Education Loan Interest Rate

Lowest Interest Rate Student Loan Options For Abroad Studies

Interest rate is the amount of money charged on the principal loan amount by a lender. If you borrow money from someone, you will have to pay some monthly amount over and above the principal amount. In simple terms, it is the cost of borrowing money from a bank or other financial institution. In abroad education loans, even a slight variation in interest rate per annum can make a significant difference in the total amount repaid!


Compare Abroad Student Loan Interest Rate

Abroad Education Loan Interest Rate in 2021

S.No. Lender Interest Rate
1. State Bank of India Starts @ 7.65 % p.a.
2. Bank of Baroda Starts @ 7.75% p.a.
3. Axis Starts @ 11.25% p.a.
4. ICICI Starts @ 11.5% p.a.
5. HDFC Credila Starts @ 11.0% p.a.
6. Avanse Starts @ 11.75% p.a.
7. InCred Starts @ 11.75% p.a.
8. Auxilo Starts @ 12.7% p.a.

Interest rate as in June 2021.

Rates can vary depending on borrower's profile.

Interest rate of secured loans is always lower than unsecured loans.

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Education Loan Interest Rate
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Types of Interest Rates

What are the different types of interest rates?

 

Floating Interest Rate

  • Can increase or decrease during the loan tenure.
  • Change depends on the market conditions.
  • Public sector banks offer less volatile interest rates.

Fixed Interest Rate

  • Stays the same throughout the loan tenure.
  • The EMIs remain the same as well.
  • The certainty element makes it easy for a borrower to budget.

Education Loan EMI Calculator

I want to borrow at

a rate of % over year(s)

My course is month(s) long

Total Interest to be paid

0

Total Payment Principal + Interest

0

Your EMI per month will be

0

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Public-Sector Banks
State Bank of India 8.65% per annum, with additional 0.50% concession for girl students, and additional 0.5% for Rinn Raksha credit life insurance or similar policyholders.
Bank of Baroda Listed Universities: 8.25% per annum for boys, 7.75% for girls, Unlisted Universities: 8.9% for boys, 8.4% for girls. Interest rates are linked to MCLR
Private-Sector Banks
Axis Bank Starts at around 11% per annum. The exact interest rate depends upon the applicant’s profile
ICICI Bank Starting at 10.50 % per annum. The exact interest rate depends upon the applicant’s profile
NBFCs
HDFC Credila Starts at around 11% per annum. The exact interest rate depends upon the applicant’s profile
Avanse Starts at around 12.65% per annum. The exact interest rate depends upon the applicant’s profile
InCred Starts at around 11.75% per annum. The exact interest rate depends upon the applicant’s profile
Auxilo Starts at around 12.70% per annum. The exact interest rate depends upon the applicant’s profile
Public-Sector Banks
State Bank of India Doesn’t provide unsecured loan above INR 7.5 Lakhs
Bank of Baroda Doesn’t provide unsecured loan above INR 7.5 Lakhs
Private-Sector Banks
Axis Bank Starts at around 11% per annum. The exact interest rate depends upon the applicant’s profile
ICICI Bank Starting at 10.75% per annum. The exact interest rate depends upon the applicant’s profile
NBFCs
HDFC Credila 11% to 12.5%.
Avanse 11.75% to 16% per annum.
InCred Up to Rs.10 lakh: 12.75% - 16% p.a., Above Rs.10 lakh: 11.75% - 16% p.a.
Auxilo 12.70% p.a -18% p.a.
International Lenders
Prodigy Finance
  1. Ranges from 6.7% to 11%
  2. The average is 8.4%.
  3. The exact rate is linked to a benchmark rate (US 3 month LIBOR) and depends on your profile.

    APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the loan

MPOWER Financing
  1. For Graduate Courses- 11.99% (APR - 12.94 percent)
  2. For Undergraduate Courses- 13.99% (APR - 14.98 percent)
    • 0.50% discount will be offered if the students opt for the EMI autopay method.
    • 0.50% discount will be offered on 6 consecutive autopay payments.
    • 0.50% discount on presenting graduation and proof of employment.


