Pursuing higher education is an important step after 12th class that shapes your career path. However, the rising cost of quality education often acts as a barrier for many students. This is where education loans come into the picture.
Education loans provide financial assistance to students to pursue higher education without worrying about the expenses. With education loans, you can fund your tuition fees, accommodation, travel, exam fees and other costs related to college education.
In this comprehensive guide, we will discuss everything you need to know about getting education loans for studies after 12th standard.
What is an Education Loan?
An education loan is a financing option provided by banks, NBFCs and financial institutions to help cover the costs related to higher studies. It is an unsecured loan given to students who have secured admission in professional or technical courses after 12th standard.
Education loans help pay for expenses like:
- Tuition and university fees
- Accommodation and hostel fees
- Cost of books, laptop and study materials
- Travel and commuting costs
- Caution deposits and security fees
- Living expenses like food, utilities etc.
The loan amount is disbursed directly to the educational institution. Students have to start repaying the loan amount after completing the course once they find employment.
Benefits of Education Loans
- Access to funds for higher education without financial constraints
- Flexible and longer repayment tenures after getting a job
- Lower interest rates compared to personal loans or credit cards
- Option to apply with a co-applicant for better eligibility
- Tax benefits on interest paid subject to income tax laws
Eligibility Criteria for Education Loans
The broad eligibility criteria for getting education loans after 12th are:
- Indian citizenship
- Completion of 12th standard or equivalent course
- Secured admission in a professional degree/diploma course from accredited colleges and universities
- Minimum of 50-60% aggregate marks in the last qualifying exam
Some banks may have additional criteria like minimum work experience for co-applicants or requirement of security in the form of property or liquid collateral.
Documents Required for Education Loans
You need to submit certain documents to avail education loans after 12th standard. Key documents include:
For Students:
- Marksheets of 10th and 12th standard
- Photo ID and address proof (Aadhaar, PAN Card, Voter ID, Driving License etc.)
- Proof of admission like offer letter, admission letter etc.
- Fee structure and course details from college
- Bank account details
- Passport size photographs
For Co-applicants:
- Identity and address documents (Aadhaar, Voter ID etc.)
- Latest salary slips and Form 16
- Income tax returns for last 2 years
- Bank statements for 6 months
- Property documents if keeping collateral
Top Banks Offering Education Loans
Most leading public sector and private banks offer education loan schemes that you can consider after 12th standard. Here are some popular options:
Public Sector Banks
- State Bank of India
- Bank of India
- Bank of Baroda
- Canara Bank
- Punjab National Bank
- Union Bank of India
Private Banks
- HDFC Credila
- ICICI Bank
- Axis Bank
- Kotak Mahindra Bank
- IDFC First Bank
- RBL Bank
NBFCs
- Avanse Financial Services
- HDFC Bank
- Tata Capital
- CreditVidya
Compare interest rates, loan amount, repayment options and other terms before finalizing the lender.
How to Apply for Education Loans After 12th
You can apply for education loans through both online and offline modes.
Online Application Process
- Visit the official website of your chosen lender
- Go to the education loan page and click on ‘Apply Now’
- Start filling the online application form providing your personal, academic and loan details
- Upload scanned copies of your documents as per the list
- Pay the processing fee online
- Submit the application and await approval
Offline Application Process
- Visit your nearest bank branch
- Ask for the education loan application form and brochure
- Fill in the form with all key details and attach the document photocopies
- Submit it at the branch and pay the processing fees
- The bank will evaluate your profile and call you for further process
Banks charge a processing fee of around Rs. 1000-2000 for education loan applications. Processing time can range from 1-2 weeks based on the bank.
Expenses Covered Under Education Loans
Education loans are flexible in terms of usage and a wide range of expenses can be covered under them. Here are some common expenses funded by education loans:
- Tuition and university fees
- Hostel and mess charges
- Exam fees
- Cost of books, laptops and study materials
- Academic equipment like calculator, software etc.
- University societies membership fees
- Travel expenses including visa fees for foreign universities
- Health or medical insurance premium
- Any other expense mandated by the institution
Some banks may have limits on living expenses covered so check the fine print before applying.
Interest Rates and Repayment
- Education loans typically have an interest rate ranging from 10% to 15% per annum. It is charged monthly simple or compound interest.
- A moratorium period matching the course duration is provided where you only need to pay interest monthly.
