How Much Education Loan Can You Get Without Collateral?
Loan Amount
Collateral Required?
Bank Type
Up to Rs 4 lakh
No collateral, no guarantor
All banks
Rs 4 lakh to Rs 7.5 lakh
Third-party guarantor (no property)
PSU banks
Rs 7.5 lakh to Rs 20 lakh
Collateral required (property, FD, LIC)
All banks
Above Rs 20 lakh
Tangible collateral mandatory
All banks
CGFSEL scheme: The Credit Guarantee Fund for Education Loans (CGFSEL) allows banks to lend up to Rs 7.5 lakh without collateral by providing a government guarantee. Most PSU banks participate in this scheme.
What is PM Vidyalaxmi and How Does It Help?
PM Vidyalaxmi is a central government scheme launched in 2024 that provides:
3% interest subsidy during the course + 1-year moratorium period for loans up to Rs 10 lakh
Eligibility: family annual income up to Rs 8 lakh
Credit guarantee for loans up to Rs 7.5 lakh (helps students without collateral)
Available through 38 banks on the PM Vidyalaxmi portal
Aadhaar card and PAN card (student and co-borrower)
10th, 12th and graduation marksheets (as applicable)
Admission letter from college/university
Fee structure from institution
Co-borrower income proof: last 3 months salary slips or last 2 years ITR
Co-borrower bank statement: last 6 months
Collateral documents (if loan above Rs 7.5 lakh)
Section 80E — Tax Benefit on Education Loan Interest
Under Section 80E of the Income Tax Act, the full interest paid on education loan is deductible from taxable income. There is no maximum limit. This deduction is available for 8 consecutive years starting from the year repayment begins. The loan must have been taken for higher education of self, spouse, children or a student for whom you are legal guardian.
Education loan interest rates at PSU banks range from 8.50% to 9.00% p.a. in 2026. Union Bank offers around 8.50%, SBI at 8.65%, and Bank of Baroda at 8.70%. With PM Vidyalaxmi 3% subsidy, the effective rate during moratorium is reduced significantly for eligible students.
Yes, but it becomes harder above Rs 4 lakh. Below Rs 4 lakh, most PSU banks do not require strong co-borrower CIBIL. Above Rs 4 lakh, the co-borrower CIBIL score matters. Improving the co-borrower CIBIL to 700+ before applying significantly increases approval chances.
The moratorium period is the time during which you do not need to repay the loan. For education loans, it typically covers the course duration plus 1 additional year after the course ends (or 6 months after getting a job, whichever is earlier). Interest may accrue during this period depending on the bank.
Missing EMIs affects your CIBIL score and the co-borrower's CIBIL score. The bank can declare the account NPA after 90 days of non-payment. For students facing genuine hardship, most banks offer restructuring options. You can also apply for income-based repayment under some schemes. Always contact the bank before missing payments.
⚠️ Disclaimer: All information is for educational and informational purposes only. Rates shown are based on publicly available bank data as of June 2026 and may have changed. FinMandi is an independent information platform — not a bank, NBFC, or registered investment adviser. Always verify directly with your bank before making any financial decision.