Tuesday, 29 July 2014

Complete Checklist and Details on taking Education Loan / Student Loan

Posted by MyInvestmentsPub
Loans are common and general thing in India now-a-days. Either to buy a house / car, pursuing for higher studies in India / abroad, many people is opting for Loans. Student Loans or Educational Loans have become popular in India for funding higher education needs. The college fees are also sky rocketing in the current market, and for common man, there is no other option but to take loan to achieve these goals. Certain benefits are also introduced in Education loans which making it popular in India now-a-days. We will see the complete details about Educational loans, Benefits, New guidelines and the Tips to be taken care in Educational loans in this article.



Why you need an Education Loan / Student Loan:


To meet the entire cost of higher education cost either in India or in Abroad, it is almost impossible for a common man because of the current cost of the education like Engineering, Medicine or M.S. in US. So, due to various reasons, own savings might not sufficient some times to bear the cost of educational course. In these circumstances, taking an Education loan is a great help.


Cost of Higher education in India:

Most popular higher education courses in India are MBA, Engineering and Medicine. For Engineering courses, the fees could be ranging from Rs. 5 Lakhs – 10 Lakhs. For a five-year medicine course in a private colleges ranging from 50 Lakhs – 75 Lakhs and for MBA courses, the fees could be 10 Lakhs+.

Cost of Higher education in Abroad:

The same courses outside India could be 5 – 10 times. Insurance is a compulsory for abroad studies and is an added cost. The assured can vary between a minimum of Rs. 30 Lakhs to Rs. 1.5 crore based on the kind of college. The premiums vary from Rs. 8500 – Rs. 10000 per year.

Why Educational loans more popular :


  • Provide need-based finance to meritorious students, opting for higher education.
  • Lower interest rates ranging from 11.5% - 14.5 %
  • Tax benefits under Section 80E act of IT for 8 years
  • Special concession on Interest rates, if get admission in to highly rated institutions
  • Special concession on Interest rates for Women students
  • Special concession on Interest rates for Economically Weaker Sections (EWS), whose family annual income less than Rs 4.5 Lakhs.
  • Moratorium period for repayment is Course period + 1 year or 6 months after getting the job, whichever is earlier.
  • No margin money for loans up to 4.5 Lakhs.

Checklists  / Features of Education loan / Student Loan:



  1. Student’s secured admission to a course is required
  2. Co-applicant is must, can be parents, spouse, siblings
  3. For loans up to 4 lakhs, no guarantor or security is required
  4. For loans from 4 lakhs to 7.5 lakhs, third-party guarantor is must
  5. For loans above 7.5 lakhs, lender will ask for collateral
  6. Repayment starts 6 months – 1 year after completion of the course
  7. Under Education loans, tuition fee will be paid directly to colleges
  8. Any default, affect the Credit report of Students and Co-applicant
  9. For abroad studies, sponsorship of part-time job is must
  10. Insurance is compulsory for abroad studies
  11. Both fixed and floating interest rates are available
  12. Online facility is available

Interest rates of Education Loans / Student Loans:


Currently, various Public sector banks and Private sector banks offering Education loans with interest rates ranging from 11.75% to 14.75%. Some banks offering discounts in Interest rates for female students. Most of the banks offering concessions on Interest rates for all students who got admission in to reputed institutions. Simple interest will be charged during the study period and up to commencement of repayment. Servicing of Interest during moratorium period is optional and students can avail 1% rebate on interest rate if they they decide to pay.

Eligible expenses under Education Loans / Student Loans:


Under new Guidelines of IBA on Education Loans / Student Loans, the following expenses will be covered under Education Loans / Student Loans:
  • Tuition fee
  • Accommodation charges
  • Exam and Library fees
  • Reasonable expenses on Books, Computer, Travelling to abroad
  • Any other reasonable expenses to complete the course

Margin Money on Education Loans / Student Loans:

  • Nil for loans up to 4 Lakhs
  • 5% for loans above 4 Lakhs for study in India
  • 15% for loans above 4 Lakhs for study in Abroad

Repayment of Educational Loans / Student Loans:


Moratorium period for repayment is Course period + 1 year or 6 months after getting the job, whichever is earlier and the Repayment starts immediately after this Moratorium period. Repayment is generally in the form of EMI. Students should opt their EMI such a way that the EMI amount should not exceed 50% of their likely salary.

A word of Caution on Education Loans / Student Loans:

  • Banks will check the Academic progress of the Students during moratorium period. Students should maintain a certain level of academic progress throughout the course, otherwise getting ‘Capability Certificate’ is difficult.
  • There is always a risk of getting job immediately after completion of the course. Parents and students are to be prepared to encounter such situations.
  • Any default would affect the Credit score of Students as well as Co-applicant.

Current Educational Loan / Student Loan Interest rates in India:


Conclusion:

It is essential that students land up with good jobs after completing their jobs. Also, you should not do any default on your EMI payment and maintain a good Credit score.

Wish you all the Best! 



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