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Sunday,24.04.16 ( 10 views )
Education loan just what a student need
Education loan is the now the need of the hour. It is such a loan which will shape your child’s future. This type of financial product is so designed to provide an amount of money when your child so desperately needs it for financing the cost of study in colleges and higher education.
Importance of education loan can only be understood when you need to go for higher education which costs a lot and you surely need financial help. This financial product aims to offer the much needed financial support to deserving students for pursuing higher professional or technical education in India and abroad.
This type of loan will surely ensure that worthy students are empowered to take their destiny to their hands. But surely this process of getting a loan for education process is not so easy and you have to follow or meet the necessary conditions to get such a loan.
At a Glance
- Benefits of education loan
- Features of education loan
- Eligibility for education loan
- Documents needed for applying for education loan
- Interest rates and chargeability
- Fees, term and moratorium
- Pre-payment options of education loan
- Security for the loan
- Rebates on education loan
- Insurance coverage against education loan
- Banks offering education loan in India
Benefits of education loan
The main objective of educational loan is to offer the much needed financial assistance for the students in furthering their education degree but there are also other benefits which come with the education loan. Let us look at some of the benefits of education loans-
- The main benefit of these loans is the deferment of re-payments. Here the borrower is not needed to repay the loans while the process of studying is going on. The re-payment process begins after the completion of the specified course and getting a job within a stipulated period of time.
- It not only satisfies the financial need to go on with the higher education but also helps in saving income tax also while repayment. The tax benefits helps in cutting the overall cost of the loan.
- Under section 80E you can claim deductions from taxable income.
- These types of loans are great alternatives as compared to conventional loans.
- They not only offer lucrative interest rates but also have easier terms and conditions.
Features of education loan
Education loans cover all types of courses including professional courses in schools and colleges in Indian and abroad. Some of the key features are-
- This loan scheme provides loans up to Rs 10 lakh for studies in India and up to Rs 20 lakh for studies abroad.
- If the loan amounts to Rs 4 lakh there is no security and the interest rate is not to exceed the Prime Lending Rates but for loans above Rs 4 lakh the interest rate will not exceed PLR plus 1 percent
- The loans are to be repaid over a period of 5 to 7 years.
- There is a provision of grace period of 1 year after completion of studies.
- The repayment of education loan is deductible under section 80 E of the Income Tax Act.
- Only loans borrowed for higher education loan may claim deduction.
- The deduction will be available for a maximum of 8 years beginning from the day you start paying back.]
Eligibility for education loan
Eligibility criteria vary slightly from one bank to another but there are some common criteria which is listed below to help you understand the eligibility factor. These conditions has been laid down to make sure that lending is responsible and there is proper utilization of funds
- The borrower of the loan must be 18 years of age or older
- The borrower of the loan must be able to confirm admission at a college
- Borrower and co-borrower must be Indian citizens
- Borrower must enroll in a higher studies course. The course includes undergraduate, graduate and post graduate courses and certificate approved by UGC or the State Government.
- Vocational training and skill development course may not be eligible for some loans.
Documents needed for applying for education loan
Keep in mind that you will need a great degree of documents when you consider applying for such loans. The following documents must be with you at the time of discussing or applying
- Mark sheets from your 12 exams
- Proof of college admission
- Bank account statements for last six months
- Income tax assessment order for last two years
- Proof of income (borrower and co-borrower
- Proof of Indian nationality
- Loan application form (provided by the bank concerned)
- Expense schedule for your course
- Passport size photos
- Address proof
Interest rates and chargeability
The basic factor that you should be keeping in mind while picking up the ideal education loan is the interest rate. Just like any other loans, here also there is the option of floating rate/fixed rate. Depending on your outlook towards interests, you should choose the rate that is suitable for you. If you think the interest rates to take a downward turn in the years to come, then opt for the floating rate interest rate. On the other hand if you expect the interest rate to move, you should choose the fixed rate.
Fees, term and moratorium
Just like any other loan, for education loans also comes with processing fees, administrative fees, documentation. The term of the loan can vary from 3 years to 7 tears. The moratorium period or the gestation phase is often equivalent to one year besides the course period or six months after getting job, whichever is earlier.
