More about Types Of Student Loans
Student loans or Education loans is an investment into a brighter future. But before you apply for a student loan, you should know it's types and how they work and what types can you apply for.
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Personal Finance
- Swati Tripathi
- 2022-12-10
- 03 min read
#education loans
#student loans

What are student loans? How do they work?

Student loans or education loans are a type of loan you borrow money to support your post-secondary or higher education and the related expenses. Broadly, Education loan covers the tuition fee. It also covers books, other study supplies. It also covers any living expenses for student studying far away or in foreign countries. 

Most repayments are deferred while the students are still studying. This depends on the banks /financial institutions. There are lenders that even pins for student loans are different for an additional six months period after earning the degree. This lets the students secure a job to start making the payments. 

Also Read: How Savings Account Helps In Financial Education

Different types of student loans

Students can opt for the different types of student loans in India based on the education curriculum. Some of the standard education loans for students are loans for certificate and diploma courses, loans for skilled-orientated courses, student loans for studying abroad, etc.

Let's see the categorization of these student loans. 

Location-Based Student Loans

  • Domestic Education Loan: If any individual prefers to undertake an educational programme on Indian soil, they can opt for a domestic loan. There are various eligibility criteria for the loan sanction. Once the student gets admission to an Indian institute, the loan is sanctioned. The institute should fit into the lender's requirement. 

  • International Education Loan: Mostly likely, the students who are willing to pursue their education abroad take this type of loan. The loan approval process is similar to the domestic one, and the candidate has to secure a seat in the foreign institute listed by the lending organisation. 

Also Read: How to Instill Financial Discipline in Students

Course-Based Student Loan

  • Undergraduate Education Loan-
    This type of education loan is extended to individuals to pursue a bachelor's degree. The student applying for this loan should have completed or are undergoing their higher secondary education. 

  • Graduate Education Loan-
    Education loans are extended to students who wish to continue obtaining advanced degree. These courses need to be pursued within the country. It is mainly for students who want to have a postgraduate degree or other professional courses. So, to apply for these loans, the applicant should complete their undergraduate degree. 

  • Career Education Loan-
    Many banks and financial institutions offer career education loans that help applicants complete their training and courses. Such courses help them with career development plans or provide job opportunities. So, anyone who intends to attain career-based courses or join trade and technical programmes in colleges of India can apply for this loan. 

    Also Read- Why is Managing Monthly Allowances Important?

Secured Loans Based on Collateral Types

  • Loan Against Property-
    The most common type of secured loan is by pledging any property. This includes immovable assets like residential land, agricultural land, home, flat, etc. 

  • Loan Against Deposit-
    Secured loans are available when we deposit valuable items like fixed / recurring deposit papers or gold. 

  • Loan Against Securities-
    Different securities can be used as collateral to obtain student loan. For example, Bonds, debentures, shares, mutual funds, and others fall in this category. 

  • Third-Party Guarantee-
    In a few cases, a guarantee from a fellow colleague or home bank can also help to fetch secure loans. 

    Also Read: What Is Credit Score And How To Check It

Unsecured Loans For Parents

  • Loans for Parents-
    Every parent wants to give the best education to their children. However, it becomes difficult with the increasing educational expenses. Now, many banks have introduced education loan schemes for parents that help fund almost 100% cost of education. It can be used for various educational purposes including tuition fees, books, etc. 

  • College Parent Loans-
    Such unsecured loans that requires no collateral. Applications need to be signed by both - student and the parent. It primarily supports different expenses like tuitions fees, books, etc.

    Also Read: How to Read an Offer Letter



Q. Can a student expect to get an education loan of 50 lakhs in India?

Definitely, a student can obtain an education loan worth Rs. 50 lakh in India. However the applicant has to pledge some kind of security. There are certain banks and NBFCs which are offering a loan of up to Rs. 40 lakh without any collateral. 

Q. What happens if I can no longer continue making payments for my student loan?

There can be many consequences if you fail to pay your student loan. Your credit scores will fall drastically in an unsecured loan, which stops you from getting any future loans and credit cards. For secured loans, you will lose your pledged property. 

Q. Name the best student loans meant for education purpose?

Some of the best students loan meant for education purposes in India are HDFC Bank Education Loan, Axis Bank Education Loan, Union Bank of India Education Loan, IDBI Bank Education Loan, and Avanse Education Loan. 

Also Read: Why is Financial Literacy Important for Students?



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