Demystifying Education Loan Interest Rates - What You Need to Know

Demystifying Education Loan Interest Rates - What You Need to Know: Taking a loan for education has become common nowadays, as getting admission in good institutions for higher education can be expensive. 

There are many student searching online for private student loans, best student loans, student loans without cosigner, apply for student loan and loans for college students etc. related all details.

In such a situation, education loan is a great option, which provides financial help to the students to complete their studies. But before taking an education loan, it is very important to understand its interest rates. Therefore, in this article we will learn about education loan interest rates in detail.

Demystifying Education Loan Interest Rates - What You Need to Know:

What is an education loan?

Education loan is the financial help given by banks and financial institutions to students for their higher education. This loan is given to them for their study expenses such as tuition fees, book expenses, hostel fees etc. The process of repaying the education loan is quite flexible, and it can be repaid in some time after the completion of studies.

What is interest rate?

Interest rate is the amount charged by a bank or financial institution on the loan amount. When you take a loan, you not only have to return the principal amount but also pay the interest amount charged on that amount. This interest rate may vary in different banks and financial institutions and its impact affects your total loan repayment amount.

Why do interest rates on education loans vary?

Interest rates on education loans may vary due to various reasons. The bank's policies, loan amount, loan tenure, and the person's credit history play an important role in this. Some of the main reasons are mentioned below:

Bank policy: Every bank and financial institution has its own interest rate policies. Some banks have low interest rates, while some may have high interest rates.

Loan amount: If you take a loan of a higher amount, the interest on it may also be high. On the other hand, if you take a loan of a lower amount, the interest rate may be low.

Loan tenure: In some banks, interest rates may be slightly lower if you take a loan for a longer period. On the other hand, interest rates may be higher if you take a loan for a short period.

Credit score: Your credit score also affects interest rates. If you have a good credit score, you may get a loan at a lower interest rate.

What are the interest rates on education loans?

Interest rates on education loans in India typically range from 7% to 15%. The rate may vary depending on the bank and the terms of the loan. Public sector banks, such as State Bank of India (SBI), Punjab National Bank (PNB), etc., usually offer lower interest rates than private banks.

Interest rates in public sector banks can be something like this:

SBI: 8% to 9.5%

PNB: 8% to 10%

BOI: 9% to 11%

Interest rates in private banks can be slightly higher, such as:

HDFC Bank: 10% to 13%

ICICI Bank: 10.5% to 13.25%

Axis Bank: 11% to 13.5%

How are interest rates on education loans decided?

The main factor in deciding the interest rates is MCLR (Marginal Cost of Lending Rate) or RLLR (Repo Linked Lending Rate). These rates indicate the minimum interest rates charged by the bank on its loans.

MCLR: This is the rate at which the bank provides its loans. This is the benchmark rate, and above this, the banks fix their interest rates.

RLLR: This rate is linked to the Repo Rate set by the Reserve Bank. Whenever the Reserve Bank's rates change, the interest rates of banks may also change.

What type of interest rate scheme is there?

Banks have two main schemes regarding the interest rates of education loan:

Fixed Interest Rate: In this scheme, the interest rate remains the same throughout the loan period. The advantage of this is that you do not have to worry about any kind of change during the payment plan. However, this scheme can be a little expensive sometimes.

Floating Interest Rate: In this scheme, the interest rate is fixed on the basis of changing market rates from time to time. If the rates in the market are low, then your interest rate can also be low. But if the rates increase, then your interest rate can also increase.

Interest subsidy on education loan -

Some banks and financial institutions also give interest subsidy on education loan. The Government of India also gives interest subsidy to the students of poor or weaker sections under some schemes.

Pradhan Mantri Shiksha Loan Yojana: Under this, students from low-income groups can get interest rate concessions in certain cases.

Swarna Jayanti Yojana: This scheme also provides interest rate concessions on loans for higher education, especially for students pursuing education in special fields.

EMI (Equated Monthly Installment) of Education Loan and its Impact -

Interest on education loan is paid every month in the form of a fixed EMI. EMI is determined based on the loan amount, interest rate and loan tenure. It is very important to repay the education loan EMI on time, as late repayment may increase the interest and also negatively affect your credit score.

How is the interest on education loan paid?

The higher the interest on education loan, the larger the amount you borrow. Payment of interest usually starts after completion of studies. Some banks provide a "Grace Period" of 6 months or 1 year after completion of studies, so that you can take time to get a job or improve your financial condition.

Conclusion:

Education loans can be a vital tool to help you fulfill your dreams, but understanding the interest rates is essential to use it correctly. It is important that you choose the most suitable loan plan based on your needs and the bank's terms. Interest rates can affect your total amount, so it is important to pay attention to this. 

Always try to repay your loan on time to avoid any kind of additional interest. Finally, using an education loan correctly can make your future brighter, but also keep in mind that the responsibility of repaying the loan will be on your shoulders.

We hope you got all points related to best college loans, student loan interest rates, student loan rates, personal student loans and student loans no cosigner etc. from this above article.