An education loan is an amount taken for post-secondary education. It’s a loan specifically designed for students to help with the tuition fees, books, living expenses, and supplies. The interest rates are lower and the payment schedule differs when compared to a personal loan. But how to get education loan in India with lowest interest rates?
Once you’ve completed your graduation, you think about pursuing higher studies. Taking a loan for higher studies may be a good idea to pay for your next course. Pursuing higher studies abroad has become the norm. In some cases, parents can afford it, but for the others, taking a personal loan for higher education is the only option.
Why an Education Loan in India a Difficult Affair?
Since you will be paying off the loan amount only after you have got a job, banks have much stricter rules when it comes to offering education loans. Below are a few points that will help you understand why.
1. Highly expensive: Because of past incidents, banks have increased the rate of interest from 9-11% to 12-14%. Education in itself is very expensive and if one takes a loan for it they end up paying much more than the amount.
2. Guarantor and collateral: If you’re a student taking the loan, you’ll need to register a family member or guardian as the guarantor. The person registered as your guarantor must have a good credit score. If your loan amount exceeds a certain number you’ll need to offer the bank something as collateral.
3. Placements: Within 6 months to a year you will have to start repaying the loan. Certain courses and universities offer high salary placements but not all of them are true. And if you don’t get the good placements, the universities can’t be held responsible. So, if you don’t get a good placement repaying the loan will be a huge task.
4. Insufficient funds: Every bank has a limit up to which they will offer you a loan. While taking a student loan even if you have a co-applicant or guarantor they still won’t exceed the limit they can offer a loan to you.
5. Credit score: If for some reason you are unable to repay the loan or skip instalments then it will directly affect your credit score and future eligibility to take loans. This is a huge risk and one can’t foresee it.
While it may look like a messy affair to get an education loan, there are advantages too.
Why should you take a Student Loan?
1. Good deals: While you may hesitate to take a loan, education loan will help you to complete you higher studies with ease. Student loans offer special terms and condition to adhere to the conditions of a college going person. Most banks offer the loan at a very low interest rate and repayment facilities are also very flexible.
2. Federal loans: In the case of federal loans, the loan amount comes from the government or private lenders. Federal loans offer flexibility of payment and they ensure that your college needs are met to the fullest. Private lenders give the loan at very low interest rates compared to traditional loans. Enough grace period to repay the loan is given in the case of a federal loan.
3. Low fees: Students loans are tailored to cater to the financial needs of the student and not become a financial burden. Very minimal processing fee and early repayment fee is charged. In the case of federal loans absolutely no fee is charged either in case of early repayment, or orientation fee.
4. Credit rating: For many people, education loan may be the first loan they have ever taken. This is an excellent opportunity to get a commendable credit score. Compared to other loans, a student loan can be easily paid off and this will reflect well on your CIBIL score. Just by paying the student loan on time you can increase your eligibility to get a loan in the future to a great extent.
Eligibility for Education Loan in India
- The student should be a citizen of India.
- He/she should have a consistently good academic record.
- A proof of acceptance from the university should be submitted.
- The co-applicant of the student should be earning.
- The applicant should be a student of selected national educational institutions.
- The course applied to the student should be recognized.
Every bank has a basic eligibility criteria that can be calculated using loan eligibility calculator via the bank’s website. Proof of identity, Proof of residence, Guarantor form are some of the required documents for education loan that will be needed by every bank.
Whilst studying, it would be a good idea to do some part-time work that will help you to start saving money. Not just that, it’ll also help you to manage some day-to-day expenditure because of which, the loan amount you take can be reduced. Apart from the loan, you can apply for scholarship and avail other student grants to study in the college of your choice.
So this is all you need to know about student loan. Please feel free to share this articles with your friends who might want to take an education loan in India for study abroad.
This article is contributed by Arwind Sharma. He is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India. He is still busy in discovering how to avail Personal loan for higher education.