Things to know before securing an education loan

This article brings to you a list of things to keep in mind before securing an education loan for your child.

By Akshaya Ganesh  • 5 min read

Things to know before securing an education loan

Receiving quality higher education in a premier institution is a dream of many students. Previously, many students belonging to financially weaker sections of the society were unable to study in reputed educational institutions as they could not afford to pay the high fees charged by such institutions. But, nowadays, students can take loans from banks and other lenders to fund their education. However, there are certain things one must pay attention to before taking an education loan.

An education loan is a facility that students can avail of to pursue quality higher education in a reputed institution of their choice. But before approaching the bank for an education loan, it is important for students to know and understand the loan policies and procedures. Listed below are some of the conditions that applicants must satisfy for availing an education loan:


  • The student should be an Indian national and should have secured admission to an approved diploma/degree/postgraduate course in India or a reputed university abroad.

Age limit:

  • The applicant should be between 16 and 40 years old.

Loan amount:

  • A maximum of Rs. 10 lakhs can be availed as loan to study in India. For studying abroad, a maximum of Rs. 20 lakhs can be taken as loan. Depending on the repayment capacity of the student, the bank decides on the quantum of loan.

Margin (the amount students need to pay from their own funds):

  • Loan upto Rs. 4 lakhs: No margin
  • Loan above Rs. 4 lakhs: 5% for studies in India,  15% for studies abroad.


  • Loan of up to Rs. 4 lakhs do not require any security.
  • Loan above Rs. 4 lakhs and up to Rs. 7.5 lakhs require a third-party guarantor.
  • Loan above Rs. 7.5 lakhs requires collateral security equal to the loan amount. The collateral can be immovable assets like property, or movable assets like fixed deposits or NSCs.

Interest rate and repayment period:

  • Interest rates on loan and the repayment period vary from bank to bank. Public sector banks provide a much lower interest rates when compared to their private counterparts.

Always remember to compare the interest rates and other details before zeroing in on a bank for a loan. Websites like PolicyBazaar and BankBazaar can help you understand and compare the details of loans provided by different banks.

The world we live in values education highly and high education is a matter of prestige. While an education loan can be a ticket to a dream college, it is always a wise step to know all the facts and figures beforehand when taking such an important decision. After all, a student should not be burdened by debts and the resulting worries and stress while in pursuit of education.

With inputs from Vani Kabilan, Chief Manager, Indian Overseas Bank, Chennai