What Is an Education Loan And How Does It Work?

Oct 14th 2023
Loan
What Is an Education Loan And How Does It Work?

What Is an Education Loan And How Does It Work? An education loan is a loan that students apply to meet the financial requirements to complete their course. Many loan companies in India offer education loans at competitive rates to help educate the upcoming Innovators and leaders. Different loan companies like Investkraft and financial institutions offer Education Loans to aspirants at competitive rates, to help them make quality education affordable.

For those students who apply for an Education Loan, it is not necessary to pay the amount immediately; the repayment tenure starts from months or years, after the completion of the course. It is important to notice that the interest rate varies as per the banks.

Importance of Education Loan:

A student loan is only provided to students who show a possible surety of repaying the loan back to the bank. To confirm this possibility, banks cite eligibility norms for applicants. These eligibility norms are not only meant for loan sanction but also the student loan tax benefits and subsidies, which are discussed in a later section.

What Is an Education Loan And How Does It Work:

An education loan is a financial assistance program designed to support students in pursuing their academic goals. The loan is granted based on the applicant's eligibility, ensuring a likelihood of repayment. This aligns with the broader concept of responsible lending.

  • Access to Skilled Workforce: By offering education loans, Investkraft supports the development of a skilled and educated workforce. This, in turn, benefits the economy by providing a pool of qualified professionals.
  • Long-term Investment: Education loans are a long-term investment. As students graduate and secure well-paying jobs, they can repay their loans with interest. This interest income contributes to the firm’s revenue.
  • Diversification: By including education loans in its portfolio, Investkraft diversifies its investments. This helps mitigate risks associated with other financial instruments, ensuring a more stable financial performance.
  • Social Responsibility: Investing in education loans aligns with Investkraft’s social responsibility. It helps reduce financial barriers to education, promoting inclusivity and equal opportunities.

How To Get An Education Loan With The Help Of Investkraft?

Documents Required To Apply For An Education Loan

  • Your address proof and identity proof
  • Your college admission letter
  • The fee structure of your course
  • Income documents like salary slips, bank statements, and Income Tax (IT) returns.

Benefits Of Education Loan

  • Applicable for all: Any student who wants to study can apply for an education loan. Even the economically backward sections of the society can take education loans from Investkraft and other government education loan providers.
  • Applicable for all courses: Education loan can be used to pursue all types of courses — graduation, post-graduation, diploma courses, vocational courses — whether in India or in foreign universities.
  • Easily available: Education loans are widely and easily available at Investkraft. In fact, they are a priority product in all banks as per the RBI’s guidelines.
  • Varied loan amounts: Investkraft can offer loans anywhere between Rs.2 lakh and Rs.22 lakh for studying in India. Of course, the size of the loan depends on the course applied for. To study abroad, the loan amount goes up to Rs.20 lakh.
  • Helps in the completion of education: The expense curve of education is increasing with inflation and shifting prices. To avoid hindrances in studies, education loans become essential.
  • Additional benefits: Education loans include many additional benefits like caution deposits, library fees, building deposits, laboratory fees, tuition, examination fees, hostel fees, money for buying books, instruments and uniforms, travel expenses for studies abroad, etc.
  • Low-interest rate for females: Female students are offered loans at lower interest rates.
  • Easy repayment: Another great advantage of an education loan is that the loan amount need not be repaid immediately. At Investkraft, the repayment tenure can extend up to five to seven years after the completion of the course. This makes it easy for repayment.

How Does Education Loans Work?

Education loans are offered to students or to their parents to secure monetary assistance for quality education in India or abroad and embark on successful career options. The loan amount, offered for a particular period of the course, doesn’t require to be paid immediately. The bank pays the amount directly to the institution at the beginning of the course and covers all expenses, including tuition fees, travel, books, hostel, etc.

The repayment tenure starts at the end of the course. Many good loan provider commpanies even provide a grace period of 6 months for repayment called a holiday period or moratorium period. This period starts after the student acquires a job, or even after a year of completion of the course, whichever is earlier.

