Education Loan » Education Loan for Engineering in India 2023 – Eligibility, Interest Rates, EMI & More
by Aakash Badola
Education Loan for Engineering in India – With lakhs of students pursuing engineering education in India, courses like BTech and BE have always been the two most-popular streams of study. Numerous programs are offered for every vertical under engineering and students find themselves with a large number of options.
As per the India Brand Equity Foundation (IBEF), engineering firms occupy 27% of the total number of industries in India and represent 63% of the overall foreign collaborations. This makes it the largest industrial sector in the country. With a large number of employment options, students find themselves surrounded with numerous opportunities to excel and succeed.
That being said, several engineering aspirants find themselves confused about one of the most important facets of a college education – education loans. Pursuing higher studies usually involves high fees. An engineering education loan comes in handy at this point and enables students – despite their financial standings – to pursue and complete their dream education.
However, there are several elements that a student needs to be aware of before he/she applies for an education loan for engineering.
This article will acquaint the students with everything they need to know about the education loan process, interest, EMI, and more.
Engineering Education Loan – At a Glance
An engineering education loan is a sum of money borrowed to finance higher education-related expenses while pursuing a BTech or BE degree. These loans cover the cost of tuition, books & supplies, and living expenses while the student is in the process of pursuing a degree.
Education loans are of different types. Majorly they are divided into two categories – domestic and international. For the purpose of this article, we are going to focus on education loans for engineering students in India (domestic).
Domestic education loans are further divided into three categories based on the type of education. These categories are:
- Higher Education Loan (degree/graduation)
- Diploma Student Loan (diploma/professional skill-based learning)
- Professional Study Loan (post-graduation/doctoral/post-doctoral education)
A BTech or BE degree comes under the higher education category. However, the logistics of applying for and getting selected for a loan are the same for all categories.
Expenses Covered Under Education Loan for Engineering Students
An engineering loan majorly covers the following expenses of the engineering degree:
- Tuition Fee
- Semester Exam Fee
- Library Fee or Project Costs
- Donation Fund
- Annual Fee
- Boarding Charges
- Stationary Charges
- Other Education-Related Costs
Engineering Education Loans – Important Points to Note
- Indian students between the ages of 16 years and 35 years can avail an education loan from a registered lender.
- These can be for pursuing graduate, post graduate, or diploma courses in several engineering branches.
- To do so, the applicant must have a confirmed admission (with document proof) in a university or a college recognized by the UGC, AICTE, and other such boards.
- The applicant must apply for an education loan with a co-applicant. The co-applicant can be a parent, guardian or spouse in case the applicant is married.
- Interest rate is low if the amount is less than INR 4 lakh. Interest rates increase with the amount being borrowed.
- Also, the education loan interest rate will vary as per the bank and is subject to frequent changes.
- Many banks offer concessions in interest rates for female students who have secured admission to recognized engineering colleges.
- Most banks also do not demand security for education loan amounts up to INR 4 lakh. However, for amounts in the range of INR 10 lakh to INR 30 lakh and above, documents of assets like gold and houses can be pledged as security.
Who Provides Education Loan for Engineering in India?
Only public and private banks have the permission to provide an education loan for engineering in India.
Here is a basic breakdown of a few banks that provide loans and their loan processing fees:
| Name of the Bank | Processing Fees |
| PNB | 1% of Loan Amount |
| SBI | Up to Rs.10,000 |
| Axis Bank | Nil to Rs.15,000 + GST |
| Bank of Baroda | 1% of loan amount up to Rs.10,000 |
| HDFC | Up to 1% of loan amount + tax |
| Kotak Mahindra Bank | Nil |
| Federal Bank | Depends on Bank |
What is the Eligibility Criteria for Education Loans for Engineering Students?
| Student Details | Eligibility |
| Nationality | Indian |
| Age | Minimum – 18 years Maximum – 35 years |
| Academic Record | Good (Students Will be Required to Prove a Good Academic Record Through Marksheets and Other Documents) |
| Qualification | Pursuing Graduate, Postgraduate, or Diploma courses in Engineering |
| Income Source | Parents, Guardians, or Family Members |
| Income | Stable and Regular |
| College Applied | Recognised by UGC, AICTE, and Other Boards |
| Admission Status | Must be Confirmed |
| Security | Depends on Loan Amount and Income Source |
| Average Interest Rate* | 8.40% Per Annum |
*The education loan interest rate that applicants will get varies from bank to bank. Also, during the post-pandemic economy, the education loan interest might be higher than usual. However, it is estimated that the rates will decrease back to the original market rates soon. Thus, candidates need not worry about higher interest rates.
What Documents are Required to Apply for Engineering Education Loans?
What documents are required while applying for an education loan? Is there anything that I need to keep in mind while applying?
Aspirants often wrestle with thoughts like these. This section will clearly lay down the documents that will come in handy while applying. Plus, we will also provide a few basic guidelines to further streamline the engineering financing process.
Here are the mandatory documents that a student needs to provide while applying for an engineering student loan:
- Duly filled and signed application form with affixed photographs
- 2 passport size photographs
- Mark sheets of Class 10 and Class 12
- Statement of cost of study
- Aadhaar card (of student and parent/guardian)
- Pan card (of student and parent/guardian)
- Voter ID/Driving License/Passport (optional)
- Residence proof*
- Income proof**
*Residence proof can be the bank statement of 6 months of the student or co-borrower/guarantor or can be one of the following – ration card, gas book, electricity bill, telephone bill.
