Have you ever wondered how the funds from an education loan reach the university? Though applying for a loan is a big step, learning about the education loan disbursement process is also crucial. The process ensures that the sanctioned funds reach the educational institution or student as required. In this article, we will see the process of application for the disbursement of an education loan and the required documents.
What is Education Loan Disbursement?
Education loan disbursement refers to the process of releasing the sanctioned loan amount to the student or the respective educational institution. The disbursement is done in instalments or as a lump sum, depending on the lender’s policies and the course structure. Now, let's understand how the student loan disbursement process works.
Step-by-Step Education Loan Disbursement Process
Below is the step-by-step process of how an education loan is disbursed in India.
Step 1: Loan Sanction & Signing of Agreement
Once the borrower gets the approval for an education loan, the loan sanction letter is given. The sanction letter includes the amount sanctioned against the loan, interest rates, repayment terms, and disbursement stipulations.
To advance further, the borrower has to sign the agreement, signifying acceptance of the terms and conditions of borrowing.
Step 2: Submission of Disbursement Request
Before disbursing the funds, the borrower must submit a disbursement request form that specifies the amount and the preferred mode of disbursement, accompanied by:
- The fee structure of the educational institution
- Academic schedule or invoice from the university
- Application letter from the borrower (if applicable)
Step 3: Verification of Documents
The lender will check all the documents for authenticity. Some of the most important documents needed for the student loan disbursement process are:
- Proof of admission (university/college offer letter)
- Fee schedule (released by the institution)
- KYC documents (proof of identity, address proof, etc.)
- Academic records (mark sheets, certificates, etc.)
- Co-applicant details (if applicable)
- Collateral-related documents (if a secured loan is availed)
- Disbursement request form
Step 4: Choosing the Mode of Disbursement
Education loans are normally disbursed through one of the following two channels:
- Direct to Institution: The loan amount is transferred directly to the university or college in accordance with the fee structure.
- Partial to Student: Some lenders disburse a portion of the loan amount to the student for expenses such as books, living costs, or travel.
- Instalment-Based Disbursement: Funds may also be disbursed in instalments based on the academic year or semester system.
Step 5: Confirmation of Disbursement
After disbursement of the loan, both the student and the institution receive an acknowledgement from the lender stating that the transaction is complete, and tuition fees are paid per the agreement.
Essential Documents Required for Loan Disbursement
To ensure a smooth education loan disbursement process, students must submit the following documents:
- Admission Confirmation Letter: Proof of admission to the institution
- Fee Structure: A detailed breakdown of tuition and other academic expenses
- KYC Documents: Identity proof, residence proof, and signature verification, including:
- Photo ID Proof: PAN Card, Valid Passport, Voter Identity Card, Driving License, Aadhaar Card, ID Card
- Residence Proof: Valid Passport, Voter Identity Card, Bank Statement/Passbook, Telephone Bill, Utility Bill
- Signature Verification: Valid Passport
- Academic Records: Mark sheets, certificates of previous qualifications
- Co-Applicant Documents: Income proof, bank statements, ID proof
- Collateral Documents (if applicable): Property papers, fixed deposit receipts
- Disbursement Request Form: A formal request for loan disbursal
Conclusion
Understanding the education loan disbursement process is crucial for students to manage their finances smoothly. From sanction to final disbursement, every step requires careful attention to ensure timely fund release.
For students looking for an education loan for abroad studies, Credila provides student loans with flexible repayment options to facilitate the education process.
Disclaimer:
As of March 31, 2024. T&C apply.
Credila Financial Services Limited (Formerly known as HDFC Credila Financial Services Limited)
The education loan facility provided by Credila Financial Services Limited ('The Company') will be at the sole discretion of the Company and within the Company's prescribed credit and underwriting norms/guidelines prevailing at the time of processing and disbursing the education loan. The Company maintains the right to change the interest rate at any time and at its sole discretion, without prior notice.
