Know the basic features of education loan in India
With the cost of higher education increasing by leaps and bounds, many students take education loan from different banks of India. This article discusses the basic features of educational loan being offered by the public sector/private sector banks. Knowledge of these features would enable the students applying for education loan to bargain hard with the loan-offering banks.
Education, especially higher education, is becoming more and more costly with the passage of time. As a result, even middle-class Indian parents have to go for education loan to meet the expenditures associated with higher education in India and abroad. So, it is absolutely necessary for all of us to know the basic features of education loan in India. In this article, we will discuss the features and eligibility conditions of education loan sanctioned by different banks (both public sector and private sector) in India.Eligibility criteria
Courses eligible
(I) Courses in India
(II) Courses abroad
Eligible expenses for loan
The following types of fees are considered for grant of education loan: Maximum loan available
The above are the ceilings fixed by RBI. But the banks are free to re-consider this limit if the course fees are higher than these limits (like course fees of IIMs, ISB, etc.)Security
In some cases of education loan, security is not required. Up to a loan of Rs. 4 lakh, parents of the students need to be the joint borrower. In this case, security is not required. However, for education loan amounting to above Rs. 4 lakh, the applicant needs to bring collateral security in the form of third party guarantee. However, if the loan-approving bank is satisfied with the financial condition of the borrower, then there is a provision of waiver of third-party collateral.
Rate of interest
The interest rate on the education loan will be charged at the rates linked to the base rate of the banks. Simple rate of interest will be applicable till the period of study and commencement of repayment. But after this period, the extended interest along with the original principal will be considered as principal for the purpose of calculating EMI.Tenure of repayment
In case of loans up to Rs. 7.50 lakh the maximum tenure is 10 years. For educational loan above Rs. 7.50 lakh the maximum tenure is 15 years. There is no penalty on early repayment of the loan.Loan approval
The applicant is required to apply for education loan either in physical mode or through online mode. The loan is sanctioned or rejected within 15 days after the relevant documents are submitted along with the application.Other features
Concluding comments
Every student (along with his/her guardians/parents) who is going to apply for an educational loan, must know the aforestated basic features of education loan. Knowing these basic facts would enable the students to negotiate with the bank(s) more effectively.
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