their child studies pursuing nursery to class XII that too for international studies. Its loans come with debit cards, which is in addition to the disbursement of the loan directly to educational institutions. Women borrowers can also avail of 0.50% concession on loans.
Extra Details
Processing fee: Nil.
Security: Available.
Co-borrowers: Parents or guardians.
Margin: 5% for loan above INR 4 lakh.
Concession: 0.50% concession in rate of interest to loans for female students.
Bank of Baroda Education Loan Interest Rate Range
- Nil processing fee
- Loan available for child’s schooling
- Nil documentation charge
- Concession to female borrowers available
- Free debit card option
- Charges upfront fee per property on collateral.
ICICI Bank
Interest Rate Range
9.50% onwards
Purpose
For studies in recognised colleges and universities.
Loan Type
Term loan up to INR 1 crore for domestic, and INR 2 crore for international studies.
Interest Rate Range
9.50% onwards
Purpose
For studies in recognised colleges and universities.
Loan Type
Term loan up to INR 1 crore for domestic, and INR 2 crore for international studies.
Borrowers who are 18 to 35 years old qualify for ICICI Bank’s education loans based on their academic growth, GPA score and whose admission is confirmed at recognized colleges and universities in India or abroad. Parents or guardians become the co-applicant and have to submit tangible collateral as security, depending upon the course, loan amount and source of income. The interest rates on such loans are generally low.
Extra Details
Processing fee: Up to 2%.
Security: Fixed deposit, property value, and up on existing loans.
Co-borrowers: Parents or guardians.
Margin: Nil for premier institutes, and up to INR 20 lakh for others. Accepted in the form of FD, and scholarship or initial fee paid to the institute.
Concession: I-smart education loans for studies in Canada come with lower rates.
ICICI Bank Education Loan Interest Rate Range
- Loan amount can be increased if the course is extended
- Pre-approved loans are available
- High processing fee
- No concession for women borrowers.
Bank of India
Interest Rate Range
8.25% to 11.60%
Purpose
For studies in recognised schools, colleges and universities.
Loan Type
Term loan need-based financing.
Interest Rate Range
8.25% to 11.60%
Purpose
For studies in recognised schools, colleges and universities.
Loan Type
Term loan need-based financing.
Similar to Bank of Baroda, parents or guardians can also obtain an education loan for their child studies pursuing nursery to class XII. All categories of the bank’s education loans come with zero prepayment charges, no margin up to INR 4 lakh, and without collateral security up to INR 7.5 lakh. Bank of India provides up to 1% concession on RoI to female borrowers, which is mostly confined up to 0.50% among lenders. Concession on RoI is also available for all students pursuing professional courses. Loans are in stages as per requirement directly to the institution.
Extra Details
Processing fee: Nil.
Security: NA
Co-borrowers: Parents or guardians.
Margin: Nil on loans to INR 4 lakh
Concession: Up to 1% concession on RoI to female borrowers, and all students pursuing professional courses.Bank of India
Education Loan Interest Rate Range
- Takeover of loans available
- Option term Insurance cover
- Charges one-time fee for any deviation from the scheme norms
- Charges on application online via Vidya Lakshmi web portal
Bank of Maharashtra
Interest Rate Range
9.20% to 11.05%
Purpose
For studies in India and abroad.
Loan Type
Term loan up to INR 10 lakh in domestic and up to INR 20 lakh for abroad studies.
Interest Rate Range
9.20% to 11.05%
Purpose
For studies in India and abroad.
Loan Type
Term loan up to INR 10 lakh in domestic and up to INR 20 lakh for abroad studies.
Bank of Maharashtra offers a set of private education loan products with a few unique features. Meritorious students get up to 0.50% flat concession on the rate of interest, which is rare among lenders. Concessions are also given to female borrowers up to 0.50%. All categories of the bank’s education loans come with zero prepayment charges, no margin up to INR 4 lakh, and collateral security is charged on loans aboveINR 7.5 lakh.
Extra Details
Processing fee: As applicable.
Security: Not required for loans up to INR 7.5 lakh.
Co-borrowers: Parents or guardians.
Margin: No margin up to INR 4 lakh.
Concession: Up to 0.50% concession to meritorious students and female borrowers.
Bank of India Education Loan Interest Rate Range
- Concession to meritorious students, women borrowers, and existing home loan borrowers.
