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How To Calculate EMI On Education Loans In India?

  • Highlights

  • EMIs depend on the interest rate, principal and tenure

  • In the moratorium period, only simple interest is incurred

  • After that, compound interest applies to the total amount

  • Education Loan on Property offers large amounts and easy repayment

When planning to send your children to study abroad or enrolling them for an expensive course in India, it’s crucial to know the extent of funding required. This will help you apply for the right loan and plan your educational loan repayment too. The amount you need to pay back to your lender is broadly divided into your principal and the interest incurred.

You can determine these figures by using an education loan calculator. However, an educational loan is not as cut and dry as a personal loan and interest calculations change during the course of the term. To help you understand this, here’s more on the factors that come into play when banks calculate education loans EMIs and interest in India.

Moratorium Period

An educational loan is one of the loans that comes with a moratorium period. This period denotes the time during which you as a borrower are not required to make repayments. It is designed to facilitate students to pay loans only once they start earning.

When you are looking for methods explaining how to calculate education loan interest, it is important to note that within the moratorium period interest is calculated on a simple interest basis only. Post that, compound interest applies.

Also Check here: Various Education loan schemes

Loan Amount And Tenure

After using any education loan calculator in India, you will notice that the total interest you pay hinges on few key parameters. Two of them are depend more on your demands: the loan amount and the repayment tenure. Larger loans translate to larger interest and EMI payments. On the other hand, longer tenure implies smaller EMIs but larger overall interest.

Lender’s Interest Rate

Another thing an education loan interest rate calculator will reveal to you is that interest and EMI payments are directly proportional to the interest rate your lender gives you. Though the lender has greater discretion over this variable, you can secure a better interest rate by having as a guarantor someone with a handsome credit score. Similarly, admission to a reputed college with promising job prospects to follow will help you get a lower rate.

Loan Against Property - Know the features and benefits | Bajaj Finserv

Phase #1: During the moratorium period

As was already stated, during your moratorium period banks calculate interest using simple interest formulae only. So, if your bank disburses an amount of Rs.10 lakh in the beginning at a 10% interest rate for a 3-year moratorium term, then you will incur interest of Rs.1 lakh per year. Which means that after 3 years your total outstanding amount is Rs.13 lakh (Rs.10 lakh + Rs.3 lakh)

Phase #2: Once you start paying EMIs

At the end of the moratorium period, you begin making EMI payments. To compute your monthly dues banks factor in your total outstanding amount (principal + total simple interest). Next, future interest and EMIs are calculated based upon this total amount by using compound interest formulae. Since these are complex, it's easier to use an education loan EMI calculator or a student loan calculator to determine the monthly cost of your loan and the total interest you incur.

Now that you know how to calculate education loan interest and EMIs, if educational loan rates and the resulting EMIs appear too steep, consider opting for Bajaj Finserv Loan Against Property for Education. You can secure this loan without worrying about meeting multiple educational loan requirements like course- and institution-specific criteria. Here you get finances up to Rs.3.5 crore for tenures of up to 20 years to cover all your expenses comfortably, be it for tuition, accommodation, travel, and other living expenses.

Additional Read: What is the education loan procedure

Utilising and repaying this loan becomes easy when you opt for the Flexi Loan facility. It allows you to borrow from your approved sanction in parts, and pay interest only on the amount used. Additionally, it gives you the freedom to pay interest-only EMIs for the first few years. This helps you tackle much of the repayment when you begin to earn.

To avail of this loan, you need to identify a residential or commercial property that you can pledge as collateral. Once done, check offers from Bajaj Finserv. By doing so you get instant approval, access to customised finance solutions and quick loan disbursal.

 
 
 

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