**Income proof can be recent salary slips, form 16 of the parent/guardian/co-borrower, 6 months bank statement of the borrower or updated passbook of bank, updated ITR (Income Tax Return) of 2 years, or IT assessment order of last 2 years of parent/co-borrower/guardian.
Education Loan for Engineering in India – Average Interest Rates
| Bank | Loan Amount | Average Interest Rates | Margin Money* |
| State Bank of India (SBI) | INR 20 Lakh or Above | 6.90% – 9.30% | 5% for loans above INR 4 lakh |
| Punjab National Bank (PNB) | Depends on Student | 6.90% – 9.55% | 5% for loans above INR 4 lakh |
| Bank of Baroda | INR 60 Lakh | 6.85% – 9.95% | 5% for loans above INR 4 lakh |
| Axis Bank | INR 40 Lakh | 13.70% – 5.20% | 5% for loans above INR 4 lakh |
| HDFC Credila | INR 25 Lakh | 12.25% | No Information Available |
| Tata Capital | INR 25 Lakh | 10.99% | Not Mentioned |
| Canara Bank | Depends on Student | 7.40% – 9.40% | 5% for loans above INR 4 lakh |
| Central Bank of India | INR 10 Lakh | 6.85% – 9.00% | 5% for loans above INR 4 lakh |
| Bank of India | INR 10 Lakh | 9.05% – 9.85% | 5% for above INR 4 lakh |
*Margin money is the amount that needs to be financed by the borrower himself for higher studies. This can be managed with the help of scholarship assistance as well.
To find scholarship opportunities that engineering students can apply for – click here.
To know more about engineering scholarships – click here.
How to Apply for Engineering Education Loans in India?
To apply for engineering loans, students must first do their due diligence on what bank or provider will be the most suitable for them.
To do so, here are a few pointers to stick by:
| Loan Amount | How much is needed to completely fund the degree and whether the concerned bank provides that amount. |
| Interest Rate | What will the education loan interest rate be? In the case of engineering education loans, the lesser the interest rate the better. |
| EMI | How much will the monthly equated monthly installment (EMI) be? Will the decided EMI amount be feasible for the student/parent to pay or will further reduction be required? |
| Moratorium Period | This is the period during which the borrower is not required to make payments. Generally, most students prefer to start paying back once their course is completed and they have landed a job. Thus, most banks provide a moratorium period equal to the course duration plus 6 months. This means, the students – in most cases – will have to start paying back after 6 months of course completion, which is deemed sufficient time to get a job. |
Note: While reducing the monthly EMI amount might look more feasible in the short run, it ends up increasing the overall interest rate and the borrower has to pay back far more than what was initially loaned. Thus, candidates are advised to think deeply before accepting any EMI reduction from the bank.
Once candidates have scrutinised all their options based on the parameters above, they can apply for the education loan by following the steps given below:
- Visit the bank’s website from where the loan has to be borrowed.
- Click on the new loan application option.
- Fill up the form.
- Provide all mandatory details.
- Attach all required documents (including signature).
- Complete the application.
- The bank will then contact the applicant for all further procedures and verifications.
Note: Alternatively, one can apply for a loan by visiting the nearest branch of that particular bank with all the necessary documents, discuss the terms of the loans with a bank representative, and fill the form in person. Candidates can even call the lending bank directly (or request a call back) to apply.
Do’s and Don’ts While Taking an Education Loan for Engineering
Do’s
- Take a loan only when absolutely necessary. If one can complete their education just on scholarship aid, one must absolutely do so as there is no requirement to pay the scholarship back.
- Consider how much salary one can expect to earn after the course is completed. This will help the candidate estimate how much EMI he/she will be able to manage per month.
- Do due diligence (as stated in the preceding section).
- Calculate the EMI much in advance. Each bank has its own EMI calculator – use that.
Don’ts
- Take a loan just because it is available. The pressure of a student loan and the mounting expectation from parents/family members often makes college life difficult.
- Say yes to any interest rate or EMI. Do market research first.
- Take top-up loans*.
*A top-up loan is the amount given by the bank over and above the initial loan amount. This increases the amount owed, the interest rate, as well as the EMI. Avoid this at all costs!
FAQs
Are there any charges or fees associated with engineering education loans?
Yes! Most banks either charge a fixed amount or a percentage of the loan amount as processing fee.
What is EMI? How can I calculate the EMI for my loan?
EMI stands for Equated Monthly Installments. This comprises both the principal (original loan amount) and the interest component (whatever interest is charged on the principal amount). EMI is calculated depending on the loan repayment duration chosen by the candidate. The EMI is higher if one chooses to repay within a shorter period as opposed to a longer-term loan. A shorter repayment period, however, reduces the interest over the term of the loan. This means, less money is borrowed in total if the repayment period is shorter.
What is a repayment period? When does it begin?
The repayment period starts with the first installment of the monthly EMI. It mostly begins six months after the candidate completes the course and gets a job. Some banks even allow candidates to start repayment 1 year after the course period or 6 months after the candidate gets a job (whichever is earlier).
