With rising tuition fees and living expenses, securing an education loan has become a practical option for students wishing to pursue undergraduate courses, whether in India or abroad. Education loans can provide the financial support necessary to help you pursue your academic goals without the stress of upfront costs.
In this guide, we’ll walk you through the process of how to get an education loan after 12th standard in India, helping you make an informed choice about your financial options.
Why Take an Education Loan After 12th?
Here’s why you should take an education loan after 12th:
- Rising Cost of Education: The cost of quality education is rising every year, making it increasingly difficult for many families to afford tuition and other academic expenses. Education loans bridge this financial gap, enabling students to access quality education.
- Easing Financial Burden: By securing an education loan, you can pursue your academic ambitions without worrying about upfront costs. This flexibility allows you to focus more on your studies and less on finances.
- Encouraging Financial Discipline: Managing loans and repayment builds responsibility and financial discipline. For instance, timely repayments help improve your credit score.
Types of Education Loans Available
Education loans are generally categorised into two types:
- Secured Loans: These types of loans require collateral, such as property or fixed deposits. Secured loans typically offer added security for the lender.
- Unsecured Loans: These do not require any collateral. However, the interest rates might be slightly higher than secured loans, and the loan amount may have a limit.
Eligibility Criteria for an Education Loan
To be eligible for an education loan, the following criteria are generally required:
- Age: Typically, you must be between the ages of 16 and 35 years.
- Educational Qualification: You should have passed Class 12 from a recognised education board.
- Admission Requirement: You must be admitted to a recognised undergraduate course in India or abroad. Do note that some lenders may have specific preferences for certain courses or institutions.
Documents Required for an Education Loan
When applying for an education loan, you will need to provide several documents, some of which include:
- Academic Documents: These include your Class 10 and 12 mark sheets and the admission letter from the college or university.
- KYC Documents: Proof of identity and address for both the student and the co-applicant (if required).
- Income Proof: Salary slips, ITR documents, or any other income-related documents of the co-applicant to demonstrate financial stability.
If you’re planning to study abroad, the lender may ask you for additional documentation.
Step-by-Step Process to Apply for an Education Loan
- Research and Compare Loan Options - It’s important to compare the different education loan options available, considering interest rates, repayment terms, and eligibility requirements.
- Shortlist Lenders - Based on your eligibility and loan preferences, shortlist potential lenders.
- Prepare Documents - Ensure that all your documents are up-to-date and ready to be submitted.
- Loan Application - You can apply online through the lender’s portal or visit the branch to apply offline.
- Loan Sanction and Disbursement - Once the loan is approved, the sanctioned amount will be disbursed to your college or university account as per the loan agreement.
Loan Features to Consider Before Applying
Before committing to a loan, consider these essential features:
- Interest Rate: The interest rate will determine how much you pay over the course of the loan.
- Repayment Flexibility: Some lenders offer flexible repayment options, such as the ability to start repayment after the completion of the course or once you begin earning.
- Margin Money: Some loans require a margin (a percentage of the total loan amount) to be contributed by the borrower. Make sure you are aware of any margin requirements.
- Course and Institute Eligibility: Ensure that the course and institute you are applying for are eligible for loan coverage as per the lender’s criteria.
Repayment and Tax Benefits
Repayment for education loans typically begins after a grace period following the completion of your course. This grace period gives you time to settle into your career before starting to repay the loan. For instance, Credila offers flexible repayment options and loan tenures of up to 15 years with a study period + 1 year of grace period, allowing you to choose a plan that fits your financial situation.
Additionally, when a loan is availed from a lender such as Credila, the interest paid on education loans is eligible for tax deductions* under Section 80E of the Income Tax Act, helping reduce your taxable income. It’s advisable to plan your finances early to ensure a smoother repayment journey. Early planning can ease the repayment process, enabling you to manage the terms effectively without undue stress.
Disclaimer:*Under the old tax regime. Please consult your Chartered Accountant or Tax Advisor for information specific to you.
Tips to Improve Chances of Loan Approval
Here are a few tips to increase your chances of getting an education loan for a 12th pass student approved:
- Maintain a Strong Academic Profile: A good academic record demonstrates your commitment to your studies and increases your chances of loan approval.
- Choose Recognised Colleges/Institutes: Opt for recognised institutions, as lenders prefer to offer loans for accredited programs.
- Provide All Required Documents: Submitting all the necessary documents upfront will help you avoid delays in the approval process.
Conclusion
Securing an education loan after Class 12 is a practical and achievable option to fund your higher education. With the right preparation and research, you can easily navigate the loan application process and pursue your academic goals without the financial burden. For instance, Credila offers education loans for abroad studies to 12th pass students, helping them focus on their studies without worrying about their finances. By planning early and understanding the loan process, you can ensure a smooth application and repayment journey.
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.
