Education Loan Interest Rates
The journey to study abroad comes with lots of challenges. Securing funds for studying abroad remains at the forefront of it. You can fund your abroad education in several ways, such as scholarships, financial aid, grants, education loans, and more.
An education loan is your best bet, as it typically covers all your study expenses. However, the interest rates matter the most when securing a study abroad loan. A higher interest rate states that you’ll pay more in interest, increasing the overall loan amount, while a lower interest rate reduces the overall cost of the loans.
Education Loan Interest Rates Comparison
Interest rate is the amount of the interest due on the loan, aka the money you pay monthly above the principal amount. The interest rates vary by bank, as the interest rate depends on the type of loan, the bank’s policies, the borrower’s credit history, and more. Here’s what Education Loan interest rates for abroad study in India by different lenders look like:
State Bank of India (SBI)
- Interest Rate: 9.65% – 10.15%
- Loan Amount:
- Minimum – INR 20 lakhs
- Maximum – INR 1.5 Crore
Bank of Baroda (BOB)
- Interest Rate: Starting from 9.70%
- Loan Amount:
- INR 150 lakhs for Institutions in the list of Premier Institutions
- INR 60 lakhs for Institutions not on the list of Premier Institutions
Axis Bank
- Interest Rate: 13.70% – 15.20%
- Loan Amount: Starting from INR 50,000
Bank of India
- Interest Rate:
- Floating: RBLR + 1.70% presently 10.85% – 11.05%
- Fixed: 12.20% – 12.40%
- Loan Amount: Up to INR 1.5 crores
Union Bank of India
- Interest Rate: 9.25% – 11.25%
- Loan Amount:
- Minimum – INR 7.50 lakhs
- Maximum – INR 1.5 Crore
ICICI Bank
- Interest Rate: 9.50% – 14.25%
- Loan Amount: Up to INR 3 crores
Bank of Maharashtra
- Interest Rate: 8.10% PA
- Loan Amount: INR 20 lakhs
HDFC Bank
- Interest Rate: 8.64% – 9.55%
- Loan Amount:
- The entire cost of education with collateral
- INR 45 lakhs for unsecured loan
Earnest
- Interest Rate: 4.39% – 16.15%
- Loan Amount: US $200,000
Union Federal
- Interest Rate: 4.43% – 14.04%
- Loan Amount: US $99,999
Sallie Mae
- Interest Rate: 4.50% – 15.49%
- Loan Amount: US $200,000
How is the Interest Rate Calculated on Education Loans?
If you plan to apply for an education loan or have already applied for one, you might wonder how the interest rate is calculated. To understand how the education loan interest rate is calculated, refer to the steps below:
Step 1: Calculate the Daily Interest Rate
Start by taking the annual interest rate on your loan and dividing it by 365 to determine the daily interest rate.
For eg, You owe 50,000 on a loan with 10% of annual interest. Start dividing the same by using the above formula. Divide the 10% rate by 365:
0.10 ÷ 365 = 0.000274
This leaves you with a daily interest rate of 0.000274. To calculate the daily interest rate, multiply the same with your loan amount:
50,000 × 0.000274 = 13.70
Hence, the daily interest rate on your loan is 13.70.
Step 2: Convert the Daily Interest Rate Into a Monthly Amount
Start by multiplying your daily interest amount by the number of days in a month. For a 30-day cycle, the amount of interest you will be paying for the month is
13.70 x 30 = 411
Based on the monthly amount, your total interest rate for the year will be
411 × 12 = 4,932
Key Factors Influencing Education Loan Interest Rates
Various factors influence education loan interest rates for study abroad. Some of these factors are:
|
Factors |
How It Affects Interest Rates |
|
Credit Score |
A higher credit score leads to lower interest rates, while a low score leads to higher interest rates |
|
Type of Interest Rate (Fixed or Variable) |
Fixed interest rates remain constant, while variable interest rates fluctuate based on market conditions |
|
Co-Signer |
A co-signer with a good credit score can lead to lower interest rates |
|
Loan Amount and Repayment Plan |
Larger loans or longer repayment plans may lead to higher interest rates as it may increase risk for the lender |
Frequently Asked Questions
What is the lowest interest rate on Education Loans for studying abroad?
The lowest interest rate for education loans can range from 3% to 8%. However, the lowest interest rate on Education Loans for studying abroad can vary depending on the bank’s policies, loan amount, and more.
What is the Education Loan interest rate?
An Education Loan interest rate is the percentage of the loan charged on the amount for borrowing, which is ultimately added to your monthly payments.
How is the Education Loan interest rate calculated?
Education Loan interest is calculated based on the annual rate divided by 365 to get the daily rate. Multiple that by the loan amount to find the daily interest rate. Then, calculate your monthly and yearly interest rate.
Can my Education Loan interest rate change?
Your Education Loan interest rate can change if you have a variable interest rate. It can change based on the market conditions, while the fixed interest rate remains unchanged.
Do federal Education Loans have interest rates?
Yes, federal Education Loans have fixed interest rates, which the government decides. These rates may vary depending on the type of loan, such as Subsidized, Unsubsidized, PLUS loans, and consolidation loans.
