Student loans are one of the most preferred options for Indian students to fund their higher education. Whether you plan to study in India or pursue higher education abroad, understanding how student loans work can help you make informed financial decisions and manage your future repayments wisely. In this article, we will see how does an education loan work, their components, and what you should know before applying.
What is a Student Loan?
A student loan helps students cover the cost of higher education. The loan is typically taken by the student (borrower) along with a co-borrower, usually a parent, spouse or guardian, who shares responsibility for repayment. These loans apply to both domestic and overseas studies, covering various levels from undergraduate to postgraduate and professional programs.
Components of a Student Loan
A student loan generally includes the following key components:
- Principal Amount: The actual loan amount covering tuition, living expenses, and other academic costs.
- Loan Tenure: Usually ranges between 5–20 years, depending on the loan type and amount.
- Moratorium Period: A grace period where repayment is not required, typically the course duration plus an additional year buffer period.
- Repayment Schedule: Repayment usually starts after the moratorium period ends.
How to Apply for a Student Loan from Credila
- Fill out the online application form: You can apply even before securing confirmed admission.
- Get guidance from Credila: A representative will connect with you and your family to assist with queries.
- Submit documents: The Credila representative will collect the signed application form along with supporting documents.
- Application review: Credila’s credit team will assess your application and may ask for additional details if required.
- Loan approval and disbursement: Once approved, the loan amount is electronically transferred to the designated bank account.
This process ensures a smooth experience while you focus on your academic journey.
Loan Repayment Structure
Student loans are repaid in Equated Monthly Instalments (EMIs). Borrowers may have the option to prepay or foreclose the loan subject to the lender’s policy. Ensure you read all the loan documents carefully to avoid any doubts
Collateral and Co-applicant Requirements
Student loans can be either secured or unsecured, and the need for collateral or a co-applicant depends on the type of loan and the loan amount:
- Secured Loans: These require collateral such as property, fixed deposits, or other tangible assets.
- Unsecured Loans: These do not require collateral, but lenders assess the co-applicant’s (typically a parent or guardian) income, credit score, and the student’s academic profile to determine eligibility.
- Role of Co-applicant: The co-applicant (typically a parent, guardian, or spouse) is necessary and shares responsibility for repaying the loan.
What Do Student Loans Cover?
Student loans typically cover:
- Tuition fees
- Hostel charges and living expenses
- Books, laptops, and other necessary academic tools
- Travel and visa charges (in case of overseas education)
Tax Benefits
Under Section 80E of the Income Tax Act, you can claim deductions on the interest paid on your overseas education loan. This helps ease the financial burden during the repayment years.
Important Factors to Keep in Mind
Before taking a student loan, it’s crucial to:
- Compare loan terms, interest rates, and hidden charges across lenders.
- Understand moratorium period conditions and EMI structure.
- Evaluate your course’s earning potential to ensure repayment feasibility.
Conclusion
Student loans offer valuable support for those aiming to pursue higher education without immediate financial burden. Understanding how a student loan works can help you make informed financial decisions. These loans fund your academic goals while providing the flexibility to repay over time. If you’re exploring funding options, Credila offers education loans for abroad studies with flexible repayment plans. With the right planning and loan partner, you can focus on your education while managing your finances confidently.
Disclamer:
*T&C apply. The education loan facility provided by Credila Financial Services Limited (The Company/Credila) 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. Credila maintains the right to change the interest rate at any time and at its sole discretion, without prior notice. Read More
