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  • Category: Miscellaneous

    Education loans at 11 percent and Housing loans at 7 percent

    The latest RBI advisory to the scheduled banks that they should go for big loans to boost the housing sector and those who apply for more than 30 lakhs are now going to pay just 7 percent interest and that is very cheap. Whereas a student who availed a education loan has to pay more than 10.5 percent to 11 percent and that is compounded every year. Why RBI and other banks are mum on not decreasing the interest on education loans as the students sincerely pay the loans back with interest and no defaulters reported so far.
  • #712142
    Yes. RBI should consider reducing interest rates on education loans also. Education is a must for all the people and one should not stop his education due to their poverty. So banks should offer loans at a lesser rate of interest. Of course, the government is giving scholarships and free education to some students based on their caste. But poor students in other castes are not getting frees from the government. They will be stopping their education because of their financial problems. For such students, if the banks give loans at a less rate of interest, they will pursue their higher studies. If a bank thinks that it is not possible to reduce the interest, they can think of reducing the rate of interest to at least some people who are meritorious and obtained good ranks in the previous examinations. Banks should not think of making profits by giving education loans. It should be seen as a service to the poor. Another problem is security. Where from a poor student can bring collateral security for the loan he is getting. There should be some way out for this problem also.
    always confident

  • #712148
    Education loan opens the doors of higher education to the meritorious students and they deserve such type of assistance from the government. However, it is very ironical to ask them to pay a hefty rate of interest to the tune of 11 percent and that too on compound interest basis. Since loan is the only mean with which they can think of persuing higher studies. Ultimately they are to pay it with substantial amount of interest. If the housing loan attracts a rate of interest of 7 percent much cheaper than the education loan. Taking housing loan for procuring a flat in a city indicates that they are the working class people having capacity to bear even higher level of interest. Keeping in view of promoting the studies of the really inquisitive aspirants, loan should not come in the way of obstructing their progress.

  • #712154
    I had availed education loan for my son's education. I closed it very soon after his completing course, because I was feeling the high interest burden and was repaying interest periodically. I was also always feeling and saying about this irony in interest rates. In fact most other loans are easily available and at less interest rate.
    However, from the banks' side, education loan falls under 'unsecured loans' category. That is, they do not have any collateral security unlike housing loan where the house (and land) is the collateral security.
    It is the experience of banking industry that education loans have a high percentage of default in comparison to other loans. There are many practical issues banks face in education loan. Though people are eager and sincere at the time of availing loans, by and by, they 'forget' about the loan. As there is no EMI remittance during the education period and there is not frequent contact with the borrowers, by the time the loan is due for repayment, banks may not have the latest whereabouts of the borrower also. As there is no collateral security, banks find it very difficult to recover such defaulted education loans. In the case of educational loans without security bankers (especially public sector bankers) find themselves between devil and deep sea.
    Personally I feel that the education loan scheme has to be thoroughly remodelled so that deserving students get loans at affordable interest rates and repayment, and at same time they are bound suitably to pay back on time without default. It needs thorough reworking.
    As the general financial culture is trending towards a scenario that defaulters are encouraged or benefitted, I have my own doubts in this regard.

  • #712161
    But while sanctioning loan a government employee security is needed and that stands as guarantee for the educational loans.
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #712190
    Housing is more important than education. One is getting educated to make money to buy houses and make wealth. Therefore, government has made it easy to build or buy houses at cheaper interest rates. It is skipping education to get a house. As rightly said by Venkiteswaran, the house itself becomes a security as many are unable to payback their loan amounts, while education loan doesn't have anything to recover if the borrower fails to payback the loan amount.
    No life without Sun

  • #712260
    In housing loan generally the house itself is mortgaged in the name of the bank giving loan so bank feels that this type of loans are secured. That could be one reason of this disparity between education loan and housing loan. I remember earlier when housing loan was hovering around 12- 13 % then the education loan used to be in the range 13-16 %. So this gap is being maintained by the banks for the obvious reasons.
    Knowledge is power.

  • #712310
    We all know the importance of education is invaluable in human life, and every effort is made to ensure that every class gets the benefit of education, especially professional courses for those whose education is expensive, education loans were arranged for this purpose so that all classes in order to take advantage of this, the right decision of the rate of interest is very important, this rate should be kept to a minimum, otherwise, the real goal of this system will not be met.

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