Study Loans and Their Increasing Popularity in the Pandemic


While the pandemic and subsequent lockdowns have caused financing options to lose popularity in 2020, study loan remain an exception. According to a CRIF High Mark report, financial institutions saw a record high demand and disbursal of Rs.11,000 crore student loans in 12 months, with 3 lakh new applicants between March and October last year.

Education is the one area that many people, especially Indians, are willing to spend on. Earning a good education is seen as one of the chief aspirations of millions, if not a billion, Indians and it is the one investment that an overwhelming majority of Indian families will agree on! However, a quality education, whether in India or overseas, can also be quite expensive and an education loan is one way of managing the cost.

The growing popularity of student loans can mainly be attributed to individuals signing up for up-skilling courses to enhance their employment chances in the post-COVID world.

Many families also faced a cash flow gap due to the recession, which prompted individuals to seek external funding to finance their education and to get education loan.

Read on to know more about the features and requirements of this financial product.

Why is the demand for education loan schemes increasing?

Most students opt for study loans for higher education due to the following advantages:

-          They have the option of studying in India as well as abroad

-          They can enjoy a moratorium period of up to 1 year since course completion, during which they do not need to make any repayments

-          Specific lenders offer additional rebates on interest for female students

-          Individual borrowers can also enjoy tax deductions on interest up to 8 years under Section 80E of the Income Tax Act

However, note that the last benefit cannot be availed by companies and HUF utilising funds for any of their members. Also, these tax exemptions are only applicable to funds used to finance higher studies.

These days the cost of higher education is very high due to which education loan in India is one of the highest appreciating domains, and it requires a substantial quantum of funds. Recently, loan against property for education has emerged as the most financially prudent solution for numerous individuals who want to fund their children’s education at some of the top institutions in this country.

Types of courses covered under study loan schemes

Here is a list of courses individuals can avail funds for.

       UG degrees and diplomas: B.Sc., B.A., B.Tech, B.Com, B.E, B.Ed, L.L.B, B.B.A, M.B.B.S, etc.

       PG degrees and diplomas: MBA, M.A., L.L.M, M.Com, M.Res., M.Sc., M.F.A, M.Ed, M.Phil, etc.

       Certificate job-oriented courses

       Diploma in job-oriented courses, such as agriculture and engineering

       Degree or diploma in navy, army, pilot training, and air-force training courses

       Miscellaneous doctoral courses

       Vocational training under government institutes

       Specialised training programmes

Students opting for other short-term courses may not be able to secure study loans from most financial institutions. In such circumstances, they can opt for an education loan against property instead.

Who can qualify for an education loan in India?

Besides applying for any of the courses mentioned above, individuals must be meritorious students and have Indian citizenship to qualify for a study loan in the country.

Additionally, applicants need to provide the following documents for verification.

-          Recent passport-sized photographs

-          ID proof

-          Address proof

-          Admission certificate

-          Latest mark sheets

-          Employment and income proof

-          Visa for education abroad

-          Financial documents

Considering the COVID-19 pandemic, students have been facing increasing difficulties in acquiring admission letters, which is a primary cause behind many rejected applications. Plus, these funds only cover course fees, hostel charges, and stationery expenses.

To finance a different accommodation type and travelling costs, individuals can resort to an loan against property. You must also know how to manage your finances better when studying abroad for effective fund allocation.

Documents Required for Education Loan On Property:

-          Identity Proof

-          Income Proof

-          Address Proof

-          Bank Statements

-          Property Papers

LAP loan: A better alternative

Below listed are some prominent reasons that make a loan against property a better way to finance your child’s education.

       Higher funds: Due to its secured nature, a LAP loan offers a high quantum compared to student finance.

       Faster disbursal: Comparatively simpler documentation aids in quick loan disbursal within 72 hours.

       Competitive interest rates: Due to the security offered by mortgaged assets, lenders charge lower property loan interest rate. Given the RBI’s 4% repo rate, mortgage loan rates have reached an all-time low.

       Longer tenor: Mortgage fund creditors offer repayment tenors of up to 20 years, facilitating smaller EMI payments for better affordability.

       Pre-qualification: Some NBFCs also bring pre-approved offers that can help expedite the loan application process. These offers are available on various financial products, including loan against property and home loan. Submit your name and contact details to check your pre-approved loan offer before applying.

Individuals can use a LAP EMI calculator to determine their accurate fund requirement, tenor, and interest scheme for easy repayment. Also, one can enhance savings with tax benefits on interest payment under Section 27(1).

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