Types of Education Loans: Which One Is Right for You?

Post Date:- September 3, 2024

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Table of contents

Understanding the Types of Education Loans

Types of Education Loans

Based on the Classes of Education

Based on the Location of the Institute

Based on the Lender Entity

List of 7 Key Factors for Choosing an Education Loan

Choosing the Right Education Loan

Conclusion

Introduction

Looking to pursue your higher education without any hassles or financial constraints? Be wise enough to look for options to ease your enrollment, so that you can ace your education program with flying colours. An education loan helps you fill your financial requisites needed to achieve your academic aspirations by studying within the country or abroad. However, with many different types of education loans available, you are bound to be confused while choosing the right one. This blog by Qck Loans guides you to choose the right loan that suits your needs.

Understanding the Types of Education Loans

An education loan helps students cover their higher education-related expenses by acting as financial aid to ease their burden. These expenses generally include tuition fees, accommodation and food charges, examination charges, library fees, book and laptop purchase charges, and other miscellaneous costs. As a student, there are many lending entities from where you can avail the most suited from among various types of education loan offered by different financial institutions, like banks, NBFCs, and government-sponsored schemes. Read on to know more about these education loan types.

Types of Education Loans

Students can opt for either an education loan for abroad studies or within the country. It can be broadly differentiated based on criteria such as:

1. Based on Location: Domestic vs. Overseas Education Loans

a. Domestic Education Loans

These loans are offered to students who want to pursue higher education within India. The courses should be from UGC/AICTE/recognized institutions.

Lower loan amounts (usually up to ₹10–₹15 lakhs)
Requires a co-applicant (parent/guardian)
May not require collateral for loans up to ₹7.5 lakhs
Interest rates are generally lower than for overseas education loans

Best For: Students studying in Indian colleges or universities

b. Overseas Education Loans

These are offered for students pursuing education abroad (USA, UK, Canada, Germany, etc.)

Higher loan limits (up to ₹75 lakhs or more)
Collateral or security is usually required for larger amounts
Includes tuition fees, travel, living expenses, and insurance
Requires a strong academic profile or admission to a reputed foreign university

Best For: Students planning to study abroad

2. Based on Security: Secured vs. Unsecured Loans

a. Secured Education Loans (With Collateral)

These loans require the applicant to pledge an asset (property, FD, insurance) as collateral.

Higher loan amounts (up to ₹1 crore and above)
Lower interest rates (starting from 9–10%)
Longer repayment tenure
Faster approval if documents are in order

Best For: Students applying for higher loan amounts and those who can provide property or other assets

Popular Providers: SBI Global Ed-Vantage, Bank of Baroda, Canara Bank

b. Unsecured Education Loans (Without Collateral)

These do not require any collateral but typically require a co-applicant with a stable income.

Loan amounts up to ₹7.5 lakhs (public banks); NBFCs and private banks may offer more
Higher interest rates (11–14%)
Based on student’s academic merit and university profile
Requires co-applicant (parent/guardian)

Best For: Students who don’t have property to pledge or need smaller loan amounts

Popular Providers: HDFC Credila, Axis Bank, ICICI Bank, Prodigy Finance (for abroad), Leap Finance

3. Based on Lender: Government vs. Private Education Loans

a. Government Education Loans

Provided by public sector banks or through schemes backed by the Indian government (like Vidya Lakshmi portal, CSIS subsidy scheme, etc.).

Lower interest rates
Interest subsidy schemes for economically weaker sections
Transparent process
Requires collateral or co-applicant for higher loan amounts

Popular Government Schemes:

Central Sector Interest Subsidy Scheme (CSIS)
Padho Pardesh (discontinued)
Dr. Ambedkar Central Sector Scheme for OBC/EWS students

b. Private Education Loans

Offered by private banks, NBFCs, and international lenders.

Quicker disbursal
More flexible repayment options
May not require collateral for select universities
Higher interest rates compared to public banks

Best For: Students admitted into top-ranking institutions or who need fast approvals

4. Based on Course Type: Undergraduate vs. Postgraduate Loans

a. Undergraduate Education Loans

For students pursuing bachelor’s degrees (B.Tech, B.Com, MBBS, etc.).

Lower loan amounts
Parental co-applicant often mandatory
Eligibility based on 12th-grade performance and entrance exams

b. Postgraduate Education Loans

For higher studies like MS, MBA, M.Tech, etc.

Higher loan amounts
Better chances of approval if admitted to reputed institutions (IITs, IIMs, or top global universities)
Sometimes offers flexible repayment options

5. Specialized Education Loan Options

a. Skill Development Loans

For short-term courses or vocational training (e.g., digital marketing, UI/UX design, technical skills).

Loan amount up to ₹1.5–₹2 lakhs
No collateral required
Lower interest rates
Shorter repayment period

b. Education Loans for Minority/Backward Categories

Offered through government schemes with interest subsidies and relaxed eligibility norms.

CSIS for economically weaker sections
State government scholarships or loans (like Karnataka Minorities Loan Scheme)

List of 7 Key Factors for Choosing an Education Loan

Interest rates comparison
Look for better interest rates when you compare the types of education loan providers and choose the one that suits you with their best deal and matches all your requirements.
Repayment options and tenure:
Check if you have options like EMI and bullet payment so that you have the liberty to choose your repayment method and period to plan accordingly.
Loan amount calculation:
Make a rough initial calculation to ensure the education loan covers all your education and the miscellaneous expenses.
Pre-check eligibility criteria:
Ensure you have the necessary pre-requisites check-marked for whichever lender you are opting, in order to get your education loan disbursed quickly without hassles.
Option of a collateral:
Some types of education loan lenders may require collateral, some may not, and offer unsecure loans. According to your financial conditions, be wise to choose your favourable lender for your education loan for abroad studies or in India.
Transparency in processing fees:
Check for all the details for processing charges before applying for a loan to avoid incurring any type of hidden charges later, midway through the loan process. Compare the processing fees charged by different lenders.
Be informed of penalty charges:
Me mindful of the penalty charges levied for defaulting or making late payments of your loan amount.

Choosing the Right Education Loan

If you are looking for the best among the types of education loan, ensure to check all the criteria which suits best for your situation:

Course and institution:
The course you have chosen along with a reputable institution will determine how easily you will get the loan and also the amount required. The more reputable the course and institution is, the more loan amount you may receive.
Financial profile:
Your family’s income status, bank balance, credit score, and co-applicant's financial standing will majorly influence your eligibility.
Repayment capacity:
Make sure you do not default on making your repayment at any point in time. Based on this, you can choose a lender who gives a higher amount even if it comes with more stringent guidelines.
Interest rates:
Compare the interest rates and go for the ones best suited to you.

Conclusion

Choosing among the types of education loans can become challenging for a student. As it acts as a breather for you as students to pursue their academic aspirations. At times it can turn out to be more of a burden by making blunders such as defaulting payment or paying extra for hidden charges, all because you were not guided properly at the time of applying. To avoid such scenarios, Qck Loans, a leading brand offering education loans for abroad studies mostly, can guide you to choose the ideal option from the education loan packages with us. Visit our website Quick Loan to learn more and apply for an education loan today.

Apply now at Qck Loans.

For any queries related to which types of education loan is better for you, reach out to us at Qck Loans

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