An education loan is a form of financial support from any bank or financial institution that enables a student for taking higher education. Availability of the education loan, at the appropriate time will help millions of deserving bright young Indians to achieve their dreams come true. All graduation, post-graduation and professional courses from institutes approved by the state and central government and also from foreign universities are eligible for a loan. Several institutes/ colleges have tied up with various banks, for the benefit of prospective students. For studies in India one can get loans up to Rs.7.5 lakh and up to Rs. 15 lakh for studies abroad.
Before giving the loan, banks study the viability of the borrower based on personal discussions with the student, family's assets and annual income, the nature of the course and reputation of the institute. In most banks for loans up to Rs. 4 lakh no collateral or margin is required and the interest rate will not exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will be PLR plus 1 percent. PLR is a term used to refer the interest rate of the bank and it may vary with each bank. Some banks offer lower rates to women students or those from specified institutions. Security to the loan depends on the amount. Security is some form of investment (i.e. bank deposits, house property etc.) that are surrendered to the bank while taking the loan. Security is not needed for loan amounts up to Rs. 4 lakhs. Instead of security, some bank may ask for a third party guarantee (guarantor) for higher loan amounts. There is no need to repay the loan while studying. The repayment starts after you have finished the course or started working. The repayment cannot be delayed for years after the completion of course. The loans are to be repaid over a period of 5 to 7 years with provision of grace period of one year after completion of studies.
Courses Eligible for Education Loans
A candidate, who applies for a program with prospects of employment, can apply for the loan. Whether you apply for a graduate, professional or postgraduate program or any other course sanctioned by UGC, AICTE or the government, you will be considered eligible for the loan.
Expenses taken into account
The student loan covers school, college or hostel fees as well as cost for buying books and other necessary items.
- Apart from the library, exam or library fees, even caution deposit, refundable deposit and building fund are considered for the loan.
- Other expenses, which are mandatory for completing the course, travel expense as well as a maximum cost of Rd 50,000 for buying a 2 wheeler, are taken into account.
Quantum of Loan & Security
An applicant is sanctioned a loan of maximum Rs 10 lacs for studying in India and Rs 20 lacs for studying in abroad. On a loan above Rs 4 lacs, there is a margin of 5% and 15% for studying in India and abroad respectively.
- No security is required for loan amount upto Rs 4 lacs.
- A borrower should present a 3rd party as guarantee for a loan amount above Rs 4 lacs. However, on bank / financial institution discretion, this clause of 3rd party guarantee may be waived off in certain cases.
- If you borrow a loan amount above Rs 7.5 lacs, you need to offer a material collateral security and assign the future income of the student for paying installments.
- The guardians or parents of a borrowing student should secure an education loan.
- If the borrower is married, his or her spouse, parents-in-law or parents can act as the co-obligator.
Repayment of Education Loan
The borrower can begin repaying 6 months after getting job or one year after the course is completed, whichever happens earlier. The loan can be repaid in a period of 5 to 7 years.
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