A student loan helps you cover study-related expenses, from living costs and buying a laptop to tuition fees, both in Estonia and abroad. It is a loan product regulated by law, which is why student loans come with more favourable terms than average. LHV student loan specialists Katerin Tobi and Triin Aimla answer the six most common questions about student loans.
1. Is the student loan only meant for university students?
No, it is not. In addition to those studying for a bachelor’s, master’s or doctoral degree, student loans can also be applied for by those studying at applied higher education institutions and vocational schools. Vocational training must be based on secondary education.
A student loan can also be applied for by Estonian citizens studying abroad, provided that the nominal duration of their studies is at least six months and they are not currently on academic leave or studying externally.
Student loans can only be applied for in formal education: for example, a bachelor’s or master’s curriculum at a university or studies based on secondary education at a vocational school. Micro-credential programmes or other in-service training courses do not make one eligible to apply for a student loan.
You can apply for a student loan once per level of education, for the nominal duration of studies. For example, during a three-year bachelor’s program, you can take out a student loan each academic year in the amount of EUR 6,000. It does not matter whether you are a first-time or repeat student.
2. Do I need collateral to apply for a student loan?
Usually, you do not need collateral to apply for a student loan, as a suitable guarantor is generally enough.
A guarantor is someone who promises to repay your student loan, if necessary. This means that if you default on the loan, the bank may demand repayment from the guarantor. You will need a guarantor to apply for a student loan, even if you are earning an income.
Your guarantor can be a family member, partner, good friend or anyone else with a regular income whose existing financial obligations do not exceed 50% of their income.
If you do not have a suitable guarantor or do not want to involve someone in your loan obligation, you can use property belonging to you or a family member as collateral. In this case, the bank has the right to sell the pledged property and use the proceeds to cover the loan if repayment issues arise. It is important to know that this property cannot already be used as collateral for another loan. It must be professionally valued and a mortgage must be established. This makes the process more complex and expensive, so finding a guarantor is generally the easier and more favourable option.
3. How high is the student loan interest rate?
The student loan interest rate consists of the bank’s margin, which is 1.95% at LHV, and the Euribor. We will include a 6-month Euribor in the contract, the rate of which you can see here.
If the Euribor is, for example, 2.244%, the student loan interest rate would be 1.95% + 2.244%, totalling 4.194%. If the Euribor rises and the total interest rate exceeds 5%, the state will cover the excess, so the maximum interest you pay is always 5%. LHV reviews the Euribor every six months and any changes are reflected in your loan payments.
During your studies, you only pay interest to the bank. This is automatically debited from your bank account once a year, in November.
4. When do I have to start repaying the student loan?
You do not have to start repaying the loan immediately. At first, you only pay interest to the bank. During the period of study, the interest calculated on the outstanding balance of the loan must be paid once a year, on 1 November.
Repayment of the principal on a monthly basis begins 12 months after graduation.
The repayment period depends on the nominal period of your curriculum: we will prepare the payment schedule for a period that is equivalent to twice the nominal period of study. For example, if you take a loan during a three-year bachelor’s program and do not continue studying, you will repay the loan over six years.
However, if you cancel your studies, the student loan is to be repaid a bit faster, i.e., over a period that is one and a half times the duration of the period actually studied. The shortest repayment period is six months. Even in case of discontinued studies, the condition remains that you start repaying the loan 12 months after cancelling your studies.
5. What changes can I make to my student loan contract?
You can amend the student loan contract free of charge.
In most cases, the amendments concern the payment schedule or a change of guarantor. For example, you can shorten the payment schedule, start repayments earlier, or repay the loan early. The latter is a good option if you start working during your studies.
You are entitled to a grace period when you are on parental leave, in compulsory military service, or in residency. During this time, the state pays interest on your behalf.
- If I have already taken a student loan from one bank, can I apply for a new one from another bank?
Yes, it is possible. To do this, you must change your student loan contract, as you can only have one valid student loan contract at a time with one bank. You can transfer an existing loan to another bank even if you do not want to take out a new student loan from them. The transferred loan will be subject to the current student loan terms and conditions.
To transfer a student loan to LHV, submit a student loan application, and if approved, we will sign a new loan and guarantor contract with you. After that, you will have to pay interest for the student loan to the previous bank, which is calculated until the new student loan contract is concluded, and LHV will transfer the loan principal to the previous bank. Once you have signed the new student loan contract with LHV, your previous loan contract ends and you will make future repayments to LHV.
To apply for a student loan, submit an application via the LHV website or mobile app. It is free and does note oblige you to sign a contract. The loan guarantor of your choice will then fill in their application. As the third step, we will inform you of the loan decision. We will do our best to make that decision within three business days. Finally, we will digitally sign a loan contract with you and a guarantor contract with the guarantor. When everything is ready, we will transfer the student loan amount to your account.
We will also share a few insights from experience to make the student loan application process clearer and easier.
- If you are currently on academic leave, you are not eligible for a student loan, because academic leave is not counted within the nominal study period.
- You may apply for a student loan only once per educational level, for one nominal study period. This means that at the bachelor’s level, you can apply for a student loan for one curriculum, and the next time you can apply for a student loan for a master’s program or vocational education institution.
- You have the right to pause student loan repayments while on parental leave, in compulsory military service or in residency.
The student loan is offered by AS LHV Pank. Always think through your loan decision carefully. Read the terms and conditions at lhv.ee/oppelaen and consult with our expert. The annual percentage rate (APR) of a student loan is 5.127% under the following example terms: loan amount EUR 6,000, 6-month Euribor + 1.95% annually (up to a maximum of 5%), no contract fee, loan period of 112 months, including a principal payment grace period of 40 months. The total amount repayable is EUR 7,946.55, paid in equal monthly annuity payments. If property is used as collateral for the student loan, an insurance contract for the collateral is required. The APR does not include costs related to collateral setup or insurance.
