Education Loans- All About Moratorium Period | MoneyMindz

By | 11/06/2018
Education Loan | MoneyMindz

MoneyMindz – India’s First Free Online/On-call Financial Advisory Portal | Education Loan

What Is An Education Loan?

An education loan is a capital acquired from a lender or bank to finance education, either within the country or abroad. often, payments need not be made up to six months after completion of the course.

In simple terms, education loans are loans issued so that the borrower (usually a student or a legal guardian of the student) can ensure the student’s course is completed and no financial hurdles come across.

Nowadays, higher education abroad is becoming an increasingly popular choice and both students and parents dream of a foreign degree. However, the cost of education has always been rising. Hence it becomes necessary to have an education loan. Thus, parents and students look for education loans in banks and financial institutions.

By getting admission in a credible university, your chances of getting an education loan will get higher and easier. If the college or university you are applying to has an approving placement history, your loan will be sanctioned.

An education Loan covers tuition fee, hostel charges, and purchase of equipment and so on. If it’s a case of overseas education loan providers include the price of a return ticket into education loan.


What Is A Moratorium Period?

It is a specific period of loan tenure when the borrower need not repay anything. It is essentially a waiting period before the borrower begins repaying the loan amount or the Equated Monthly Installments (EMI). Usually, when an individual takes a loan, he/she has to start paying EMI from day 1 till the last day of the tenure. However, with a moratorium period, you don’t have to start paying EMI from day 1. You would be given a grace time or a grace period. The moratorium period is usually provided for education loans. Once the borrower, usually the student, completes the course and gets a job, he/she can commence paying EMI.

The interest rates depend on the amount of loan through some institutions charge 8% interest while some charge 13%. The Reserve Bank of India has asked banks to give students a one year grace period or moratorium period so that they can first start earning and then repay the money.

The moratorium feature of education loan makes it preferable compared to personal loans, which in turn don’t have moratorium periods. Students have the option to pay EMI during the moratorium period to help alleviate the interest burden.

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Benefits Of Moratorium Period

Before moratorium period was introduced, banks would expect students to start paying EMI as soon as their courses ended, despite being without jobs yet. This proved to be arduous for students and they had to take up part-time jobs to repay loans.

Moratorium period eliminated this by giving students time off from their liabilities for a year after the course ends and permits them to look for jobs not only to support themselves but also pay off their EMI. Despite this, the interest still accumulates, adding to the burden. Pay the EMI regularly even before the grace period ends, to avoid the interest burden.

Feel free to reach out to Education Loan advice at with any questions. Give a missed call on 022 6211 6588

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