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Steps To Secured Education Loan Application Process

Secured Education Loan

Education is the only scale on which human intelligence can be measured, and there is no other substitute for that. 

Our parents have always told us how education completes life in every direction by demonstrating how to behave in a mature and balanced manner. There was a time when getting into top schools and universities were not for everybody. However, times have changed, and if you have potential, you should be able to reach great heights in your life. However, that is better stated than achieved. The rising cost of education, especially higher education, is a source of concern for both parents and students. And if an applicant passes a difficult entrance exam for admission to a particular institution, the tuition fees are so exorbitant that students find themselves in a difficult situation. In this blog, we will go through the Step-By-Step Guide To Secured Education Loan Application Process.

Due to the high expense of tuition, parents are compelled to pursue alternate plans while also facing a financial shortfall when it comes to paying college fees. In such a case, an education loan to study abroad proves beneficial in saving a person’s life. With the dramatic increase in the fees for MBA and other vocational schools, banks have begun to provide education loans to students so that they can pursue their education without any obstacles. Under this financial assistance, meritorious students with outstanding educational credentials are given wings to fly and pursue their dreams. Furthermore, the paperwork mechanism is held to a minimum in order for students to receive the loan amount in a timely and simple manner. 

So, before moving onto the step-by-step guide to the secured education loan application process, here is a quick overview of what is the meaning of a secured education loan.



Secured Education Loan: Meaning


A secured student loan is granted with the use of collateral. In India, the standard procedure for obtaining a collateral-based higher education loan entails the pledging of collateral support. All of India’s major government banks make these loans affordable. A student who has been accepted into an accredited college is entitled to request an education loan. Furthermore, parents, siblings, or spouses can also apply on behalf of the student as co-applicants. 

The loan is specifically designed for students who wish to pursue higher education in India or abroad. The number and interest rates on domestic and foreign education loans vary from bank to bank. The moratorium period, which is like a loan holiday given to all applicants until the repayment period starts, is one of the most significant advantages of secured education loans lent from government banks. This moratorium duration allows other students to pursue work and continue repaying their college loans for overseas studies.


Secured Education Loan Application Process


The process of applying for a secured education loan involves researching and choosing the right lender, gathering required documents, understanding the loan terms and conditions, completing the application form accurately, submitting the application along with the necessary documents, undergoing verification and credit assessment, and finally, accepting the loan agreement if approved. Here is a step-by-step guide:



Step 1: Filling the Application Form


As with every other loan, the first move is to complete an application form. The application form is easy, and you must include your personal contact information as well as your academic information. In this form, make sure to include true and genuine facts.


Step 2: Personal Interview


The interview round is the next phase in the education loan process. After reviewing your submission, your bank will usually contact you for a personal conversation or interview. It should be noted that the loan is given to the student with the co-obligation of parents/guardians, and the student is deemed the primary loan borrower. You will be asked questions about your academic performance, the institution you want to join, the course you choose, the potential scope of your chosen course, and so on. You must be truthful and willing to persuade the bank that you are selecting a stream that has the ability to produce a high income, allowing you to repay the loan.


Step 3: Documentation


For that loan to be approved, you must show the bank that your desired institution has offered an acceptance offer. This is the main document that all banks need, long before the loan application process starts. The bank will contact the university to confirm your enrollment. In most cases, if the education loan crosses a particular amount, you would be expected to have collateral in the form of a third-party guarantee if the loan value is up to an amount prescribed by the bank, and collateral protection equal to 100 per cent of the loan amount along with assignment of the student’s potential profits for payment of instalments if the loan amount exceeds the prescribed limit. 


Step 4: Loan Approval


According to the education loan repayment process, banks provide the loan to the student borrower, and since the student cannot repay the loan before the course is finished, the bank deems parents/guardians to be co-applicants. Before sanctioning the loan, the bank always verifies the credit background of the co-borrower/guarantor. The bank has a moratorium period that is equal to the course period plus one year, and it is optional for borrowers to pay the interest on education loans during this period. The borrowers will obtain a “sanction letter” from the bank after the loan has been authorised. If the borrowers have accepted the terms and conditions of the sanction, the bank will contact them to execute loan documentation and hand over collateral protection papers in original to the bank, as necessary by the terms of the sanction.


