What is a merit-based education loan?

Worried you don’t have a good credit history to get an education loan for your children? With the increasing cost of higher education, it has become very difficult for students to pursue further education.

Most financial institutions like banks assess a loan application on the basis of creditworthiness. Students don’t usually have a decent credit score making it difficult to get loans for higher education.  

For students who are good at academics, this is where merit-based education loans come in. This new type of education loan program evaluates the students’ profile and potential based on their academics or merits so that loans could be given on their future earning potential rather than their credit history. 

The main purpose of education loans is to ensure that every student who wants to pursue higher education gets the opportunity to study and develop a sound career.  

The merit-based education loans are easy to get once your profile qualifies for the loan and are solely given on the basis of a student’s merit and profile. These loans can be obtained digitally.

Who is eligible for the merit-based loan program？ 

The eligibility for merit-based loans solely depends on the student’s academics and merits. To be eligible for these loans, the student must be excellent in their academics and merit.

This would be evaluated by their individual profile. The loan would be approved once the academic excellence is established. 

Eligibility criteria:  

• The applicant should be a resident of India who has secured admission to renowned colleges or universities in India and abroad.   
• The candidate should be within the range of 18 to 35 years at the time of taking the loan.  
• The applicant must be pursuing a graduate or postgraduate degree and a PG diploma.  
• He/she must have a confirmed admission in a college/university recognized by UGC/Govt./AICTE etc.  
• Candidates applying for full-time courses must have a co-applicant who can be the parent/guardian/spouse/parent-in-law (if married). 

Which courses are this loan program applicable to? 

• Undergraduate Degrees and Diplomas (BA, BCom, BE, BEd, BSc, BBA, MBBS, B Tech, LLB. 
• Postgraduate Degrees and Diplomas (MA, M Com, MSc, M Res, LLM, MFA, M Ed, M Phil, MBA, MD, and others) 
• Ph.D. courses/Miscellaneous Doctoral Programmes. 
• Specialized Training Courses. 

Furthermore, the lender will determine which courses are qualified for merit-based loans.  

How does extending loans based on merit work? 

• Merit-based loans are given after examining a student’s potential via the Employment Predictability Model which is an Artificial intelligence (AI) that examines the merits and academics of a student to test for their soft and hard skills so as to assess the student’s employability in the future which will help the AI to decide if your profile is fit for a merit-based loan. 
• The assessment then predicts the future income of the students. 
• Then loans are sanctioned on the basis of your future employability score. 

What are the documents required to apply for merit-based education loans?  

• Properly filled Loan Application Form  
• Letter of admission  
• Copy of 10th/12th mark sheet or latest education certificate  
• Statement of cost of study  
• 2 passport-size photographs  
• PAN card and Aadhaar Card of the student and Parent/ Guardian  
• Driving License/Voter ID/Passport/Aadhaar Card (Copy of any one)  
• 6 months bank account statement of the student or guarantor or co-borrower/Rental agreement/Ration card/Electricity Bill/Tel Bill/Gas Book (Copy of any one of these)  

Income proof  

• Latest salary slips or Form 16 of the parent/ guardian/ co-borrower  
•  Last 6 months’ bank statement or updated bank passbook  
•  Updated 2 years ITR (Income Tax Return with income computation) or Last 2 years IT assessment order of parent/guardian/co-borrower  
•  Statement of the assets and liabilities of the parent/guardian/co-borrower 

Is a merit-based loan right for you? 

• Students who want to pursue higher education & require financial support can apply for the merit-based loan program.  

• The loan program overlooks your family income and credit score and gives loans solely on the basis of the applicant’s merit.  

• Students who do not want to bother their parents for finance can seek a merit-based loan program for their higher education. 

Top Indian Banks that offer merit-based education loans 

• State Bank of India 
• HDFC Bank 
• Axis Bank 
• Canara Bank 
• SBBJ 
• Union Bank 
• UCO Bank 
• Bank of Baroda 
• Punjab National Bank 
• Non-Banking Finance Company (NBFC) 

Merit-based loan interest rates in 2022

State bank of India	6.85% p.a. to 8.65% p.a
HDFC Bank	9.55% p.a. – 13.25% p.a
Canara Bank	8.75% p.a. to 9.25% p.a
Union Bank of India	6.80% p.a. to 10.05% p.a
UCO Bank	7.30% p.a. to 9.70% p.a
Bank of Baroda	7.60% p.a. to 9.70% p.a
Punjab National Bank	6.90% p.a. to 9.55% p.a
Axis Bank	13.70% p.a. – 15.20% p.a

Merit-based loan EMI calculator  

It is necessary to be aware of how much money you would have to repay once they acquire the merit-based loan.

For this purpose, you can use Edufund to figure out the cost of repayment, how much your monthly payments would be, and how much the total cost of the loan would be.

Enter a few loan-related factors such as the loan amount, tenure, interest rate, and processing costs to get an estimate of your equivalent monthly installment (EMI).  

Need help finding the best education loans for your child’s higher education? Look no further, click here now to get started!