- Pre-approved loans available
- Takeover of loans not available
Central Bank of India
Interest Rate Range
8.30% to 11.25%
Purpose
For studies in recognised colleges, universities, and premier institutions.
Loan Type
Term loan up to INR 50 lakh.
Interest Rate Range
8.30% to 11.25%
Purpose
For studies in recognised colleges, universities, and premier institutions.
Loan Type
Term loan up to INR 50 lakh.
The Central Bank of India offers a generous concession of up to 1% on rate, if the interest is paid during the period of the course. The bank offers lower interest, starting 8.30% onwards, for executives pursuing MBA from reputed management institutes, without margin requirement. Borrowers can choose an eight-year repayment term in case the loan amount is up to INR 7.50 lakh, and up to 12 years in case the loan amount is more than Rs.7.50 lakh.
Extra Details
Processing fee: Nil for studies in India, and up to 1% for abroad studies.
Security: As applicable
Co-borrowers: Parents or guardians.
Margin: Nil up to INR 4 lakh.
Concession: 1% concession on RoI if interest is serviced during the moratorium period.
Central Bank of India Education Loan Interest Rate Range
- 1% concession on RoI if interest is serviced during the moratorium period.
- Separate life insurance cover
- Nil documentation charges
- Irrespective of loan amount, 100% tangible collateral security equal to loan amount
- Nil documentation charges
Summary: Best Education Loan in 2024
Methodology
We scored 18 public and private sector banks of India across 43 education loans products, and 15 data points in the categories of interest rates, processing fee, loan terms, security, repayment option over and above basic eligibility criteria and ease of access to information. We chose the seven best lenders based on those earning four stars or higher.
The following is the weighting assigned to each category:
– Interest rates: 30%
– Application process: 20%
– Loan terms: 20%
– Security: 10%
– Repayment: 10%
– Fees: 5%
– Ease of access to information: 5%
Specific parameters taken into consideration within each category included concession to meritorious student and women borrowers, takeover option of loans, repayment based on income, time to defer payment as well as loans for schooling besides colleges and universities.
Lenders who offered interest rates below 10% scored the highest, as did those who offered flexible repayment options, nil charges on prepayment, availing loans to other categories besides Indian residents, and who charged minimal fees.
Education Loan Interest Rates in 2024
Interest rate in an education loan, like in any other personal loans provided by public and private sector banks, is key to determine the total amount you have to repay when the equated monthly installment (EMI) begins.
Lending institutions provide education loans and charge interest rates depending upon the students’ choice of further studies, either at domestic colleges or abroad.
Interest rates on education loans also vary upon lending institutions, loan amount, repayment tenure, borrower’s credit profile, collateral kept as security as well as aspirants’ select-course and the type of education institution offering the course, to name a few.
The policy repo rate hike by the Reserve Bank of India (RBI) in Dec. 2022 to 6.25% has led many banks to increase their interest rate on loans. A consumer can still get a reasonable rate of interest on an educational loan.
Here are the interest rate on education loan provided by major public and private sector banks of India:
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Punjab & Sind Bank
Punjab National Bank
State Bank of India
Axis Bank
City Union Bank
Federal Bank
ICICI Bank
IDBI Bank
IDFC First Bank
Karur Vysya Bank
Kotak Mahindra Bank
South Indian Bank
Tamilnad Mercantile Bank
The above interest rates and details on education loans are updated as on Feb. 13, 2023. While we update this information regularly, the rate of interest and loan details may have changed since the page was last updated.
How do Banks Calculate Interest Rate on Education Loan?
An interest rate fixed by the bank on an education loan plays a crucial role in one’s ability to pay the borrowed amount. Although banks do not ask you to pay the sum during the moratorium period or while you are studying, it is best to consider paying at least the interest amount during the period. Doing this will not only ease the burden of the EMI, but may as well help you get a certain concession on the principal loan amount later as per the bank’s policy.
Most public and private sector banks in India offer “floating interest rate” while lending an education loan. In this type of rate of interest (ROI), the interest rate on your easy EMI is calculated as per the “base lending rate” plus the standard premium rate, or credit spread, markup, etc.
Banks refer to base rate, with floating components like repo-linked loan rate (RLLR) or marginal cost of fund-based lending rate (MCLR), among others, while determining their actual interest rate on education loans.
