Education loan eligibility – Know the factors affecting it

Education loans are the ideal way to fund higher education in India or abroad. They –

1. Provide hassle-free funding
2. Give you the desired funds
3. Help you afford quality education from premier institutes
4. Do not create a burden or put a dent in your financial savings

Plus, the flexible repayment tenures, availability of collateral-free loans, and easy sanctions make education loans popular.

But is everyone eligible for the loan?

Not necessarily. There is a set of eligibility criteria that you must fulfil to qualify for the loan. Moreover, various factors affect education loan eligibility. Let’s understand the education loan criteria and the factors affecting them.

Who is eligible for an education loan?
 

Parents or students, both resident and Non-Resident Indians (NRIs), can take an education loan. The applicant should –

1. Be within a specified age bracket, which usually starts from 18 years and can go up to 60 or 65 years
2. Have a stable source of income to repay the loan. If students apply for the loan, the parent’s source of income is considered
3. Have a good credit score, which is 700 or above
4. Have admission to the desired institution under the desired course. In some cases, the loan is granted even when you have not secured the admission. However, in such cases, there are specific conditions attached to the loan

Factors affecting education loan eligibility
 

Now that you know the common education loan criteria, check out the factors that affect eligibility –

1. Age
 

Your age is an important eligibility parameter for the loan. Besides determining eligibility, your age also impacts the repayment tenure. If you are young, you can opt for a long-term repayment tenure to make EMIs affordable. This improves your repayment capacity and allows quick loan approvals.

2. Academic history
 

Lenders assess your academic history when they sanction an education loan. You are considered a favourable applicant if you have been a meritorious student with a proven track record. With easy sanctions, you might become eligible for a higher loan amount.

3. Institution and course selected

Lenders prefer premier institutions that offer lucrative job opportunities in the future. Moreover, they prefer accredited institutes with a good reputation.

The course selected also impacts your eligibility. Popular courses, with increased chances of jobs, are preferred and given priority during loan sanctions.

4. Details of the co-applicant or guarantor
 

Education loans usually require a parent or guardian to act as the co-applicant or guarantor for the loan. The co-applicant or guarantor is equally responsible for loan repayment, which is why their details also affect your eligibility.

Co-applicants or guarantors with a steady income source, high-income level, and financial stability are preferred. The higher the co-applicant’s income, the better your eligibility will be.

5. Credit score
 

The credit score depicts your repayment capacity and creditworthiness. A high score is favourable as it improves the eligibility for the loan.

Lenders check the credit score of the student and/or the co-applicant. The higher the credit score, the faster the loan approval will be. Moreover, you can get preferential interest rates and higher loan amounts, too.

6. Type of loan
 

Education loans can be secured and unsecured. Unsecured loans do not require any collateral security, while secured loans do.

If you choose secured loans, you must mortgage a security in favour of the lender, and your eligibility would depend on the value of the security. In the case of unsecured loans, the eligibility depends on your or the co-applicant’s financial standing and income.

Secured loans can easily provide adequate funding compared to unsecured loans, which depend on your income and repayment capacity.

7. Loan amount
 

The ticket size of the loan sought also affects eligibility. Low to mid-sized loans are sanctioned more easily than high-value loans, which require proper scrutiny and assessment of repayment capacity.

8. Documentation
 

Lenders specify a list of documents required for education loans. Complete documentation with proper self-attestation can speed up the sanction process, while missing or incomplete documents can cause a delay.

9. Loan repayment capacity
 

Lenders judge the repayment capacity of borrowers and co-applicants. This assessment considers the details of existing debts, credit score, requested loan amount, and income level. Applicants or co-applicants with limited debts, high credit scores, and good income levels can get quick loan approvals.

Tips to improve education loan eligibility
 

You can optimise the abovementioned factors and improve your education loan eligibility for quicker sanctions. Some of the ways to do so are as follows –

1. Maintain a good track record of academic performance
2. Pay your bills and debts on time to maintain a high credit score
3. Choose a co-applicant who has a stable occupation with a high-income level
4. Keep existing debts minimal
5. Seek admission to a reputed college and an accredited course
6. Take up a part-time job to enhance your repayment capacity
7. Look for scholarships or grants so that the loan requirement is reduced
8. Try and pledge collateral security and opt for secured loans, which are sanctioned faster

How to evaluate your education loan eligibility? (Illustration idea)
 

Before understanding how to get a student loan, check and evaluate your eligibility. This will give you an idea of your maximum loan amount.

Here are the steps by which you can evaluate your eligibility –

Step 1 – Compare and choose a lender offering the loan at the best terms

Step 2 – Check the eligibility criteria specified by the lender

Step 3 – Choose a co-applicant or guarantor for the loan

Step 4 – Use the online education loan eligibility calculator to assess your eligibility

Step 5 – Enter the following details to find your customised loan offer –

– Your age

– Past academic performance

– Institute to which you are seeking admission

– Type of course selected

– Details of the co-applicant – name, relationship, age, occupation, income level, and credit score

– Loan amount

– Type of loan – secured or unsecured

– Repayment tenure

Step 6 – Calculate your loan eligibility using the calculator. You can also change the details entered, like the co-applicant and income level, course, etc., to update your eligibility.

Get easy funding with IDFC FIRST Bank Education Loans
 

For hassle-free loans with simple eligibility parameters, choose IDFC FIRST Bank Education Loans. It offers –

1. Competitive interest rates
2. Loan amount of up to ₹1.5 crore with collateral
3. Collateral-free funds of up to 75 lakhs
4. Faster sanctions with a seamless application process
5. Funding for 35,000+ courses across 4500+ institutes
6. Flexible repayment tenure of up to 15 years
7. Customised solutions depending on your needs