Step 5: Loan Disbursement


Loan disbursement is the final phase in the education loan process. Banks usually direct disburse the loan to your desired university through a banker’s cheque, demand draft, or SWIFT message based on the position of the chosen university/institution, as well as the margin if stipulated in the San


Education Loan Documents Required


To apply for an educational loan, you will need to submit the following documents:

  1. Admission letter: A document confirming your admission to the educational institution.
  2. Detailed course fee structure: A breakdown of the fees associated with your chosen course or program.
  3. Loan application form and photographs: A completed application form along with passport-sized photographs.
  4. KYC documents: Know Your Customer (KYC) documents such as identity proof (driving license, passport, Aadhar card, or any other government-approved ID) and residential proof (driving license, passport, electricity bill, telephone bill).
  5. Marksheet of educational qualifications: Copies of your academic records and certificates.
  6. Pan card of student and parent/guardian: Permanent Account Number (PAN) cards for both the student and the parent or guardian.
  7. Bank statements: The last six months’ bank statements for the student, co-applicant, or guarantor.
  8. Statement of assets and liabilities: A document providing an overview of the parent/guardian/co-applicant’s assets and debts.
  9. Proof of income: Documentation showing the income of the parent, guardian, or co-applicant



Interest Rate Of Education Loan


Education loan interest rates are subject to variation across different banks, taking into account factors such as the loan amount, the chosen college or institution, and the specific course of study. Typically, interest rates for educational loans range from 9% to 14%. Moreover, banks often provide concessions to students who secure admission into esteemed institutions like IIT and IIM. As a result, the interest rate on loans for such students may be reduced by up to half a percent, making the loan more affordable.


Key Considerations Before Applying for an Education Loan:


  1. Co-applicants: When applying for an education loan, it’s crucial to remember that the student is the primary borrower. However, if the student is unable to repay the loan, the responsibility falls on the co-applicants, such as parents, spouses, or siblings.
  2. Accreditation: Banks typically provide loans for colleges and courses that are accredited. It’s essential to choose a degree program that can lead to a job with sufficient income to repay the loan.
  3. Repayment Period: Be aware that the repayment period begins as soon as the course is completed. Depending on the loan provider, you may receive a grace period of around six months before the repayment starts.
  4. Additional Charges: Take into account the various charges associated with the loan, such as processing fees, prepayment charges, and late payment charges. These charges can vary from one bank to another, so it’s important to consider them before finalizing the loan.
  5. Tax Benefits: Individuals who take an education loan can avail of benefits under Section 80E of the Income Tax Act. This provision allows for deductions on the loan’s interest. However, these benefits are applicable only to individuals paying loans for themselves, legal guardians, spouses, or children.

Remember to carefully evaluate these factors before applying for an education loan to ensure a well-informed decision that aligns with your financial circumstances and goals.


Eligibility Criteria For Securing Educational Loan


To be eligible for an educational loan, it is important to note that the specific criteria can vary among different banks and financial institutions. However, some common factors for determining eligibility are as follows:

  1. Recognition of Institution: The educational institution that the student is applying to must be recognized and approved by relevant authorities or accrediting bodies.
  2. Acceptance Confirmation: The student must provide documented confirmation of acceptance from the college or university where they intend to pursue their education.
  3. Age Range: The age of the applicant generally falls within a specific range, typically between 16 and 26. However, some banks may extend the upper age limit to 35, depending on their policies.
  4. Academic Performance: Applicants are typically expected to have an excellent academic record, showcasing their commitment to their studies and the potential for success in their chosen field.
  5. Financial Stability: Many lenders require a regular income source from the parent or co-applicant to ensure repayment capacity. This income is usually assessed to determine the ability to repay the loan.


Different Terminologies Used In Education Loan Process


Familiarise yourself with key education loan terminologies to better understand the bank’s terms and conditions and make informed decisions during the loan process.

