Discover how to secure an education loan for studying in Canada in this comprehensive guide.
Learn about eligibility criteria, the application process, and the costs covered by student loans in Canada.
Canada and the United States are locked in a fierce rivalry for the top spot as the most sought-after destination for international higher education.
The expenses of studying in Canada, much like any other country, can be influenced by a variety of factors, including the university, course, and length of study, along with the cost of living.
Even though India houses numerous reputable universities, the allure of exotic career prospects and an elevated standard of living draws students to study abroad.
Not all ambitious students, however, have the financial capacity to reside and study in Canada.
Consequently, various banks and financial institutions have risen to the occasion, offering education loans to students yearning to advance their education in Canada.
While multiple financial aids and scholarships are accessible, stiff competition prevents every student from benefiting from them.
This comprehensive guide will walk you through each step of securing a student loan for Canada, from eligibility criteria to the application process, and everything in between.
Additionally, we’ll also fill you in on the different costs that can be covered by a student loan in Canada.
The Roadmap to Securing an Education Loan
Obtaining a loan can be an arduous and time-consuming endeavor.
Therefore, to avoid any eleventh-hour scramble, it’s prudent to kick-start the loan application process early on.
Once students receive their admit letter from the university, they get a clear picture of the total cost involved in living and studying.
This is your moment to take stock of your finances: gauge how much you need to borrow and how much you can pay out of pocket.
Before rushing to fill out a loan application, take a pause to study the market. Identify the institutions that offer the most competitive lending rates.
Consider these key factors while comparing loan offers from different banks:
- Interest rate
- Processing fee
- Expenses covered under the education loan
- Loan processing time
- Prepayment terms and duration
Once you’ve zeroed in on a bank, fill out the application form, and assess the bank’s requirements.
An inability to show sufficient funds may lead to a rejection, thus it’s typically advisable to apply to at least two to three banks for loans.
The Checklist: Documents Required For An Education Loan
With the escalating number of Indian students pursuing studies abroad, the demand for loans has also seen a parallel surge.
Banks undertake a meticulous verification of the information provided by applicants before sanctioning the loan.
Consequently, the applicant needs to furnish a set of documents to the banks.
- Admission letter from university/institution (Proof of admission)
- Loan application form
- Passport size photographs
- Academic documents (certificates and mark sheets)
- Documents of qualifying exams (like GMAT, IELTS)
- Resident proof of the student and the guarantor
- Statements of borrowers’ bank accounts (last year)
- Income proof of the guarantor
Please note: The required documentation may differ according to the bank’s specific rules and regulations.
Therefore, it’s always recommended to cross-check the list of required documents with your chosen bank.
Courses Eligible For Student Loans In Canada
Banks extend financial support to students who aspire to enroll in undergraduate, master’s, or research programs at reputed institutions.
They also fund SPP programs. Nationalized banks generally do not provide education loans for vocational, short-term, or diploma programs.
Being keen on recouping their loaned funds, banks tend tofavor career-oriented courses.
Therefore, understanding which programs are supported by your bank can help you plan your academic future.
What Makes You Eligible To Apply For An Education Loan To Study In Canada?
Before setting foot on the loan application journey, ensure you fulfill the eligibility criteria. All banks take into account the following factors:
- The borrower must be an Indian citizen.
- The applicant must have secured admission in a recognized overseas university or institution.
- The loan applicant must be over the age of 18, or his or her parents must apply for the loan.
- The applicant must have secured admission in a professional course.
The Payback Plan: Repayment of the Education Loan
Repayment kicks off six months after the end of the course or one year, depending on which occurs first, once the student lands a job.
Once repayment starts, the loan must be paid off within a span of 5 to 10 years.
Repayment terms can differ based on the bank’s policies or the terms outlined by the loan scheme.
What Does Your Education Loan Cover?
This is a pivotal factor to consider when applying for an education loan.
As banks offer an array of student loan schemes, it’s a smart move to investigate which program suits your needs best.
Different schemes cover different expenses, so it’s always advisable to consult with the bank about which costs, aside from the tuition fee, are enveloped under the loan scheme.
The loan generally covers the following expenses:
- Tuition fee
- Travel expenses
- Cost of buying books and other study materials
- Laboratory fee
- Hostel fee
- Purchase of a laptop (If required for the course)
- Expenses for project work or study tours
The Safety Net: Collateral Regulation
If the loan amount exceeds INR 7.5 lakh, tangible assets are required as collateral security.
Additionally, all education loans necessitate the involvement of parents as co-borrowers.
Reaping Benefits: Tax Deductions
Section 80E allows for tax deductions on interest paid on the total loan amount.
What’s more, these tax benefits can be claimed for up to seven years once the repayment commences.
Loans are a godsend for talented students who possess the potential to scale great heights in life but are restrained by soaring costs.
However, it’s always advisable to scrutinize the terms of the loan agreement thoroughly.
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When should I start applying for an education loan?
It’s advisable to start your loan application process as soon as you receive your admit letter from the university. This will help you avoid any last-minute rush and provide ample time to evaluate and compare loan offers from different banks.
What documents are required to apply for an education loan?
A set of documents is needed, including an admission letter from the university, loan application form, passport size photographs, academic documents, documents of qualifying exams, resident proof, borrowers’ bank statements, and income proof of the guarantor.
Which courses are eligible for student loans in Canada?
Banks generally provide loans for undergraduate, master’s, or research programs at recognized institutions, including SPP programs. Loans for vocational, short-term, or diploma programs are typically not provided by nationalized banks.
What does an education loan cover?
An education loan generally covers the tuition fee, travel expenses, cost of buying books and other study materials, laboratory fee, hostel fee, purchase of a laptop if required for the course, and expenses for project work or study tours.
What are the tax benefits on education loans?
Under Section 80E of the Income Tax Act, tax deductions can be claimed on theinterest paid on the total loan amount. These tax benefits can be claimed for up to seven years once the repayment commences.