Tips to Apply for Student Loans

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Here are the 12 tips to keep in mind while applying for Student loan. Studying abroad provides immense benefits as one can get the exposure of advanced technology, good scope of research work and excellent job prospects. But this does not come easy as, education abroad is expensive and loans become a necessity thus certain tips help in applying for student loans.

These are the basic things to be kept in mind:

Know the Institute

It is important to choose a bank which has proper standing, rating, infrastructure and reputation. Each and every bank has different policies and procedures they follow. Proper check of institution is necessary to ensure that in the future the entire process will remain smooth and the institute will not cause problems in between which might lead to unnecessary hassle.

Amount – Rs 50,20,000 Public Sector Undertaking Private Banks and Institutions
Interest Rates 9.5%-10.5% 11.5%-12%
EMI (considering Tenure – 5yrs) Rs 1,07,899 Rs 1,10,403
Processing Fees Rs 10,000 (generally a fixed amount or sometimes 1% of loan amount) Rs 75,300 + 18%GST (2% on loan amount)
Expanse Coverage 90% 100%

Plan Your Finance

Keep a thorough account of the money required and the money that you will be able to easily pay off. One should keep borrowing to minimum and ensure they do not overburden themselves by taking huge amount of loans which they can’t pay off in the future. Before taking the loan, calculate the amount you will have to pay back every month along with the interest rate. This helps in keeping a reality check and prevents future hassle. Keep your prospective career field in mind and calculate your ability to pay back. Your education should be an investment and should not become a burden for you. 

Make Informed Decisions

There are various plans offered by the banks and financial institutions thus you have several options. Ensure you choose the one that meets your requirement. Keep in mind the present interest rates which in India, is somewhere between 8.50% to 15.20%. There are various offers in banks for different kinds of students, like subsidies on interest rates for female students. Make sure you make an informed choice.

Choose Duration

It is preferable to choose short term loans as compared to long term loans as longer period means higher interest rates thus, larger amount of money for repayment. If you are confident that you will get a good job after completing your education, it is always beneficial to choose shorter loan tenure. Even though it leads to higher EMI (equated monthly installments) the overall cost is less because of the reduction in interest rates.

Understand the Loan

Check what all your education loan covers apart from the college fees. This includes admission, boarding and lodging, library fees, travelling expenses and payment for education equipment such as computer or laptop. Go through the margins and penalties in case of late repayments and explore the hidden side of the loan. Many a times you might have to cancel the loan so go through cancellation fees as well. Read the terms and condition carefully and all the clauses mentioned.

Clear Doubts

It is necessary that one is clear about the type of loan that is being taken. If you have any doubt regarding the condition of the loan or the method of repayment it is better to ask the bank/financial institution before taking the loan. This helps in having a clear picture and the kind of loan offered and prevents from any unpleasant surprises in the future.


Many a times there are various scholarships available to students in need of help. Keep a close eye on such scholarships as they help reduce the amount of loan to be taken and reduce the burden to pay back money.


There are a few NBFC’s in India that provide education loan without any collateral. But in case you apply for loan in a bank which ask for collateral these are the following commonly accepted collaterals by banks/financial institutions-

  • FD (Fixed Deposit)
  • Land
  • Life insurance
  • Residential property (Flat/ Apartment/ House)

Keep Duration in Mind

It generally takes banks/financial institutions at least 15 days after receiving the application for loan so ensure you keep the time frame in mind and apply accordingly.

Documents Required

After you have decided the loan you want to take from a particular plan it is important you keep proper documents ready for verification as well as other documents required by the bank. Bank look for people who are credible thus there should be no hindrance while you show all the supporting documents. Mostly these are the documents that are required by the bank:

  • Pan card
  • Aadhar card
  • KYC document
  • Mark Sheet
  • Income Proof
  • Admission letter from the foreign university
  • A complete break-up of the cost of the course
  • Statement of Liabilities/ Assets of Parent/ Guardian/ Co-Borrower
  • Bank Statements
  • Academic Documents
  • Two Passport Size Photographs

Loan Interview

Bank also takes an interview to know about the person they are loaning their money to. They verify the documents as well as your credibility to pay the loan.

Repayment Options

Repaying of loans is also an important thing to be considered. This means you need to choose how you want to repay your loans. It can be either through cheques or transfer of money from one bank account to another. Different methods have different service charges. So, choose the one which is best suitable for you.

Fail to Qualify

In a case when you fail to get loan from bank/financial institutions you need to have a co-signer. This cosigner can apply for the loan with you and promises to pay back the loan if you fail to do so.  Co-signing is considered risky so ensure you ask a person who you trust and who understands what they are getting into.

Keep these basic things in mind as it makes the entire process of getting loan a lot easier. Once you are able to pay off your education loan your credit rating becomes good. This further makes you eligible to apply for car, house loans.