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  • Category: Miscellaneous

    Its an irony that luxury is preferred over education.

    Have you all ever noticed that eduaction loan rates are more expensive than a car loan. We have a constitutional right named "Right to Education" but still the education is more expensive than buying a car.

    The education loan starts from 10.25% and while a car loan begins from 7.5% or even lower. Also to add you will need a gurantor in case you avail an education loan but not in the case of car loan.

    What a tragedy! How are we ever going to fill this difference and walk the talk? Why is is that the reality is always different from things written in the paper.
  • #709449
    My full appreciation to the author raising this issue which has been bothering me also. I have gone for bank loan for my Son's Chemical Engineering course for four years and availed loan for 2,40,000 at more than 10 per cent interest. Though the bank is not asking for payment to be made as my son started earning. But on verifying the account they already added interest to the main amount and this continues every year. Having sensed this I asked my son to pay at least 4000 per month towards the loan account in which 1800 goes for the interest and 2200 being deducted from the loan account. The manager said that gone are the days when the interest clause on educational loans were waived for the sincere payers but in our case we are paying the hefty amount of interest and that is very bad on the part of banks to charge us.
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #709454
    There is a point here. If the banks are giving you a loan for your education and if you don't pay back, there will be nothing with you to be taken by them. By taking your certificates, they can't make money and even they can't provide you with a job so that they can deduct from your salary. That the recovery is doubtful and the element of risk involved is high. But they give you a vehicle loan, you will have a vehicle with you. In case you fail to pay back the instalment they can take away your vehicle and can sell it and get back their money. If you lose your job, you can use that car as a taxi and you can pay EMI. The element of risk is less here. The interest rate will be decided based on the risk they are taking. Probably this is the logic a bank person will tell you.
    The author is right in saying that the banks will not give education loan easily but vehicle loan will be easily sanctioned. But the car may not be a luxury to all. It may be providing livelihood to some.

    always confident

  • #709456
    But Dr Rao the educational loan is given only after satisfying a government surety and that proves that the loan money would be recovered from the guarantor if we commit the default.
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #709459
    @ Dr. Rao, if we look at the financial aspect and logical aspect. Yes the bank is right in sanctioning car loan much easily than education loan. In case of car loan, if the person deafults in paying the EMI, then bank can forfeit the car and auction it to recover the balance. Obviously bank has right to safeguard the money it has disbursed, as the money itself belongs to the public. Risk in case of education loan is higher in case of default if the person fails to secure a job. Being a finance person I know this simply that in case of higher risk banks charge higher interest and vice versa.

    My main focus is that is it even ethical to charge more interest on education loan than on car loan. Many genuine people in need of education loan are devoid of the service due to higher rate of interest. Even Government spends or say focusses on education and higher education too then why not draft a proper regulation regarding this. Leaving everything in hands of bank will make thema commercial entity only which will have only one purpose, earning higher profit and nothing else.

    You must be aware of the time when there was 1/6 scheme by Income Tax department, wherein having a mobile phone, house, foreign travel, car and 2 more things was counted as a taxable person, who must pay taxes, if he has any one of the things falling in 1/6 scheme.
    Car is now means of livelihood for many and I support that as it serves as means of transport for many and especially during this time it will play a major role. But imagine 130 crore cars on the road, what will happen to the infra and environment. It is although entirely another topic of discussion.

    Live before you leave.

  • #709484
    From bank loans, if we go to environmental issues, it will be a different topic altogether. How to have a good transportation system without pollution is the question that is being discussed these days. Electric cars and electric buses are one answer to that. But it will be a time taking process.
    I have seen many drivers who lost their jobs due to this COVID 19 and the troubles they faced for taking care of their families. No cabs. No School buses. No college buses and no organisation buses. All these drivers faced a lot of problems during this period.
    Coming to the question of education loans, banks can give education loans at a lower rate of interest. That is welcome. But they need not increase the rate of interest for car loans. The government can make rules and say that banks should give loan to students for education at a lower rate and if the necessary the government can compensate for the loss of bank in some other way.
    If the governments can give loans to these students without any interest, that will be much better. Otherwise, if the government can force the educational institutes to decrease their fee structure, that will be much better.

    always confident

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