An education loan in India helps a student pay for tuition, hostel and related costs, with repayment starting only after studies end. Almost every education loan needs a co-applicant (usually a parent, guardian or spouse). Loans up to about βΉ4 lakh are normally collateral-free; larger amounts may need a guarantor or security. Repayment begins after a moratorium β the course period plus 6 to 12 months.
Who Can Be a Co-Applicant for an Education Loan?
Because most students have no income of their own, lenders ask for a co-applicant who shares responsibility for repayment. This is usually a parent or legal guardian. A spouse, a sibling or, in some cases, parents-in-law can also qualify.
The co-applicant's income and credit history matter a lot. A co-applicant with a steady income and a clean repayment record makes approval faster and can help secure a better interest rate.
What Is Margin Money in an Education Loan?
Margin money is the share of the total cost that you contribute yourself, while the lender funds the rest. It works like a down payment.
Typically there is no margin on small loans (often up to βΉ4 lakh). Above that, a common pattern is around 5% margin for studies in India and about 15% for studies abroad. So if a course costs βΉ10 lakh abroad, you might pay βΉ1.5 lakh and the lender funds βΉ8.5 lakh. Scholarships are often counted toward your margin.
How Does Collateral Work?
Whether you need to pledge an asset depends on the loan size:
| Loan amount | Security usually required |
|---|---|
| Up to βΉ4 lakh | No collateral, no third-party guarantee |
| βΉ4 lakh β βΉ7.5 lakh | A third-party guarantor |
| Above βΉ7.5 lakh | Collateral such as property or a fixed deposit |
These bands are general guidelines used by many banks; private lenders and NBFCs may offer larger collateral-free loans based on the course and college.
Is a CIBIL Score Needed for an Education Loan?
A student often has no credit history yet, so the lender mainly checks the co-applicant's CIBIL score. A strong score (usually 700+) improves the chance of approval and a lower rate. A poor co-applicant score can lead to rejection even when the student's profile is good.
Can You Take an Education Loan from Two Banks?
You generally cannot take two loans for the same expense at the same time. Lenders verify your fee structure and any existing loan, and double-financing the same cost is not allowed. What you can do is fund different needs separately, or move (refinance) an existing loan to another lender for a better rate. Always tell the new lender about any current education loan.
How Long Does Approval Take, and Is Credila Safe?
For a complete application with all documents and a clear admission letter, approval usually takes about one to three weeks. Collateral-backed loans take longer because the property has to be valued and legally checked.
Names like HDFC Credila are registered non-banking finance companies that specialise in education loans, and they are legitimate, regulated lenders. As with any loan, the key is to compare the interest rate, processing fee and prepayment terms before choosing.
How Do You Repay an Education Loan?
Repayment is built around the moratorium β the gap before full EMIs begin. A smart repayment plan can save a lot of interest:
- Pay simple interest during the course β many lenders let you pay only the interest while studying; this keeps your final EMI lower.
- Start EMIs as soon as you can β beginning a little early shrinks the total interest you pay.
- Make part-prepayments β bonuses or savings put toward the principal reduce the balance quickly.
- Claim the tax benefit β under Section 80E, the interest paid on an education loan is deductible for up to 8 years.
Which Expenses Does an Education Loan Cover?
An education loan is meant to fund the full cost of studying, not just tuition. Most lenders cover a wide set of expenses:
- Tuition and college fees β the core of the loan.
- Hostel or accommodation β living costs during the course.
- Exam, library and lab fees β charges paid to the institution.
- Books, equipment and a laptop β essentials for the course.
- Travel β airfare and related costs for studies abroad.
Knowing what is covered helps you borrow the right amount β enough to study comfortably, without taking on more debt than you need.
The Bottom Line
An education loan can make a costly degree affordable, but plan it like any long-term commitment. Borrow only what the course truly needs, pick a co-applicant with a solid credit record, and understand the moratorium and repayment terms before you sign. Paying even small amounts during the study period can meaningfully cut the total cost.
