The rate of interest on education loan is an important factor that helps students to choose the right bank. For domestic cases,the average interest rate is 11% while it is 12.5% for foreign universities. The rate of interest for each case also depends upon the student’s academic profile, co-applicant’s financial condition, and various other factors.
Interest rates on education loan are different for each bank and applicant. A number of factors affect the rate of interests such as the following:
BASE RATE: Base rate is the minimum lending rate set by RBI, below which no bank is permitted to charge interest rates.
FLOATING RATE: It is the total interest rate which changes with the market fluctuations. Floating rate of interest consists of a variable index. Variable index is controlled by RBI, so when the RBI changes the variable index, the ROI on the educational loan also changes.
BANK/NBFCs | LOAN LIMIT | INTEREST RATES |
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AUXILO |
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INCRED |
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AVANSE |
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AXIS BANK |
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SBI |
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Interest rates of several other banks can be checked on Credenc website.
The rate of interest for domestic cases is 8.5-14% while that of abroad cases is 11-14%. Some banks also offer 0.5% concession on the rate of interest if the education loan is for higher education of a girl student. The lowest interest rate for domestic cases is 8.5% and that for abroad cases is 10.75%. The borrower can avail an education loan at lowest interest rates by applying at different banks. To compare interest rates of different banks student can sign up on Credenc. The team at Credenc help the students to know the amount of education loan, the rate of interest etc he/she can get and applies at multiple banks on the behalf of the applicant. After the banks have decided whether to approve the education loan or not, Credenc guides the student what is the best option he/she can get.
According to Section 80E of Income Tax Act of India, 1961, the interest amount paid on the education loan by the borrower can be claimed as deduction. The maximum exemption that a person can claim on the tax is equal to the interest he pays on his education loan. The exemption on tax can be claimed maximum for 8 years or till when the interest is paid on education loan, whichever is earlier. However, the principal part does not qualify for any tax benefit.