Education Loan
Interest Rates In India
Education loan interest rate in India
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.
How is student loan interest calculated?
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:
- ACADEMIC RECORD: The applicant’s academic record plays a significant role in deciding the rate of interests on education loan. If the applicant has been able to maintain a continuous track record of First Class, then he/she is likely to get an education loan at a lower interest rate. Similarly, if the applicant has an average or below average academic record, the bank may charge high interest rate on education loan.
- CO-BORROWER’S CREDIT SCORE: In cases when the co-borrower has a low credit score, the bank may reject the application or charge a higher rate of interest rate. A credit score shows how your relations with the bank are, and hence good credit score helps the borrower to avail an education loan easily at a low interest rate.
- COLLATERAL PROVIDED: The applications in which the applicant can provide collateral, usually get education loans sanctioned at low interest rates. In general, unsecured loans have higher rate of interests as compared to secured loans.
- COLLEGE/INSTITUTE: The College in which the applicant is getting admission is a major deciding factor of interest rates. If the college has good campus placements, any bank would be ready to disburse loans at low interest rates.
Education loan interest rate in India
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.
Education loan by bank comparison table
| BANK/NBFCs | LOAN LIMIT | INTEREST RATES |
|---|---|---|
| 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.
How to get an education loan at lowest interest rate?
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.
Section 80 E- Income tax benefit
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.