- After the moratorium, you have to start repaying the principal outstanding and interest monthly.
- Most banks offer a repayment tenure of 5-7 years after the moratorium period ends. It can go up to 15 years based on loan amount.
- 1% prepayment charges may be levied if you foreclose the loan before the tenure.
Compare repayment options as some banks offer schemes where you start repaying principal and interest together from the start.
How Much Education Loan Can You Get?
The maximum education loan amount you can get depends on:
- Course fees and expenses
- Collateral (if taken)
- Co-applicant’s income and profile
- Your academic merit and future employability prospects
Typically you can get education loans of Rs. 10 lakhs to Rs. 1.5 crores based on the above criteria. Higher loans of Rs. 1.5 crores to Rs. 2 crores are possible with strong co-applicant profiles.
Top colleges and courses like MBBS often get higher loan eligibility.
Collateral on Education Loans
For loans above Rs. 7.5 lakhs, banks usually ask for collateral or third-party guarantee. Here are some common types:
- Immovable property like house, residential plot etc.
- Fixed deposits, insurance policies, shares or securities
- NSCs, KVPs, LIC policies
- Third-party guarantee of spouse, parents or relatives
The value of collateral is generally 1.25 to 2 times the loan amount sanctioned.
Co-applicant Requirement
To improve the chances of loan approval and get better terms, having a co-applicant is highly recommended. The co-applicant can be:
- Your parents or close family members
- Spouse or siblings
- Relatives like uncle, aunt etc.
They should preferably have stable income sources. Retired parents can also be co-applicants if they have pensions, assets and investments.
Tips to Get Attractive Education Loan Terms
Here are some tips to get lower interest rates and better repayment terms on your education loan:
- Maintain a good CIBIL score above 750
- Opt for secured loans by providing collateral
- Take parents or earning family members as co-applicants
- Have a strong academic record in 12th standard
- Get into top colleges for high-demand courses
- Provide income tax returns and bank statements showing stable finances
- Build a case on your future employability prospects
- Avoid multiple loan applications as it affects your credit score
Evaluate all the above aspects before finalizing your lender.
Education Loan Options for Study Abroad
Most leading banks also offer education loans for studying abroad after 12th standard. Key benefits include:
- Higher loan amount eligibility – Up to Rs. 1.5 crores
- Special lower interest rates starting from 8.5% per annum
- Longer repayment tenure up to 15-20 years
- Choice of secured and unsecured loans
- Zero prepayment or foreclosure charges
Ensure you apply with a co-applicant and meet all eligibility criteria for smooth education loan approval.
FAQs on Education Loans After 12th Standard
Q. Which are the best banks for getting education loans after 12th?
Some of the best banks for education loans are SBI, Punjab National Bank, Bank of Baroda, HDFC Credila, ICICI Bank and Axis Bank. Compare interest rates, tenure, fees and eligibility across banks to get the best loan.
Q. What is the maximum education loan amount I can get after 12th?
You can get education loans between Rs. 10 lakhs to Rs. 1.5 crores after 12th standard for studies in India. For foreign education, you can get loans up to Rs. 1.5 crores which can go up to Rs. 2 crores based on collateral value and profile.
Q. Can I foreclose the education loan anytime?
Yes, you can foreclose or prepay the outstanding education loan anytime. However, some banks charge a penalty of 1-2% of the prepaid amount. Avoid foreclosing in the initial 2-3 years due to high prepayment charges.
Q. What is the difference between secured and unsecured education loan?
Unsecured loans do not require any collateral. They have higher interest rates. Secured loans need collateral like property or FD but offer lower interest rates due to lower risk for the bank.
Q. Do I need to start repaying the loan immediately after getting it?
No, you get a moratorium period during the course duration where you only pay the interest amount monthly. The repayment of principal outstanding starts after course completion when you find a job.
Q. Can my parents co-apply for my education loan?
Yes, having parents as co-applicants greatly improves approval chances. Their income and CIBIL scores help you get the loan easily. Even retired parents can co-apply if they have assets, pensions and investments.
Conclusion
Education loans provide the necessary funding support to pursue higher education after 12th class without financial constraints. Choose reputed public and private sector banks and evaluate interest rates, eligibility, documents needed, and repayment schedules to get the most competitive loan.
Having a co-applicant and providing collateral also helps secure attractive terms. Plan your repayments well in advance based on the moratorium period and term to ensure a smooth loan experience.