Pre-payment options of education loan
When you are picking an education loan, you have to take into consideration the pre-payment options for repaying the loan. Suppose you get a job with a fat salary after you complete the course. Here is a choice where you can pay the outstanding loan amount before the tenure of the loan and thus become free of the loan liability. Thus you have to see or identify which banks offer you the ideal pre-payment options.
Security for the loan
Any bank you are applying for education loan will ask for security. According to the directions given by the RBI no security or interest is needed for educational loans up to 4 lakhs. Here the designation of the parents and their income tax records are needed for educational loans up to 4 lakhs. But if the loan amount goes up there is a need of “Collateral Security Deposits”. It actually means you have to provide some asset which is higher than the loan amount as security. It can in the form of Gold, Property papers or any other valuable asset.
Rebates on education loan
Rebates to students on the interest are given if they get admission to some of the reputed colleges or institutions such as IIMC, IIMA or NIFT. Particular income group of students are charged in preferential basis, 1% of the rebate is given to the girl students. A survey has revealed that that go for education loan come from the management field. Others to follow are from reputed technical institutes. Since the employability potential is higher in such studies, banks tend to sanction loans to the students coming from this area.
Insurance coverage against education loan
At present there is a tie up between the insurance companies and the banks under a common scheme popularly known as “Group Life Insurance Coverage” This is a facility which is offered by almost by all the banks. Under any unfortunate circumstances if a student dies during the intervening loan period of 5 to 7 years, the insurance companies pays the banks the entire amount outstanding of the deceased students. Remember it is always advisable to get the loan sanctioned at a fixed rate of interest as the term of 5 to 7 years is a long time.
Banks offering education loan in India
Below is a list of banks offering education loan in India
- Allahabad Bank
- HDFC Bank
- Indian Bank
- Oriental Bank of Commerce
- Bank of India
- State Bank of Hyderabad
- Bank of Maharashtra
- UCO Bank
- City Union Bank
- Bharat Overseas Bank
- Federal Bank
- Punjab National Bank
- Mysore Bank
- Andhra Bank
- Punjab and Sind Bank
- Karnataka Bank
- Syndicate Bank
- Dena Bank
- State Bank of Saurashtra
- South Indian Bank
- Bank of Baroda
- IDBI Bank
- State Bank of Mysore
- Indian Overseas Bank
- State Bank of Indore
- State Bank of India
- Bank of Rajasthan
- Central Bank
- Union Bank of India
- Jammu & Kashmir Bank
Education lays down the foundation for the success or the career growth of any student. To make it possible to undertake or pursue any course, education loan comes in the form of financial assistance to the students and help cover the cost of examination fees, tuitions fees, admission fees, hostel fees, purchasing of books, computers and other miscellaneous expenses.
Loans for education have become very popular. There are different types of loans offered by different banks to students who wish to study further. Surely this type of loans will help secure the future of many students and particularly for those families who cannot support their children financially for pursuing their studies further.
Your To-Do List
First decide on the amount of education loan you need to take. It is better to a cost benefit analysis. For studying in India the maximum loan amount is Rs 10 lakhs and for overseas it is Rs 20 lakh.
Get a checklist from the bank selected and keep all documents ready which your bank may ask for.
Check if the institute you have selected or applied has any tie-ups with banks which will speed up the loan process.
Do a comparative study of the rate of interest of different banks to know if you are getting a good deal.
When you are fully satisfied with the discussion submit all the necessary documents with the form and wait for the approval
The loan processing takes a maximum of 30 days but be prepared to wait for a long time. Also check on the moratorium period.
How we can help you
Education loan involves many complicated steps like application, discussion and putting forward supporting documents before the loan to be sanctioned. Our executives will help you through the entire process.
Our years of experience working in this sector will help you understand the process and get the loan easily. We will guide you through the amount of loan you should actually take and the bank you should select.
Like any other loan the process from application to sanctioning is a time consuming process. When you take our professional service you save time and be rest assured of getting your loan sanctioned.