Here is a brief guide to cover the basics of education loans. Whether a parent or student yourself, consider the following questions before you apply for a loan.
What all does an education loan cover?
Education loan is more than just the tuition fees. It will also cover
1. Library Fees, Lab Fees and Examination Fees
2. Travel Expenses, airfare etc. if travelling abroad for studies
3. Cost of the study material and otherequipments like laptop
4. Accommodation Fees
The essentials can differ on the basis of the course. It is wise to create a checklist and ask your loan provider to confirm the expenses your loan can accommodate.
What type of courses are covered under the loan?
Graduation, Post-Graduation and vocational courses in various streams such as medicine, management, engineering, media are covered. Other courses approved by the government or UGC are also covered.
How much loan can I apply for?
The maximum amount that you can apply as loan depends on the bank you are applying the loan from. Usually, the banks provide upto Rs 10 lakhs if you choose to study in India and upto Rs 20 lakhs if you wish to study abroad. You don’t need to fret in case your requirement is higher, banks do consider providing higher loans on case to case basis.
How do I know if I am eligible for the loan?
General eligibility criteria is:
# The age of borrower should be between 16 to 35 years
# Borrower should be an Indian resident
# For Loans ranging from 4 to 7.5 lakhs, you need to have parents as the joint borrowers and also a third party guarantor
# For Loans more than 7.5 lakhs, apart from parents being joint borrowers, you need to provide some tangible collateral security
What all documents do I need to apply for the loan?
You need to provide the following documents:
# Complete Registration Form
# KYC documents including proof of identity, age and residence
# Proof of Income of the guardian
# Account Statement of the Borrower
# Signature Proof
# Course Expense Schedule
# All your mark sheets
# 2 photographs
# Proof of admission in the university applied
# Statement of the assets and liabilities
# Tax assessment of last 2 years of guardian
Do I have to incur any fee for the loan?
Margin - Loan providers do not generally charge margin for loans upto Rs 4 lakhs. For loans higher than Rs 7.5 lakhs, you might be charged margin of 5% which would mean you will be given 95% of total loan amount by the provider and rest you have to pay yourself. It might differ if the loan amount is higher.
Processing Fees - Some banks may also charge the processing fees which is upto 2.25% while others may charge nothing.
Apart from these two, you will of course have to pay the interest. The interest rate varies from bank to bank.
What is the tenure and repayment like?
The tenure of the loan is usually upto 15 years for the loan amount more than 7.5 lakhs.
Repayment shouldn’t worry you till the course period is over. You can start repayment after 6 months your course gets over. Some banks also allow you period of 1 year wait period before your EMIs start.
What are some of the things I should keep in mind apart from the above?
# Decide on how much loan you would need
# Compare the interest rates as they differ bank to bank
# Create a checklist of all expenses related to your course
# Decide the repayment strategy before hand
# Opt for a longer tenure
# Be ready with the down payment
# Make timely repayment
# Try to get the maximum loan as possible
# Keep the loan copy safe