4 Things to consider before getting an education loan on higher studies in India


Applying for an education loan is a big decision. Students should not jump into the process without an understanding of some basic elements of loan application and finances. Make sure you make a fully informed decision when you apply for a loan.

An education loan is a big commitment. Just as it can finance your higher education in India or abroad, it can also become a big burden to bear if you are not entirely clear about the terms and conditions of the loan. Getting a student loan is one of the most important decisions of a student's life. Therefore, it is very important to only apply with full knowledge of what you are getting into.

Before you apply for an education loan to study in India or abroad, think about the following.

#1 Do you understand your finances?


Whether you are applying for an MBA or a degree in biotechnology, you need to have a clear understanding of your financial resources if you are planning to get an education loan. Ask yourself these questions before you get started on loan applications:

  • Can you make educated decisions on your finances?
  • Have you thought about the costs of living, besides the cost of tuition?
  • Will you be working while you study?
  • To lower your burden of repayment for foreign MBAs and other expensive programs, have you considered living in areas with a lower cost of living?

It is very important to have the acumen to manage costs that come with higher education programs in India and abroad. It may be a good idea to draw up a budget and financial plan for your studies before you take a loan.



#2 Do you know your credit rating?


In many cases, parents finance the education of their children, and kids go through life not knowing about their credit rating. But students who apply for a loan in their name should know their credit score. In India, you can apply for a credit score report with CIBIL. Your score will range between 300 and 900. Most banks will happily lend if your score is above 750.

The report is not free – you need to pay INR 550 for one report and score. But it is a necessary step if you want to be prepared for your loan application.

If there are errors in your credit report, you will need to contact CIBIL for corrections before you apply for a loan.

You can also get your annual CIBIL report and score for free.

#3 Do you fully understand the terms of repayment?


When it comes to education loans in India, repayment periods are typically between five to eight years. They can also be extended. You should know that the longer you take to pay off a loan, the more you will be paying, as interest. Most students try to pay off their loan within five to seven years, and that is a good strategy. It can translate into huge savings, which would otherwise go to the bank, as interest on the loan.

#4 Do you understand the advantages and disadvantages of the moratorium?


Every loan agreement will have a moratorium. This is the grace period that you get after graduation, during which you are not obliged to start repayment. It is a holiday period for the loan. Usually, you have a year of grace period after graduation. But if you get a job, then you must start repayment six months after joining.

Most students use the moratorium period to save money that can be used for EMIs later. But, remember if you do not pay anything during the moratorium, your interest accumulates. Instead, you should try to pay the simple interest during your study period, so that the EMI is much less when it comes time for the repayment.

Understand how banks calculate EMI on the education loan, so you can work out the approximate EMI you will be paying on your loan amount.



You are also entitled to tax benefits on the loan under Section 80E of the Income Tax Act of India, 1961. You can claim a deduction on the interest on the education loan.

Keep these tips in mind when you apply for an education loan, so you remain in control of your finances.


Article by Juana
Juana is a freelance writer, with years of experience, creating content for varied online portals. She holds a degree in English Literature and has worked as a teacher and as a soft skill trainer. An avid reader, she writes on a variety of topics ranging from health, travel, education and personality development.

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