Education loan interest rates in India vary widely — from around 8.15% at public sector banks to over 13% at NBFCs — and the difference compounds into lakhs of rupees over a typical loan tenure. If you’re comparing the current interest rate on an education loan in India, here’s how to actually compare your options, and a detail most calculators skip entirely: the moratorium period.
[Use the Education Loan Calculator above ↑] — see your real EMI, and how much choosing to pay interest during your studies actually saves.
| Lender Type | Domestic Studies | Study Abroad |
|---|---|---|
| Public sector banks (SBI, BoB) | 8.15% – 10.15% | 8.90%+ |
| Private banks (Axis, ICICI) | 8.5% – 12.5% | Similar or higher |
| NBFCs (HDFC Credila, Avanse) | 9.95%+ (secured), 11.25%+ (unsecured) | 9.5% – 13.5% |
Public banks generally offer 2-3% lower rates than private banks and NBFCs — but NBFCs process faster (3-7 business days for Credila vs. 4-8 weeks for SBI) and often don’t require collateral up to much higher amounts. Speed and rate are usually a genuine trade-off, not a “best of both” situation.
You don’t start repaying an education loan immediately — the moratorium period covers your entire course duration plus an additional 6-12 months (or until you get a job, whichever comes first at some lenders). But here’s the part that catches people off guard: interest still accrues during this period, even though you’re not making payments.
You have two real choices:
On a ₹10 lakh loan, moratorium interest alone can easily reach ₹2-3 lakh depending on your course length and rate — a genuinely significant amount to either pay off early or let balloon into your principal.
Loans up to ₹7.5 lakh generally don’t require collateral at public banks. Above that threshold, you’ll typically need to pledge property, fixed deposits, or LIC policies. HDFC Credila takes a different approach for larger unsecured loans, evaluating a “future employability score” based on your course and target university rather than relying purely on parental income or collateral.
Bank loans typically carry no prepayment penalty (an RBI rule for floating-rate loans to individuals), making early repayment a genuinely good option once your income allows it. NBFCs often charge a 1-3% prepayment penalty within a specified period — check your specific loan agreement before assuming you can exit early without cost.
Apply to a public bank (SBI or Bank of Baroda) for the lowest rate, and simultaneously to an NBFC like Credila for speed and flexibility if your visa timeline is tight. Compare the actual offer letters, not just the advertised starting rates — processing fees, collateral terms, and moratorium interest treatment all affect the real cost far more than the headline number alone.
What is the moratorium period on an education loan?
Typically your course duration plus 6-12 months, during which you don’t make EMI payments — though interest continues to accrue unless you choose to pay it during this time.
Should I pay interest during the moratorium period?
If you can afford to, yes — it prevents the accrued interest from being added to your principal, which would otherwise increase your total interest cost for the entire remaining tenure. Many lenders also offer a rate concession for doing this.
Is education loan interest tax-deductible?
Yes — under Section 80E, with no cap on the deduction amount, for up to 8 years, but only under the old tax regime.
Which is better: a public bank or an NBFC for an education loan?
Public banks generally offer lower rates but slower processing (4-8 weeks); NBFCs process faster (3-7 days) at higher rates. The right choice depends on your visa timeline and how much the rate difference matters for your total loan amount.
See also our general EMI calculator and CIBIL score guide for more on managing loan applications. You can also compare official rates directly on the Vidya Lakshmi portal, the government’s dedicated education loan platform.
