How to Get an Education Loan on Lowest Interest Rate

Are you aspiring to pursue higher education but worried about the cost? Education loans can be a great solution to fund your dreams. However, to minimise the financial burden, ensuring you get the lowest interest rate on education loans is crucial.

In this article, we will guide you through the process of securing an education loan at the lowest interest rate in India.

6 Tips for Getting the Lowest Interest Rate

An education loan with low interest rate can help reduce the total cost of borrowing for students pursuing higher education. Here are 6 effective tips to get education loan on low interest rates:

• Tip 1: Maintain a Good Academic Record

A good academic record increases your chances of securing an education loan at a low interest rate. Lenders consider students with excellent grades as low-risk borrowers, offering them better loan terms. Aim for a high GPA, scholarships, or academic achievements to demonstrate your credibility. A strong academic profile can help negotiate a lower interest rate.

• Tip 2: Choose the Right Loan Scheme

Opt for government-sponsored loan schemes or subsidies, which often offer lower interest rates. Schemes like the Pradhan Mantri Vidya Lakshmi Karyakram (PMVLK) or the Central Sector Interest Subsidy Scheme provide competitive rates. Research and explore various loan options, comparing interest rates and terms to find the best fit.

• Tip 3: Select a Suitable Loan Tenure

A longer loan tenure can lead to lower monthly payments but may result in higher overall interest. Choose a tenure that balances your repayment capacity with interest savings. Typically, a tenure of 5-7 years offers a reasonable balance between monthly payments and interest rates.

• Tip 4: Consider Secured Loans

If you own assets like property, think about getting a secured education loan. This type of loan requires you to offer something valuable, like your property, as collateral. Because the lender has this security, they usually offer lower interest rates compared to unsecured loans. This can make your loan more affordable in the long run.

• Tip 5: Compare Lenders and Negotiate

Research and compare interest rates from various lenders, including banks, NBFCs, and online lenders. Shortlist lenders offering competitive rates and terms. Negotiate with your preferred lender, highlighting your academic achievements, creditworthiness, or existing relationships to secure a better interest rate.

• Tip 6: Explore Government Schemes

In India, both state and central governments have launched several schemes to help students pursue higher education. These schemes are designed to make education more accessible by offering financial support through loans. Often, the loans provided under these schemes are larger than standard loans, which can be particularly helpful for expensive courses or programs

Understanding Eligibility Criteria

Before diving into the details of how to get the lowest interest rate on student loans, let’s first understand the eligibility criteria set by lenders:

Age Requirement

An education loan is available for individuals between 18 and 35. This ensures that students have ample time to repay the loan after completing their education.

Co-applicant Consideration

As many students may not have a steady source of income, lenders often require a co-applicant, such as a parent or close relative, who can take responsibility for repayment in case of default.

Credit Score Evaluation

Lenders evaluate the credit score of both the applicant and co-applicant while sanctioning an education loan. A good credit score increases your chances of securing a lower interest rate.

Loan Coverage

Education loans cover various expenses, such as tuition fees, books, accommodation, and travel expenses. Make sure you choose a lender that offers comprehensive coverage based on your needs.

List of Documents Required for Education Loan

Here are the documents required for an education loan in India:

1. Admission Letter from the educational institution.
2. Academic Documents: Mark sheets (10th, 12th, graduation), Certificates (10th, 12th, graduation), and Entrance exam results (GRE, GMAT, CAT).
3. Identity Proof: Passport, PAN Card, Voter ID, Aadhaar Card.
4. Address Proof: Passport, Utility bills, Ration Card, Aadhaar Card.
5. Income Proof (for co-applicants): Salary slips, Form 16, Income Tax Returns, Bank statements.
6. Asset Documents (for secured loans): Property documents, Fixed deposit receipts, and Share certificates.
7. Bank Statements: Student’s and Co-applicant’s bank statements (6 months).
8. Completed and signed Loan Application Form.
9. Course Details: Course fee structure, Duration, Institution’s accreditation.
10. Recent Passport-sized Photographs of the student and co-applicant.
11. KYC Documents (for NBFCs): Proof of identity, address, and income.
12. Additional Documents (if required): Scholarship documents, Entrance exam scores, Employer’s letter (for working professionals).

Please note that documents required for education loan may vary depending on the lender, loan amount, and type of loan. It’s best to check with your lender for specific document requirements.

Conclusion

Securing an education loan at the lowest interest rate is crucial to minimising your financial burden while pursuing higher studies. You can increase your chances of securing a low-interest education loan if you have a strong credit score, a stable income, and a good academic record. Remember to carefully calculate the total repayment amount and choose a lender that offers the best terms for your specific needs. At Tata Capital, we understand the importance of affordable finance for students. To explore our education loan options and take advantage of our lowest interest rate on education loans, download the Tata Capital app today.