Education Loan at Zero Interest Rate?

Education Loans with Zero Interest

Education forms the foundation for personal and professional growth.

Pursuing education often requires adequate financial resources to fund the related expenses.

To make pursuing education easier, education loans are one of the ideal options to fund the educational expenses.

These loans provide financial assistance to many aspiring students who otherwise might have abandoned their dreams due to financial constraints.

However, these loans come with interest costs.

This leads many to wonder if it’s possible to obtain an education loan with zero interest.

Here are more details regarding education loans at zero interest rate.

Can I Get an Education Loan without Interest?

No, it’s not possible to obtain an education loan without interest.

Student loans, like any other credit product, accrue interest charged by banks or lenders.

Education loans do offer certain advantages.

One advantage is a moratorium period that lasts until the completion of the studies.

Only simple interest is applied to the loan amount during this moratorium.

Candidates are only required to pay the interest during this period.

This allows students to focus on their education without the immediate pressure of repaying the principal.

This eases the financial burden temporarily.

Which Bank Gives Interest-Free Education Loans?

In India, there are many banks and NBFCs (Non-bank Financial Companies) that offer various educational loan schemes.

No banks offer educational loans at zero rate of interest.

Here is the list of banks that offer educational loans.

State Bank of India

Loan amount – Up to Rs.1.50 Crore.

Interest Rates – Range from 8.15% to 11.75%.


Loan amount – Up to Rs.150 Lakh.

Interest Rates – 9.50% onwards.


Loan amount – Up to Rs.2 Crore (international courses).

Interest Rates – 10.25% onwards.

Axis Bank

Loan amount – Up to Rs.75 Lakh.

Interest Rates – Range from 13.70% to 15.20%.

IDFC First Bank

Loan amount – Up to Rs.75 Lakh.

Interest Rates – Range from 10% to 15%.


Loan amount – Rs.1 Lakh onwards.

Interest Rates – 14.25% onwards (effective from 1 May 2023).

HDFC Credila

Loan amount – Depends on your requirement.

Interest Rates – Credila Benchmark Lending (13.80% current) Rate + Depends on various factors such as your credit profile, collateral offered, the course undertaken, etc.


Loan amount – Up to Rs.1.50 crore.

Interest Rates – 9.80% onwards.

Why are Education Loans at Zero Interest Not Available?

The following are the reasons why interest-free education loans are not available in India.

Providing zero-interest education loans would place a significant financial strain on lending institutions.

Operating costs such as administrative expenses, loan processing, and overheads would not be covered.

This could potentially lead to losses or a reduction in available funds for other borrowers.

Governments often subsidize education loans to make them affordable.

Offering 0% interest loans would heavily burden government finances.

This is especially true in countries with large student populations.

This would require substantial budget allocations.

It would affect other governmental responsibilities.

Education loans help build borrowers’ credit history, especially for first-time borrowers.

Repaying loans with interest demonstrates financial responsibility.

This positively influences credit scores.

Zero-interest loans might reduce the incentive for timely repayments.

This could negatively affect credit histories and hinder future credit access for purposes like home buying or starting a business.

Advantages of Interest-Free Loans in India

The following is the list of key advantages of interest-free loans in India.

They reduce the financial burden and overall loan cost.

This makes it more manageable for students.

They offer ease with lower monthly repayments.

This helps students handle their financial obligations better.

They provide affordable responsibilities compared to interest-bearing loans.

They promote inclusivity by offering equal opportunities to students from diverse backgrounds.

They bridge the societal gap between different sections of society.

They encourage students to pursue education without the fear of debt accumulation.

They allow students to choose their desired professional paths without financial constraints.

Government initiatives, low-interest loans from banks, and other institutions emphasize the value of education.

They impact positively on economic outcomes for youth.

They demonstrate a commitment to investing in the country’s youth.

Eligibility for Interest-Free Loans

The following is the list of eligibility criteria to avail of interest-free education loans.

Any Indian citizen can apply for an education loan.

The typical age range for applicants is 18 to 30-35 years.

Applicants must secure admission to recognized institutes in India.

Necessary documents must be provided for processing the interest-free education loan.

Eligibility and requirements may vary depending on the institute, scheme, and provider.

Understanding these variations and creating a checklist can ensure smoother loan processing.

How to Get an Education Loan at Zero Interest in India?

It is not possible to get a zero-interest educational loan in India.

