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
| S.No. | Lender | Interest Rate |
|---|---|---|
| 1. | State Bank of India | Starts @ 10.15 % p.a. |
| 2. | Bank of Baroda | Starts @ 9.7% p.a. |
| 3. | Axis | Starts @ 10.5% p.a. |
| 4. | ICICI | Starts @ 10.5% p.a. |
| 5. | HDFC Credila | Starts @ 9.75% p.a. |
| 6. | Avanse | Starts @ 11.0% p.a. |
| 7. | InCred | Starts @ 11.5% p.a. |
| 8. | Auxilo | Starts @ 10.5% p.a. |
Interest rate as in October 2022.
Rates can vary depending on borrower's profile.
Interest rate of secured loans is always lower than unsecured loans.
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
Interest Rate for Secured and Unsecured Loan
| 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 |
| 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 |
| 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 |
| 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 |
| 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 |
| 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. |
| Prodigy Finance |
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 |
|
Our Lending Partners
The total amount you repay monthly is called Equated Monthly Installments (EMI).
EMI = Principal Amount + Interest Amount
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
- A = Compound interest amount
- P = Principal amount
- r = Interest rate per annum
- n = number of times in a year the interest gets compounded
- t = 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.
- Total interest to be paid - 4,97,916
- Total Payment (Principal + Interest) - 14,97,916
- EMI per month - 24,965
- A = P (1 + r/n) nt
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 + Grace Period, 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 loan schemes to pursue abroad education, provided to students belonging to minority communities. (Please note that this scheme has been discontinued by the Government of India.)
- 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 -
The two main abroad education loan products are offered by the State Bank of India and Bank of Baroda -
- SBI’s Global Ed-Vantage Loan - 7.65% for women, 8.80% for men
- BOB’s Baroda Scholar - 7.85% for women, 8.35% for men
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 –
- Axis Bank - Starts at 11.25%
- ICICI Bank - Starts at 11.50%
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 + Grace Period. 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 -
Let’s take a glance at the interest rates offered by leading NBFCs -
- Auxilo - Starts at 12.70%
- Avanse - Starts at 12%
- HDFC Credila - Starts at 11%
- InCred - Starts at 12%
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.