Always Keep five things in mind when you approach a bank for money to finance your education.
Now a days many bank offers education loan to complete your study abroad or in country. there is very difficult to choose what is the best offer to choose because every loan offer has some advantages and some drawbacks. there are some criteria on which you can judge any loan offer to find best for you.
1. Eligibility for loan:
First of all check the eligibility for loan. Always choose recognized institution for entering any course. Most courses in India / Abroad offered by recognized educational institutions, qualify for loan, however, it makes sense to check with popular banks on the eligibility to avail loan, even before you embark on the procedure to apply for the course. Further, most banks have a maximum loan amount that is extended — typically for studying in India, the maximum limit could be around Rs 10 lakh (this could vary from bank to bank and on a case-to-case basis); the maximum limit for studying abroad could be up to Rs 20 lakh.
For loans up to Rs 4 lakh, one normally does not require pledging any collateral, co-obligation of parents / guardian would be enough. For loans exceeding this amount, the bank could call for 5 per cent to 15 per cent margin for safety purposes. For domestic studies, the margin amount could be lower as compared to overseas education.
2. Fees, tenure and moratorium
Education loans too have processing fees, administrative fees, documentation costs etc. like any other loan. Compare these fees between the available offers and clarify that there is no hidden charges.
The tenure of education loan could range from three to seven years. The moratorium period or the gestation phase (the period wherein one need not pay the EMIs) is often equivalent to one year in addition to the course period or six months after getting job, whichever is earlier.
3. Interest rates and their chargeability
Interest rates and charges are the primary factor that one should be looking at whilst choosing an education loan. Like other loans, Education loans too there is the option of floating rate / fixed rate. Choosing the appropriate interest rates depends on various factors.
If you anticipates interest rates to take a downward turn in the coming years, then you should opt for the floating rate interest rate, on the contrary if you expects it to move up, you should go for the fixed rate. If the tenure is close to seven years, then it is highly likely that you would see both up-down cycles of the interest rates.
4. Understand pre-payment charges
After getting well paying job at the end of the course everyone may also want to rid themselves of the loan liability. Most of the other loans have a pre-payment penalty clause built in (recently waived off in case of home loans) and one should diligently check regarding this clause.
5. Documentation and eligibility of individual:
Alongside a duly filled application, you have to submit following documents:
- Passport size photos,
- Address proof,
- Age proof,
- Copy of the mark sheets of the qualifying examination,
- Course admission letter,
- Course fee which is shown in prospectus and guardian’s / parents’ income proof.
You should fulfill following conditions:
- A borrow should be an Indian national, between 16 to 26 years age.
- The co-obligator in the loan should have a steady source of income and the ability to repay in case of default from the primary party (the student in this case).
- Course should be recognised by the Government.
Choosing an education loan need to do your homework before applying any loan. You also check with the educational institutions, if they have any tie-ups, because this could in the least help one to reduce paperwork significantly.