Education Loan TermsMeaning
PrincipalThe principal refers to the initial amount borrowed by the student to fund their education. It is the total loan amount before interest or fees are added.
Interest Rate:It represents the cost of borrowing the money. The interest rate can be fixed or variable.
Grace PeriodThe grace period is a specified period after graduation or leaving school during which the borrower is not required to make loan payments. It allows them to find employment.
Loan DisbursementLoan disbursement refers to the process of transferring the loan funds from the lender to the educational institution or directly to the borrower.
Loan ConsolidationLoan consolidation is the process of combining multiple education loans into a single loan, often with a new interest rate and repayment terms.


What is NBFC Education loan?


“NBFC” is an acronym that stands for non-banking financial corporation. Essentially, an NBFC provides an alternative to traditional banks when it comes to financing customer needs. NBFCs step forward to support students who are deemed ineligible for education loans by Government banks. A common occurrence arises due to the RBI mandate, which limits Government banks to offer a maximum of 7.5 lacs as unsecured education loans. These loans typically encompass various essential aspects such as tuition fees, living expenses, travel expenses, and other study-related expenditures.

By providing a comprehensive financial package, NBFCs ensure that students are empowered to pursue their dreams without financial limitations. There are a few key differences between banks and NBFCs. One of the main distinctions is that NBFCs borrow money from investors, financial institutions, and banks to lend money to a debtor. They are also subject to fewer regulations and tend to be more flexible when it comes to working with their customers.

Here are the top NBFCs in India:

  • HDFC Credila
  • InCred Student loan
  • Auxilo 
  • Bajaj Finance Limited
  • Mahindra and Mahindra Financial Services Limited
  • HDB Finance Services
  • Tata Capital Education Loan
  • Muthoot Finance Limited
  • Aditya Birla Finance Limited
  • L and T Finance Limited
  • Edelweiss Financial Services Limited
  • Cholamandalam Investment and Finance Company Limited




Even though obtaining an education loan with collateral is easier than obtaining an abroad education loan without collateral, the secured education loan application process is nevertheless lengthy and fraught with obstacles. Banks often deny or postpone loan approval due to a lack of certain documentation. Since this is a person’s first loan, taking an education loan lets you develop a positive credit score. If you repay the loan on time and without any defaults, it would be simpler for you to get a home loan, car loan, and so on in the future.

I hope you like our blog “secured student loan application process”, for more insightful blogs related to education loans for studying abroad, head to our Education Loan Archives.




1. What is the process of sanctioning education loan?

Once a government bank approves an education loan, they issue a sanction letter to the respective student. The student and their co-applicant must then go to their respective bank branches and create a mortgage and sign the education loan agreement.

2. Can I cancel education loan after sanction?

Yes, students can cancel their education loan after it has been approved but before the funds are released, they need to submit a request to their bank.

3. Can we change college after loan sanction?

Yes, you have the option to switch universities and make changes to your loan details even after your education loan has been approved.

4. Is collateral required for education loan?

The RBI sets the maximum study loan amount at Rs.10 lakh for programmes within India and Rs.20 lakh for programmes abroad. Loans up to Rs.4 lakh do not require collateral security, as per the rules.

5. What is a secured education loan?

A secured education loan is a type of loan that requires collateral, such as property or other assets, to be put up as security in case the borrower is unable to repay the loan. These loans are typically offered by banks and financial institutions.

6. What are the steps involved in applying for a secured education loan?

The steps involved in applying for a secured education loan include researching lenders and loan options, preparing documentation such as proof of income and collateral, filling out an application form, submitting the application, and waiting for approval.

7. What factors do lenders consider when approving a secured education loan application?

Lenders consider factors such as the borrower’s credit history, income, collateral, and the loan amount requested when approving a secured education loan application.

8. How much can I borrow with a secured education loan?

The amount that can be borrowed with a secured education loan depends on factors such as the lender’s policies, the borrower’s income and credit history, and the value of the collateral being used to secure the loan.

9. What happens if I am unable to repay my secured education loan?

If a borrower is unable to repay a secured education loan, the lender may seize the collateral that was put up to secure the loan in order to recover their losses. It is important to carefully consider the risks and obligations involved in taking out a secured education loan before applying.


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Secured Education Loan

Steps To Secured Education Loan Application Process

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