However, the educational loan can be availed by keeping in mind the following points.

A high credit score is crucial for obtaining an education loan.

It demonstrates your creditworthiness and can help secure lower interest rates.

Choose secured education loans for reputed institutes.

This provides security for both parties and cost-effectiveness.

Aim for admission to renowned institutions to leverage better loan options and opportunities.

Stay informed about government and institutional schemes, scholarships, and initiatives for various student categories to access the best opportunities.

Paying a higher margin upfront reduces doubts and provides a clearer loan payment plan over time.

Once repayment begins, prioritize loan payments to avoid additional interest.

Although moratorium periods are available, try to make payments during this time to prevent interest accumulation.

Save and seize opportunities to make extra payments, reducing the loan tenure and interest on the borrowed amount.

How to Repay Your Education Loan

The following are the strategies to repay the loan such that it works like zero-interest educational loans.

Carefully read and understand your loan terms, including interest rates, repayment periods, and moratoriums.

Ask your lender if you have any questions.

Create a budget to manage future liabilities, establish spending habits, and improve financial efficiency.

When repayment begins, prioritize loan payments to avoid additional interest.

Timely EMI payments are crucial.

Set aside money for emergencies to ensure you have savings for unforeseen events.

Reserves are essential.

Ask your lender about various repayment options to choose the best plan for your needs.

Automate EMI payments to ensure timely deductions and avoid extra interest.

Whenever feasible, pay more than the EMI to repay the loan faster.

Inform your lender immediately if you’re having payment difficulties.

With a good EMI payment history, some lenders may offer temporary forbearance options.

Explore refinancing options to secure lower interest rates and make monthly payments more manageable.

Some employers offer programs to help with loan repayment, easing your financial burden.

While the principal amount isn’t tax-deductible, timely EMI payments may qualify you for interest deductions.

Always pay EMIs on time to avoid severe consequences, including damage to your credit score.

FAQs on Education Loan at 0% Interest Rate

Can I Secure a 100% Education Loan?

In certain instances, it is feasible to cover 100% of your educational expenses, including accommodation, laptops, and study tours, through an education loan.

How Can I Repay an Education Loan Without Incurring Interest?

Regrettably, it is not viable to obtain or settle an education loan without addressing its interest component, as education loans operate similarly to other credit products.

Can I Obtain a Rs.20 Lakh Education Loan Without Providing Collateral?

Certainly, you can acquire a Rs.20 Lakh education loan without the need for collateral. Most education loans are unsecured and can be availed without pledging any collateral.

What is the purpose of education loans?

Education loans are term loans specifically crafted to fulfil educational needs, catering to both higher education and school fees.

What is the Duration of Zero Interest on Student Loans?

While student loans are not interest-free, they typically come with a moratorium period extending until the completion of studies. During this period, only simple interest is applicable to the loan amount, and the borrower is required to pay only the interest accrued during this timeframe.

How Can I Settle an Education Loan Without Incurring Interest?

Unfortunately, settling an education loan or managing it without addressing the interest component is not feasible, as education loans adhere to the structure of other credit products.

Is education loan at zero interest available for all courses and levels of study?

The availability of interest-free education loans varies by program, typically targeting higher and technical education. It’s best to contact your lender to understand their specific terms.

Do I need a co-signer to get an interest-free education loan?

The requirement for a co-signer depends on the loan program and lender. Some may mandate a co-signer, while others may not require which are particularly government initiatives.

How is an interest-free education loan different from a traditional education loan?

Interest-free education loans do not charge interest on the borrowed amount, making them more affordable. While traditional education loans accumulate interest, raising the total repayment amount.

Can I repay an interest-free education loan early without any penalties?

Yes, you can but need not repay an interest-free education loan without penalties during the moratorium. Interest can be waived if repayment is done on time and paying extra also gets you rid of the loan faster.

Is there a grace period before starting to repay the loan?

Yes, grace period granted by institutes or banks with zero interest education loans, which is the moratorium differing by loan amount and educational background. Once this period ends, the borrower must start making repayments.

Are there income-based repayment options for interest-free education loans?

Yes, there are income-based repayment options for interest-free education loans as there are many institutions that allow you to refinance your loan options. Loan waiver assistance may be offered by the employer and understanding tax deduction schemes can reduce your financial obligations.

Where can I find information about available interest-free education loans?

You can obtain reliable information about available interest-free education loans from government agencies, educational institutions, and

Leave a Comment