Important Things You Must Know Before Applying for an Education Loan

Are you looking for a way to finance your college education? Education is the most important investment one makes in life. Higher studies and specialization in certain fields call for additional financial support from time to time. Cost of higher education such as MBA may not be affordable for everyone. In such situation people tend to think about the Education Loans. Loans created for students recognize the fact that students have not had time to build up credit rating. For this reason, applications for Student loans are simpler and more streamlined. The qualifications for such loans are also usually more lenient. However, leading banks in India are more than willing to be a part of your dream.

 Be it SBI, ICICI bank, HDFC bank, Citibank, Bank of Baroda, AXIS bank and other Govt. and private sector banks, all are lined up to provide an education loan to the deserving aspirant. The innovative products offered by these banks have simple terms and provide the much-needed financial assistance in a very short period of time. With all these banks competing to provide an educational loan for your choice of course, what all things should you keep in mind while applying for an educational loan from banks in India? This article provides information on few important things you must consider know applying for an educational loan.

Pre-requisites for education loans: Documents Required:

• You need to have a valid admission letter from an institution. This means you should have already been selected in the institution.
• Also get the complete expense details of the course you are pursuing. Before approaching bank find out the total cost of education including tuition fee, hostel fee,
• books cost etc.
• Mark sheet of last qualifying exam.
• Two of photographs.

 Note: The documents for availing the education loan may vary from bank to bank and the list of the required document can be seen in the education loan application form,

 Eligibility to get education loan:

All graduation, post-graduation and professional courses are eligible for an education loan. Also the courses that offer a degree or diploma can avail education loans. These courses could be from foreign universities or institutes approved by the state and central government.

Various Education expenses covered under education loan:

Education loan doesn’t cover only the Tuition fee but various other expenses too which are incurred in the course of your education. Some of such expenses are:

• Tuition Fee
• Hostel Fee
• Cost of books needed during the course
• Cost of computer/laptop if it is mandatory for the course.
• Cost of flying, if the course is in abroad etc….
• In general Education Loan Amount=Tuition Fee+ Hostel fee + Books Cost+ Equipment cost+ Flight Charges + etc

 Security for your loan:

This depends on your Loan amount, if your loan amount is less than Rs.4,00,000/- you don’t need to provide a security. If the loan amount is more then you need to provide security for availing the education loan. Security means surrendering some form of assets or investment to the bank for availing the loan. Some form of investments and assets that are accepted as security deposit by banks are:

• Government securities,
• Shares ,
• Bank deposits,
• National Saving Certificates
• House property
• Land Property
• Shop etc

In case you are not able to pay back the education loan, the bank will have rights to sell these assets so as to recover the loan amount from you.

Guarantor for your loan:

In cases when loan amount is not too big, but still higher than 4,00,000/- then the bank may ask for a third party to act as a guarantor for your loan instead of asking

for security deposit. In case you are not able to pay the loan, the guarantor of your loan will be legally bound to pay the loan.

 Repayment of Loan:

Until you are pursuing the course for which you have availed the education loan you don’t need to worry about its repayment. The repayment of your loan may start at

• Some banks ask for repayment to start after 6 months of completion of course
• While some other banks ask for repayment to start after a year of completion of course
• There is also option to start the repayment once you have secured a job. (but this doesn’t mean that you can delay repayment of loan infinitely, after a certain period of time you are obliged to start the repayment of your loan irrespective of the fact whether you have secured a job or not)

 Repayment Installments:

In most of the cases 10 years would be maximum tenure in which you need to pay back the loan after completion of the course. Perhaps the number of years for repayment of loan also depends on the amount of loan. If your loan amount is say around Rs.4, 00,000/- then probably you may get 5-7 years only for repayment of the loan. If the loan amount is larger then you may get 10 years for repayment of the loan.

 The down payment:

A down payment also has to be made with every education loan, ranging between 5%-20% of the loan amount depending on banks this money has to be paid upfront.

Finally, Loans designed to help students pursue an education recognize that students should spend their school time studying, not working to repay a loan. For this reason, many loans created for students allow students to pay back their debts very gradually and only after graduating. This means that students can focus on their studies rather than on their loans. In fact, most loans designed for students give students the opportunity to put off repaying their debt until six months after graduation. This gives students a chance to settle down and find a job before repaying their debts.