Notably, the base rate for every bank changes as per the RBI’s change in repo rate (the rate at which the public and private banks borrow money from the apex bank), which is reviewed on a bi-monthly basis. Therefore, the interest rate in your floating EMI is revised as per the change in the RBI’s repo rate.
This change is, however, reflected after the “reset period” when the interest rate on your EMI is subjected to revisions. The reset period in the RLLR type of floating component is three months while it usually takes six to 12 months for the reset to take place in the MCLR concept of fixing the interest rate on your EMI.
In a nutshell: Final Interest Rate = Base Rate (MCLR/RLLR/Repo Rate) + Standard Premium/Spread per annum.
It would be best to consider this aspect of calculating floating interest rate before you choose an education loan for your further studies. Nonetheless, banks usually provide the breakdown of interest rates on your EMI against the outstanding amount in your education loan sanction letter.
Features and Benefits of Student Loan
Education loan eligibility determines the maximum amount a bank can borrow to an applicant, depending on the amount that you or your ward needs to cover the expenses. Here are some factors to consider:
Margin: Just like other retail loans, education loans require applicants to pay a portion of the total education cost for loans above INR 4 lakh, which can be around 5% for studies within India and 15% for abroad studies.
Collateral: Depending on banks, you may be required to pledge a certain percentage of the property’s value as collateral to secure loans above INR 7.5 lakh at lower rates.
Moratorium period: Repayment for the loan or the equated monthly installments (EMIs) will begin after the education course is complete. It is advised to pay at least the interest amount during the course of study to reduce the repayment burden. Some banks also offer lower rates if the interest part of the loan is paid during the course period.
Tax deduction: The student or their cosigner can claim the interest portion of the loan for tax deductions under Section 80E of the Income Tax Act for up to eight years.
Rate of interest: The RoI is an important factor that determines how much you will pay when the EMI begins. The RoI offered by major banks of India are detailed in the above section.
Remember, most banks offer concessions on the RoI (normally 0.25 to 0.50 bps) to meritorious students, female, scheduled caste, scheduled tribe, minority, and physically challenged students.
Processing fee on education loan: This charge is levied by the bank to process your application. While some banks do not charge any processing fee for studies within India, or women borrowers, the processing charge is in the range between 0.50% to 2%.
Read the fine print. Education loans come with a set of terms and conditions. Make sure you avoid needless penalties and charges, it is advisable to go through the fine print before you sign any paperwork.
Documents Required for Student Loan
– Proof of income (parents/sibling/guarantor)
– Proof of identification
– Proof of address
– Bank statement of last six months
– Copy of admission letter of the institute along with fees schedule
– Demand letter from college or university
– Loan agreement/sanction letter/disbursement request form signed by applicant, co-applicants
– Documents for collateral security (if any)
– Form A2 signed by applicant or co-applicants for studies in overseas institute
– Mark sheets, or pass certificate
Things to Consider Before Applying for Education Loan
- Central Government schemes like CGFSEL, Dr Ambedkar central scheme on education loans, Padho Pardesh Scheme offer subsidies on interest rate charged on the loan amount.
- Borrowers can avail of tax exemption under Section 80E.
- A few banks also offer concessions on the interest to their existing customers with a good credit score.
- Some banks offer up to 1% concession in ROI if the interest amount is paid in full during the study period.
- A few banks may charge additional interest as risk premium (up to 0.05%) if the lender has not obtained credit life insurance, which ensures that debts are settled after insurers’ demise.
How to Apply Education Loan Online
Registration of loans can be done directly via the government’s Vidya Lakshmi portal (VLP). Or, borrowers can get a quote on an education loan by filling up a self-explanatory form available on the lender’s website. After submission, bank’s agents get back to you over the phone or email. Details required to be filled on VLP, or lenders’ web portal, are as follows:
- Mobile number
- Course details: Country of study, course type, nature of course, course duration.
- Course Fee: Admission fee, tuition fee, hostel fee/living expense, examination lab/library fee, purchase of books, caution fee, purchase of computer, misc expenses, fellowship/scholarship.
- Applicants details like qualification, gender, work experience, state of residence.
- Co-applicant details.
- Email id
- Read and accept the terms and conditions.
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