An education loan is a huge boon for students looking to pursue higher education in prestigious institutions in India or overseas. With the cost of higher education increasing year-on-year, it's becoming challenging for parents to fund their child's higher education using their savings.

This is where education loans come into play. These loans extend financial support to students to pursue higher education in India or overseas.

Besides college scholarships for deserving students, education loans have emerged as a popular way to secure higher education funds. The process of obtaining education loans in India has been simplified over the years.

Today, families can apply for education loans online and receive the funds quickly, without any hassles.

In India, a large number of banks and NBFCs offer education loans. Students and parents can compare and analyse various education loan products and choose the best deal. 

Long moratorium period

Easy online application 

Tax benefits under Section 80E

Long moratorium period

Flexible repayment terms 

Banks and NBFCs ask for a collateral/third-party guarantee to reduce the risk of the loan. If the student fails to repay the loan, the lender uses the collateral to recover the cost of the loan. Some common collateral securities include property – house, flat, bungalow, a plot of land, or other assets like life insurance, fixed deposit, etc.

According to RBI guidelines, small education loans up to Rs. 4 lakhs do not require collateral. When the loan amount exceeds Rs. 4 lakhs, most lenders require a third-party guarantee, which in most cases, is provided by the parent(s). Besides the guarantee, lenders also require students to submit collateral when the loan is of a higher value.

Loan Amount

Collateral Requirements

Up to Rs. 4 lakhs

No collateral needed.

Rs. 4 lakhs to Rs. 7.5 lakhs

Usually, no collateral is needed but lenders ask for a third-party guarantor.

Above Rs. 7.5 lakhs

Collateral is needed.

Apply for an Education Loan under the CGFSEL Scheme 

The majority of lenders require borrowers to pledge collateral while applying for an education loan over Rs. 4 lakhs. However, when borrowers apply for education loans under the CGFSEL (Credit Guarantee Fund Scheme for Education Loans), they can avail of the loan without providing collateral.

The central government of 1st April 2019 launched the CGFSEL for disbursing education loans to students without collateral. The scheme offers a guarantee to education loans disbursed by the IBA (Indian Banks Association). 

Generally, education loans up to Rs. 4 lakhs do not require collateral. However, loans taken under the CGFSEL offer loans up to Rs. 7.5 lakhs without collateral and a third-party guarantee.