An education loan covers the course fee and other expenses such as accommodation, exam and other miscellaneous charges. While opting for an educational loan there are certain things that should be kept in mind.
New Delhi: With the increasing cost of education, people seek for education loans today. There are a plethora of options available to take an education loan. When you are deciding about the institute or the course which you want to pursue, do not get swayed by the easy availability of education loans.
An education loan covers the course fee and other expenses such as accommodation, exam and other miscellaneous charges. While opting for an educational loan there are certain things that should be kept in mind including if all courses will be covered, cap for restriction, interest rates, repayment option, etc.
1. Interest rates– The interest rates on all the bank loans including education loans are linked to the marginal cost of funds based lending rate (MCLR) and an additional spread to set an interest rate. The bank charges simple interest rate on the loan as during the course it lessens the equated monthly installment (EMI) burden on the student.
2. Repayment– The repayment starts when the course is completed and the loan is repaid by the student. There are some banks which provide a relaxation period of six months after the student secures a job or a year after the completion of studies for repayment. Generally, the repayment period is between five to seven years which can be extended beyond as well.
3. Types of courses offered– There could be multiple loan options such as the loan for full-time, part-time or vocational course and graduation or post graduation in the fields of engineering, medical, management, architecture, etc.
4. Collaterals– Banks ask for collaterals depending upon the loan amount. It is to be noted that the loans up to Rs 4 lakhs, there is no requirement of collateral, but one needs a co-borrower who can the student’s parent. However, for a loan amount above Rs 7.5 lakh banks ask for pledging securities of equal value which could be property papers, post office savings products, life insurance policy, shares, mutual funds or bank deposits amongst others.
5. Bank charges– While you apply for the loan, be aware of the bank charges such as processing, pre-payment, late payment of EMI, etc. Depending upon the Indian or the foreign course, a loan processing fees of 1-1.5 per cent of the loan amount can be levied.