Investkraft offers competitive interest rates that vary from one another. Hence, one must thoroughly know the prevailing interest rates in the market and how they are calculated (whether compounded or simple interest) after completing the course. We also offer EMI as one of the options for repayments over a particular course of time. One can easily calculate the EMI amount with the help of an EMI calculator and plan accordingly.

How To Calculate Education Loan Interest?

You can use an education loan EMI calculator to estimate the EMIs you will be required to pay on your loan. Enter the tentative loan amount, tenure, interest rate, and course duration – the tool will instantly tell you the amount of your EMI.

This is the formula that is used to calculate the EMI of an educational loan.

EMI = [P*R*(1+R)^n]/[(1+R)^n-1]

  • P = The principal amount
  • R = The rate of interest
  • N = The tenure

To calculate the EMI for an educational loan, you can use the following formula:

EMI = [P x R x (1+R)^n] / [(1+R)^n-1]

  • P = the principal loan amount
  • R = the rate of interest per month (annual rate of interest divided by 12)
  • N = the loan tenure in months.

How To Repay Educational Loans?

The process of education loan repayment planning starts even before taking the loan. Anyone who is planning for repayment after taking a student loan or after completing education is likely to suffer financial constraints. Besides the basic financial planning, students also need to be aware of banking norms related to a student loan to take timely advantage in terms of repayment.

All the top education loan providers in India like Investkraft have various options for students to manage their student loan repayment. Student loan repayment involves three major considerations namely:

  • Education loan repayment calculations: comparison of the amount of each EMI vs. no of EMIs to be paid
  • Education loan repayment modes: how, when and how much loan amount to repay
  • Student loan management: tips and hacks to maximize the loan scheme features

Steps to access this student loan repayment calculator service are:

  • Visit the official website of Investkraft.com
  • From the menu on the homepage under the ‘Others’ tab click on ‘Calculators’
  • To calculate the student loan repayment EMI amount click on ‘How much do I have to pay’
  • To calculate how many EMIs will be repaid for education click on ‘How long will it take to repay’

Students can adjust their EMI amount (increase it) to pay less interest and repay the education loan earlier than planned. Or they can extend the study loan tenure (duration) to fit the EMIs into their affordable limits.

FAQs

1. What Is an Education Loan?

An education loan is a financial product designed to help students and their families pay for the cost of higher education, including tuition fees, books, living expenses, and other educational-related expenses.

2. Who Can Apply For an Education Loan?

Typically, students who have been accepted into a recognized educational institution and their parents or guardians are eligible to apply for education loans

3. What Expenses Does an Education Loan Cover?

Education loans can cover various expenses, including tuition fees, accommodation, books, equipment, travel, and other related costs.

4. How do I apply for an education loan?

You can apply for an education loan through banks, credit unions, or other financial institutions. The application process varies, but it generally involves providing your educational and financial details.

5. Do I Need Collateral To Secure an Education Loan?

It depends on the type of education loan. Some loans are unsecured and don’t require collateral, while others may require collateral, such as property or assets.

6. What Does an Education Loan Cover?

It basically covers the entire course fee (inclusive of the exam, term charges), accommodation charges (hostel, mess) and other related miscellaneous expenses.

7. When Will The Repayment Period Start?

Repayment generally starts when the course is completed. There are some banks that offer a relaxation period of six months after securing a job or a year after the completion of studies for repayment. The repayment period is generally between five to seven years, but it can be extended.

The Conclusion

An education loan is an easy gateway for financing one’s educational needs and a good head start to embark on a successful career. It is pretty easy to secure an education loan from most banks and financial lending firms. However, one should make a decision only after prudently weighing all possibilities. One must carefully read all terms and conditions before grabbing the best deal available for an education loan. An education loan from Investkraft provides a valuable financial resource for individuals seeking to pursue higher education.

With competitive interest rates, flexible repayment options, and a commitment to empowering students to achieve their academic goals, Investkraft stands as a reliable partner in the journey toward educational advancement. By facilitating access to quality education, Investkraft’s education loans contribute to personal growth and, ultimately, to the development of a skilled and knowledgeable workforce. This financial support ensures that individuals can invest in their future with confidence, breaking down barriers to educational opportunities and fostering a brighter tomorrow.

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