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The total amount you repay monthly is called Equated Monthly Installments (EMI).
EMI = Principal Amount + Interest Amount

There are two ways to calculate an interest rate –

  • Simple Interest
    • Simple Interest = Principal Amount x Rate of Interest x Time/100

    For Example - you borrow INR 50,000 for 1 year at a 5% interest rate, then according to the formula, you owe INR 2500 as interest. When repaying the borrowed amount, you will have to make an extra payment of INR 2500 as a fee.

  • Compound Interest
    • A = P (1 + r/n) ^ nt

      Here, A denotes the compound interest amount, P is the principal amount, r is the interest rate per annum, n is the number of times in a year the interest gets compounded, and t stands for the number of years.

      For example, you borrowed INR 10 lakhs at an interest rate of 10% for 5 years. The total interest on this amount is INR 4,97,916.

      1. Total interest to be paid - 4,97,916
      2. Total Payment (Principal + Interest) - 14,97,916
      3. EMI per month - 24,965

In an education loan, the interest charged is a combination of both. During the study period, simple interest is charged, and after, compound interest is charged.

The interest on an education loan starts as soon as the amount is disbursed to the applicant’s account. During the study period, most lenders charge simple interest. After the study period + 6 months end, compound interest is charged.
Yes, it can be. Excited to know how? Well, there are various subsidies offered by the government to reduce the financial burden on students. A few of them are - Padho Pardesh, Dr. Ambedkar Central Sector Scheme, and Central Sector Interest Subsidy Scheme.
  • Padho Pardesh - Interest subsidy on education loans schemes to pursue abroad education, provided to students belonging to minority communities.
  • Dr. Ambedkar Central Sector Scheme - It is an interest subsidy scheme for abroad educational loans provided to promote the foreign education of Other Backward Classes and Economically Weaker Classes.
  • Central Sector Interest Subsidy - It is an interest subsidy scheme for economically weaker sections. If the family income is not more than INR 4.5 lakhs, the student can avail of the interest subsidy.
The subsidy can be availed by contacting the concerned bank/lender. You will have to submit an application and certain documents such as an Original Income Certificate, Interest Subsidy Agreement, Student Letter issued by the Institute, Self-declaration, and some additional documents.
We, at GyanDhan, always prefer public banks for abroad education loans. There are quite many benefits that a student can avail to further lower their financial strain. Apart from these benefits, public banks also offer lower interest rates, charge lesser processing fees, and offer better terms and conditions. Public banks also offer a moratorium period - a period during which the borrower has to make no repayments. Surely, simple interest is charged on the disbursed amount but is added to the principal amount and distributed equally among the EMIs. After the moratorium period ends, compound interest is charged.
The two main abroad education loan products are offered by the State Bank of India and Bank of Baroda -
There are several private banks in the market offering both types of abroad education loans - Secured education loans and unsecured education loans. We always advise students to take secured education loans from public sector banks only because of the benefits that they carry. Unfortunately, public banks do not offer unsecured education loans above INR 7.5 lakhs, which won’t be enough to fund education in a foreign country. The simplest solution is to take an unsecured education loan from a private bank. Let’s look at two main private banks offering unsecured education loans –
A foreign education loan from NBFCs might be heavy on your pocket because the rate of interest offered is a little higher compared to other lenders. Additionally, students have to make simple interest payments during the study period, meaning they need a co-applicant to apply for these loans. The EMIs will start after the study period + 6 months are over. There are several benefits of taking an education loan from an NBFC as well.
Let’s take a glance at the interest rates offered by leading NBFCs -
With the help of the above tables, you’d be able to conclude that public banks offer the lowest interest rates. As an applicant, you will have to pledge collateral to apply for a loan from government banks. But what if you don’t have collateral to pledge? Then, private banks are your next best bet.


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