2 min read
25 May 2021

Higher education at a renowned institute helps your children build the potential for a brighter future. You may be surprised how much of a difference the name of a good university can make on their resume. Moreover, regardless of whether your child chooses to study within the country or outside, an educational loan can help you fund all the financial requirements without straining your finances for other obligations.

However, as you will need to repay the borrowed funds, applying for a loan with the most nominal interest rate is a must! This way, you can ensure successful repayment with ease. Wondering how to acquire such rates? Then, take a look at how you can bag an educational loan in India with the lowest interest rates.

Ensure you meet all the education loan eligibility criteria

The eligibility criteria vary amongst lenders. Check your preferred lender’s education loan eligibility criteria to ensure you qualify for an education loan. This way, you can avoid borrowing from a lender at high-interest rates. Being eligible also works to your benefit as you can negotiate the interest rate with the lender and bag one of the lowest student loan rates. Being eligible also works to your benefit as you can negotiate the interest rate with the lender and bag one of the lowest student loan rates.

Consider a loan against property instead of a regular educational loan

Instead of an education loan, you can also take a loan against property to pay for higher education. As this is a secured loan, you can expect to find the cheapest student loans. So, you can enjoy lower interest rates even when you need to borrow a high loan amount to pay for all requirements, from flight tickets to tuition and lifestyle needs. What’s more, unlike an education loan, a loan against property offers higher funding based on the value of your property. An education loan funds 70%-95% of the amount you need; however, you can get the entire amount you need with a mortgage loan. Notably the repayment tenor of an education loan can stretch up to 15 years, while an education loan offers a tenure only as long as 15 years.

Look for an affordable lender

Various education loan providers in India offer different interest rates. While you may be tempted to borrow from your bank based on your relationship with the institute for years, consider NBFCs too. For instance, Bajaj Finserv offers loans at nominal interest rates with easy repayment. Further, there are no hidden charges that add to your expenses.

Choose convenient EMI options

You can use the education loan calculator and calculate your EMIs conveniently. With a longer tenure, you can reduce your EMIs conveniently. A lender is less likely to trust your repayment abilities if you borrow a heavy amount on a short tenure. While opting for a longer and more reasonable tenure tenor, remember not to choose too long as it will only increase your interest expenses. You can also consider availing Flexi-loan facilities that allow you to borrow as you need and incur interest only on the used amount. Thus, you are prepared for unexpected expenses without paying extra interest.

Central Government Interest Subsidy Scheme for education loans

The Central Government Interest Subsidy Scheme for education loans in India is designed to provide financial assistance to economically weaker students pursuing professional and technical courses. It offers an interest subsidy during the moratorium period, covering the duration of the course plus one year or six months post-employment, whichever comes first. The scheme is applicable to approved public and private banks, with the government directly crediting the interest subsidy to the student's loan account.

The eligibility criteria is based on family income and course selection, and students should apply through their respective banks. It aims to reduce the financial burden of education loans and promote higher education opportunities. Be sure to refer to the latest government guidelines for the most current information.

How to reduce education loan interest rates

Reducing education loan interest rates can be achieved through various strategies:

  1. Explore government interest subsidy schemes
  2. Seek merit-based scholarships to lower the loan amount
  3. Negotiate with lenders for lower rates
  4. Consider loan refinancing or consolidation after graduation
  5. Enroll in auto-pay for potential interest rate reductions
  6. Improve your credit score to become eligible for lower rates
  7. Request co-signer release to potentially lower rates
  8. Choose federal loans with fixed interest rates
  9. Inquire about loyalty discounts from your existing lender
  10. Make extra payments to reduce the overall interest paid
  11. Consider loan forgiveness programs for specific career paths

Each strategy has its own requirements and effectiveness, so it is important to research and consult financial experts to determine the best approach for your situation.

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Frequently Asked Questions

Are there any post loan disbursement charges on education loans?

Post loan disbursement charges on education loans may vary by lender and loan agreement. While some charges, like late payment fees or prepayment penalties, could apply, many education loans do not have post-disbursement charges. It is crucial to thoroughly review the loan agreement and consult with the lender or a financial advisor to understand and clarify any potential charges associated with the loan. Government-backed education loans often have more standardised terms and fewer post-loan disbursement charges compared to private loans.

When does the education loan disbursed amount appear in your account?

The timing of education loan disbursement can vary. Generally, the loan amount is disbursed directly to the educational institution at the start of each academic term, following verification of enrollment and adherence to the loan agreement's terms. It is crucial to communicate with the lender and educational institution to understand the specific timeline and requirements.