Education Loan Moratorium Period: Why It Matters

The moratorium period refers to the loan repayment holiday when the borrower does not make EMI payments on the loan borrowed.

Education loans offer much-needed assistance to those bright students who wish to pursue higher studies either in India or abroad but do not have the financial resources. With the financial cost of education trending upwards, educational loans provide timely help to deserving students who are financially constrained.

Educational loans have added benefits like enabling the students to conserve their scarce resources for their expenditure, maintain their CIBIL score, and gain tax benefits.

Obtaining an educational loan has become easier, with most banks and financial services companies offering educational loans to students.

What is the Moratorium Period for Education Loans?

This refers to when the borrower (Student) is exempted from repaying the loan. It refers to a repayment holiday.

The RBI, the governing authority for all banks and financial institutions, has made it mandatory for all banks and financial institutions offering loans to offer a mandatory moratorium period.

Like all loans, education loans also start accruing interest from the day the loan is disbursed.

But the student is not obligated to make interest and principal repayments when the moratorium period is in force. It should be noted that interest is only deferred and not waived off.

It is added to the loan’s outstanding balance, and higher EMIs will have to be paid when the student has a job and starts earning.

The difference between moratorium and grace period: The grace period refers to the period interval you are allowed before making EMI payments without any imposition of penalty. In contrast, the moratorium period is when there is a freeze on making EMI payments on a loan to the bank or the financial institutions.

Advantages of an Education Loan Moratorium

• An education loan moratorium reduces the financial burden on students and parents during the study period.
• Maintains the stability of the CIBIL score
• As the moratorium is valid for up to one year after the borrowing student starts earning, there are no financial penalties for non-payments of EMIs during the moratorium period. The student can complete his studies peacefully without fearing paying EMIs or penalties during the moratorium period.
• The students enjoy freedom from the liability of repayments during this period and up to one year after completing their studies.

You can apply for a student loan from Tata Capital to cover the cost of your tuition and living expenses abroad. 

Education Loan Amount: If you are studying in India, you can take a loan up to Rs. 35 Lakhs and the maximum loan amount available for studies abroad is Rs. 30 Lakhs.

Education Loan Eligibility

• You should be an Indian citizen between the ages of 16 years to 26 years
• You should have a good academic record in your past studies
• Your family (including you or your parents should have a stable income source)
• It would help if you had good collateral to secure the education loan.
• If you have a co-guarantor for the loan, both your guarantor and you should have a good credit history.

Documents Required for Education Loan

• Valid photo identity proof
• Attested copies of all mark sheets of the student from their 10th grade onwards
• Admission letter from the college the student is proposing to join.
• All other essential documents from the college/school/ institute, including Prospectus, the complete break-up fees etc.
• All other applicable documents, including employment contract, entry permit, admission letter, and an I-20 form from the foreign institution
• The student’s parents’ salary slips for the past three months, along with the copies of their Income Tax returns. If not the parents, then the guarantor’s documents will apply
• Bank statements for the preceding six months
• If the student had been hitherto employed, resignation letter, acceptance of resignation letter or sanction letter for study leave
• Documents for providing the collateralised security, including the property title deeds if immovable property is offered as collateral

Interest Rates on the Educational Loan

Interest rates on educational loan start from 10.99%. Tata Capital also provides all processing fees, delayed EMI payment charges, and foreclosure transparently charges upfront.

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Period available to pay back the loan: You can pay back your education loan for up to 6 years.

Moratorium Period for Educational Loans

The moratorium period applicable to your education loan is the entire tenure of your studies.

Plus, you get a moratorium period up to a maximum of one year after you start working before you become liable to pay back the loan. But you can start paying off your student loan after six months, which is a more prudent policy and avoid foreclosure charges. It is better to start planning your repayments early. This will ensure that your EMI amounts are lower.

Education Loan EMI calculator, including moratorium period education:

Tata Capital provides a versatile EMI calculator which will calculate the EMI amounts, i.e., principal and interest amounts payable on the loan. With the help of the personal loan EMI calculator, you can enter the loan amount, interest rate, and loan tenor. The EMI is automatically calculated.

The EMIs will be payable after the moratorium period for the education is completed. However, it would be prudent to start planning the savings for EMIs as early as possible. It would help build up personal savings to start paying the loans and reduce your EMI burden.

If you are an aspirant for higher studies, start planning the financial cost and seek help for Tata Capital’s Personal Loan.

Tata Capital loans come at competitive personal loan interest rates and easy terms.