2 Easiest Ways to Get Personal Loan for Students in India
In India, strict rules are applied especially when personal loan application is received by any financial institution offering loan. Every application undergoes through a detailed evaluation based on which the loan is either rejected or approved. Applicant’s professional qualification also plays a key role. That is, whether applicant is a working professional, self employed or student.
This article discusses in detail about personal loan for students in India. Student will typically need money for expenses incurred during studies, pay fees for coaching classes, buying computer, etc.
Students can be categorized into following three groups:
- Earning Student: These days students at young age in college start earning money. Either they start their own company or become self employed at a young age by doing freelancing or developing their own software applications or become writer, etc. But inconsistent income becomes a hurdle for them when applying for a personal loan. This is because, banks ask for income proof or form-16, etc. to validate the income. And based on the income and other factors they approve or reject the loan application.
- Not Earning: This is another category of students, who are not not earning money.
- Already taken credit: Students who have already taken education loan or any other type of credit will always find it difficult to get personal loan. Because they start repayment after the education is over and they start earning. So banks do not have any way to evaluate their credit worthiness.
All the above category of students have poor or no credit score, which is another reason for personal loan rejection.
So how can students in India get personal loan?
There are two very easy ways for students to get personal loan:
- Personal Loan against Fixed Deposit
- Joint Personal Loan
Against Fixed Deposit
This is most easy option especially for students falling into category-1 above. This type of personal loan requires individual to have fixed deposit account with minimum amount. They can then take loan against this FD. Since student is earning, it is assumed they have some kind of account with the bank. Suppose they have saving account, they can create FD account and deposit some amount into it. They can then take personal loan against FD. Banks never ask for income and related documents, neither they take credit history into consideration. Listed below are the banks offering loan against term deposit.
Here’s a table showing list of banks offering loan against fixed including to students.
|Financial Institution||Max. Loan Amount Offered i.e. % of FD Amount||Interest Rate|
|Citibank India||Up to 90%||2% above FD rate|
|United Bank of India||Up to 90%||1% above FD rate|
|State Bank of India||Up to 90%||1% above FD rate|
|HDFC Bank||Up to 90%||2% above FD rate|
|Bajaj Finserv||Up to 90%||2% above FD rate|
|Bajaj Finserv||Up to 60%||2% above FD rate|
|Axis Bank||Up to 85%||2% above FD rate|
|Federal Bank||Up to 90%||2% above FD rate|
|ICICI Bank||Up to 90%||2% above FD rate|
|Deutsche Bank||Up to 90%||2% above FD rate|
|Karur Vysya Bank||Up to 90%||2% above FD rate|
|Mahindra Finance||60% to 75%||2% above FD rate|
|Dena Bank||up to 85% to 90%||2% above FD rate|
|Central Bank of India||Up to 90%||2% above FD rate|
|IIFL Holdings Limited||Up to 90%||2%-3% above FD rate|
|Diwan Housing Finance Limited||Up to 75%||2% above FD rate|
|Abhyudaya Bank||Up to 90%||1% above FD rate|
|Canara Bank||Up to 90%||2% above FD rate|
Very few financial institutions in India offer joint personal loan. Typically joint application makes sense when someone wants to increase their chances of loan approval by furnishing income of both the applicants’. However joint personal loan with student can be difficult but not impossible. If co-applicant is earning handsome income then chances of application rejection reduces. However every bank has their own norms when approving any application.
Note: The minimum age limit to avail personal loan in India is 18 years with most of the banks.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).