Planning to Take an Education Loan in India? Here’s What You Need to Know
Once sanctioned, your fees for tuition, examinations, library, etc., are paid directly to the college by the bank.
“Neither a borrower nor a lender be; For loan oft loses both itself and friend.”
These were the words that William Shakespeare penned in Hamlet. However, in today’s day and age, this is far from the reality. Buying a car, a home, or even applying to a college of your choice now requires you to take a loan.
For undergraduate engineering courses, the fees could be anywhere between Rs 5-10 lakh, while a five-year medical course at a private college, can cost up to Rs 50 lakh. For post-graduate courses such as those on management, fees could be more than Rs 10 lakh.
Here are some of the points that you should keep in mind while applying for a loan, and some of the loans that you can look at availing.
Things to note while applying for the loan
• You must have a co-applicants name on the application form. It can be your parents, spouse, or even, sibling.
• Those availing loans to the tune of between Rs 4-7.5 lakh need to provide the bank with a third-party guarantor.
• Those availing loans above Rs 7.5 lakh will need to provide a collateral.
• Your repayment cycle will begin six months to one year after the completion of your course.
• Any default in payment will adversely affect the credit history of student and co-applicant.
• For those who are going abroad for a course, getting insurance is mandatory.
• Ensure that your acceptance letter from the college is clear and from a college that is recognised by the University Grants Commission or the All India Council for Technical Education.
• Once sanctioned, your fees for tuition, examinations, library, etc., are paid directly to the college by the bank.
While some banks may ask for additional documents for verification, these are some of the documents you must have ready.
• Passport size photographs of the applicant.
• Letter of admission from the university.
• The PAN card of the candidate.
• Proof of identity (any of the below) a) Passport
b) Driving license
c) Voters ID card
d) Aadhar card
• Details of the fees for the course you have applied for.
What are the courses that are covered under the educational loan scheme?
• Diploma/Degree/Graduation/Post-graduation/Degree/Diploma courses from recognised colleges or universities affiliated under the UGC/ AICTE/IMC/Govt. etc.
• Regular Diploma or Degree courses offered by top autonomous educational institutes in India like IIM, IIT etc.
• Pure Science, Fine Arts, Engineering, Medicine, Management, Computer science, Agriculture, Architecture, Hotels and hospitality, Design and several other educational disciplines.
• Vocational and other technical training courses such as teacher training, nursing, aviation, shipping, air-hostess etc.
What does the educational loan cover?
• The entire college tuition fees.
• The cost of accommodation.
• Exam fees and library fees of the students.
• Conveyance and other travelling related expenses while studying in abroad.
• All other necessary expenses till the completion of the course.
While the interest rates of these educational loans vary from bank to bank, the rate of interest offered by a public bank is usually 1% to 2.5% lower than private banks. The interest rate that public banks charge ranges from 8.5% to 10.5%.
The processing fee of public banks remains fixed, whereas, in a private bank, the fee is usually a certain percentage of the loan sanctioned which can range from 1 to 1.5%.
With this information in mind, do remember to make an informed decision while applying for an educational loan.
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