Public sector banks offer education loans at a cheaper rate than private sector ones. Check the processing charges when availing an education loan
It is best to fund yours or your children’s education through your savings. But if you haven’t accumulated enough to meet the cost of your children’s higher studies, then education loans are on offer. Typically, education loans are given for seven to eight years. Banks, non-banking finance firms as well as some online fintech firms offer education loans, though it’s better to stick to banks.
Public sector banks offer the lowest rates
As per data compiled by BankBazaar, public sector banks offer the cheapest education loans. Of the 23 banks’ data that BankBazaar compiled, the 14 of the cheapest rates belong to public sector banks. From Union Bank offering education loans at 6.80 percent, loan rates steadily inch upwards to 7.30 percent, offered by UCO Bank, rounding off the 10 cheapest education loan rates.
The EMI for a Rs 20 lakh education loan from Union Bank, at 6.8 per cent interest, works out to Rs 29,990.
Private sector banks offer education loans too, but at slightly higher rates. HDFC Bank offers education loan at 9.55 percent. ICICI Bank and Axis Bank offer education loans at 11.25 percent and 13.70 percent, respectively.
The interest that you repay as part of your monthly EMI (you also repay a bit of your principal) qualifies you for an income tax deduction under Section 80E of the Income Tax act. Check the processing fee. It varies from bank to bank. Many banks do not charge processing fee if the course is attended in India. But for foreign education, there is a small processing charge.
A note about the tableAll listed banks’ charges are accounted for by BankBazaar. Banks for which data was not available on their websites were not accounted for. The EMI in the table is for a loan amount of Rs 20 lakh. Only the 10 cheapest education loans for a loan amount of Rs 20 lakh and a tenure of seven years have been taken.