Interest rates on Education Loan: Decoding the enigma

A student loan is a great way to fulfil academic aspirations. It gives you the opportunity to fund your own education. However, before you apply for an education loan, it is necessary that you conduct a thorough research about interest rates, secured, unsecured loans and so on. This article will shed light on some of the important aspects of interest rates of education loans.

Should you shortlist education loan providers based on interest rates?

Selecting an education loan provider based only on interest rates is not the best way to do it. Imagine this, you select a lender because you are promised the lowest interest rates in the market, but you eventually realize hidden costs and exorbitant fees that were never revealed to you. It will be a frustrating experience. Hence, we always suggest our student community consider other aspects of the education loan, too and ask as many questions as you can to get crystal clear clarity. This will help you understand the process better and, thus make an informed decision.

Research about the benefits you would receive if the education loan provider will offer secured/unsecured loans as per your preference, the margin money and so on. Also, find out if your education loan covers the holistic cost of education, which includes tuition fees, living expenses, equipment costs and all other education-related expenses. If you are planning to study abroad, ensure it covers your travel expenses as well.

How is the interest rate calculated for an education loan?

The interest rate has two components – base rate and spread rate. The base rate is pre-determined by the financial institutions and will vary depending on the lender. The second component is floating in nature. This component can change as per market changes. This is also known as variable interest rate, as it can vary over the duration of the loan tenure.

Will the education loan interest rate be the same throughout the course period?

The fixed component of the interest rate might be the same throughout. But students or borrowers need to consider the floating component of the interest rate too. The variable part may change during the loan period. This means that your education loan interest rate can go up or come down. Therefore, they could vary because they are dependent on the external economic conditions and internal company policies.

What are the factors that will be considered for student profiling?

The financial institutions will analyse these elements before giving you an education loan.

  • Academic scores
  • Entrance exam scores
  • Consistency of academic scores
  • Continuity in studies
  • Educational institutions
  • Educational background (course)
  • Chosen study abroad destination (for overseas students)
  • Selected course
  • Selected university and so on

EMI calculators make life simpler

Interest rate is an extremely crucial component to figure out your Equated Monthly Instalments (EMI). To get an estimate of this number before applying for an education loan, you can use an education loan EMI calculator. It is a simple online tool that offers a convenient walk around the mental math required to calculate the EMI of your loan. It is like a normal calculator, but just online. You need to fill in some simple details about your loan and hit the submit button. Within a fraction of a second, you should have the indicative EMI amount of your loan on the screen before you. The three vital stats that you need to feed in are – loan amount you plan to borrow, interest rate and tenure of the loan.

We hope this information helps you make smart decisions. You can fulfil your academic aspiration by opting for an education loan for higher studies. We at Avanse are committed to providing seamless and affordable education financing solutions. If you have any doubt or queries, please feel free to share with us. We will be happy to assist you.


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