For most engineering admissions through KCET, COMEDK, JEE or state counselling, a public sector bank loan is the cheapest option: SBI was at about 9.65% to 10.15% in mid-October 2026. NBFCs lend larger amounts faster but usually charge more. Check PM-Vidyalaxmi and interest subsidy schemes first, and pay interest during the course if you can.
Public sector banks (typically the lowest rates)
SBI (State Bank of India). The Student Loan Scheme was listed in mid-October 2026 at 10.15% for loans up to ₹7.5 lakh (no collateral) and 9.65% above ₹7.5 lakh (with collateral), with a 0.50% concession for girl students. The Scholar Loan scheme for select premier institutes was at about 7.15% to 7.90%. Repayment can run up to 15 years after the moratorium. SBI is widely used for KCET, COMEDK and management quota admissions in Karnataka. See the SBI education loan rate page.
Canara Bank, PNB, Bank of India and other public sector banks publish their own education loan rates and limits, generally in a similar range to SBI, with collateral needed above a threshold. Check each bank's current rate page rather than relying on figures quoted earlier in the year.
Private banks and NBFCs
Private banks such as HDFC Bank, Axis Bank and ICICI Bank, and specialised NBFCs such as HDFC Credila, Avanse, Auxilo and InCred, usually charge higher rates than public sector banks. In return they often sanction faster and lend larger amounts for high-fee seats. Ask for the rate type (fixed or floating), the processing fee and the total interest cost in writing.
How interest works
- Moratorium. No EMI is due during the course plus about 12 months, but interest runs, generally as simple interest.
- Capitalisation. Unpaid interest is added to the loan when repayment starts, so EMIs are calculated on the bigger amount.
- Example. ₹20 lakh disbursed as ₹5 lakh a year at 10%, with nothing paid during the course: about ₹6-7 lakh of interest is added, giving an EMI of roughly ₹43,000-45,000 over 7 years and about ₹36-38 lakh repaid in total.
Try other amounts with our education loan EMI calculator guide.
Eligibility
The student is the main borrower and a parent or guardian is the co-borrower. Banks look at the admission (merit-based seats get the easiest treatment), the co-borrower's income and credit score (often 650-700 or more), and collateral for larger amounts. SBI needs no collateral up to ₹7.5 lakh. Exact income and marks criteria vary by lender.
Documents required
- Admission letter and the college's fee structure for every year
- Student and co-borrower ID and address proof (Aadhaar, PAN)
- Co-borrower income proof: last 2 years' ITR, Form 16 or salary slips
- Bank statements for the last 6 months
- 10th and 12th marksheets and the entrance exam scorecard
- Photographs, and collateral papers if the loan needs security
Disbursement
Loans are usually released year by year: the first year's fee at admission, later years on the fee demand and the previous year's marksheet. Most banks pay the college directly.
Government schemes worth checking
- PM-Vidyalaxmi. Collateral-free, guarantor-free loans for students admitted on merit to listed quality higher education institutions, with 3% interest subvention during the moratorium on loans up to ₹10 lakh for families earning up to ₹8 lakh a year. Management and NRI quota admissions are not covered. Apply through the PM-Vidyalaxmi portal.
- Central Sector Interest Subsidy (CSIS). For families earning up to ₹4.5 lakh a year, the government pays the interest during the moratorium on eligible loans up to ₹10 lakh for technical and professional courses at NAAC- or NBA-accredited institutions and Institutes of National Importance.
- Karnataka scholarships. SC, ST, OBC and other eligible students can apply for post-matric scholarships and Vidyasiri through the State Scholarship Portal, which reduces how much you need to borrow.
- Tax relief. Interest paid is deductible under the old tax regime for up to eight years. This was Section 80E and is now Section 129 of the Income-tax Act, 2025.
Strategy
For KCET or COMEDK seats, where four-year fees are in the lower lakhs, a public sector bank loan (or PM-Vidyalaxmi, if your institute is listed) is usually the best value. For high-fee management quota seats, NBFCs may offer larger amounts and faster processing, at a cost. Compare two or three lenders on rate, processing fee and total interest, and ask whether the processing fee can be waived. Applications for the 2027 cycle typically start once admission letters arrive, so keep documents ready from the counselling stage.