How to Get an Education Loan at Lowest Interest Rates in 2025

The cost of higher education is rising every year. Whether you want to study in India or abroad, the fees and living expenses can go beyond your budget. In such cases, an education loan becomes a reliable support. However, repaying a student loan can become stressful if the education loan interest rate is too high. That’s why it is important to learn how to get the best loan terms. This article explains how students and parents can get loans at the lowest possible interest rates in 2025.

Why Interest Rates Matter?

The Education Loan Interest Rate is the extra amount you pay along with the borrowed money. A lower interest rate means lower monthly payments and less burden in the future. Even a small reduction in the rate can help you save thousands over the entire loan period.

Let’s say your loan amount is ₹10 lakhs. If your interest rate is 12% instead of 14%, you can save over ₹1.5 lakhs in interest over 7 years. 

How Education Loans Work?

An education loan finance helps cover your tuition fees, books, hostel charges, travel, and other education-related costs. Most banks and NBFCs offer loans to students who have secured admission in recognised institutions.

The loan amount is given either directly to the college or to the student. Repayment usually starts after the course ends, with a small grace period.

Secured vs. Unsecured Loans

Education loans are of two types:

• Secured loans: They require collateral such as property or fixed deposits. These usually come with a lower education loan interest rate.
  
  
• Unsecured loans: They do not need any security. These are given based on the student’s academic record and the co-applicant’s financial background. Interest rates are generally higher for unsecured loans.

If you can pledge security, it is better to go for a secured loan to save on interest.

Steps to Get the Lowest Interest Rate

1. Build a Strong Profile

A good academic record and admission into a top university or course can help lower the interest rate. Lenders believe that students from reputed institutes have better job prospects and are more likely to repay on time.

2. Apply with a Co-Applicant

Most lenders ask for a co-applicant, like a parent or guardian. If the co-applicant has a stable income and a good credit score, you will get better terms. A strong financial background increases your chance of securing a lower rate.

3. Compare Lenders

Never settle for the first loan offer. Check the interest rates, processing fees, and terms offered by different banks and NBFCs. Use online tools to compare EMIs and total repayment amounts. Some public sector banks may offer lower rates than private ones.

4. Choose a Secured Loan if Possible

If your family owns property or has a fixed deposit, use it to secure the loan. Collateral reduces the risk for lenders, and they reward this by offering a better education loan interest rate.

5. Use Government Schemes

The Indian government has introduced several schemes, like the Credit Guarantee Fund for Education Loans (CGFSEL) and interest subsidies. These programs support low-income families and offer interest benefits. Ask your bank if you qualify for any such schemes.

6. Negotiate the Rate

If you have received admission into a top university or have multiple loan offers, use that to your advantage. You can ask your bank for a better rate by showing them competing offers or highlighting your financial profile.

Online Student Loan: A Smart Option

If you are looking for fast and flexible Education Loan Finance, Trusted lenders like Varthana offer customised student loans. You can get up to ₹5 Lakh without any collateral. The loan covers 100% of your tuition and related expenses.

Approval is typically granted within 24 hours after the documents are collected. Disbursement is done within 72 hours. Even students from families earning ₹10,000 a month can apply. The entire process is simple and can be done online.

Required Documents

Prepare the following documents before applying:

• Fill out the application form with your photo
• Proof of age, like a birth certificate, school leaving certificate
• Identity and address proof that includes Aadhaar, PAN, Voter ID, etc.
• Admission letter from the institute
• Academic certificates
• Income proof of co-applicant, like a bank statement, salary slip, or ITR

Having all documents ready helps avoid delays and increases the chances of fast approval.

Tax Benefits on Education Loan

Under Section 80E of the Income Tax Act, you can claim a tax deduction on the interest paid on the education loan. This benefit is available for up to 8 years from the date of repayment initiation. The entire interest amount can be deducted from your taxable income. However, the principal amount does not qualify for tax relief.

Conclusion

Getting an education loan finance with a low interest rate is possible with the right planning. Focus on building a strong academic profile, apply with a reliable co-applicant, and compare offers from multiple lenders. If you are eligible for a government scheme, take full advantage of it.

With a smart borrowing approach, you can study in your dream college and repay the loan comfortably after graduation. A low interest rate not only reduces stress but also helps you start your career on a stronger financial footing.