How to get the right education loan
How to get the right education loan
The Indian Government has framed a Comprehensive Educational Loan Scheme
which covers all types of courses including foreign education
One would always want to be educated in the 'best' institution, studying
the 'best' course. But 'best' is will no longer be restricted by geography.
With education loans becoming easily accessible, you can pursue the 'best'
degree from anywhere in the world.
In a bid to ensure that no student in the country is deprived of higher
education for want of finances, the Indian Government has framed a
Comprehensive Educational Loan Scheme which covers all types of courses
including foreign education. In consultation with the Reserve Bank of India and
the Indian Banker's Association (IBA), this scheme allows up to INR 15 lakhs
for studies abroad, no collateral or margin required for loans up to INR 4
lakhs, with interest rates not to exceed prime lending rates and repayment
period defined between 5-7 years, with a grace period of one year after
completion of studies. Tax benefits include deductions of upto INR 40,000 under
section 80E of the Income Tax Act for upto eight years. While this has formed
the base indicator, banks today offer upto INR 30 lakhs in education loan with
varying collateral, documentation and interest rates applicable.
The past decade has also seen private companies enter the education loan
market, thus simplifying the process and making it highly efficient and
user-friendly. Companies offer up to 100 per cent finance with no margin money
required; no ceiling on the loan amounts; repayment periods of upto 10 years,
loans for pre-admission expenses and even doorstep services. Loans through
private providers can be processed within a week if documentation is in place.
To facilitate education loans further, with effect from 2013-2014, the
government announced 'Padho Pardesh', a scheme of interest subsidy on education
loans for students belonging to minority communities who seek an overseas education.
This includes students from communities like Muslims, Christians, Sikhs,
Buddhists, Jains, and Parsis who seek to pursue a Masters degree and above,
abroad. Under this scheme, the Ministry will reimburse 100 per cent interest
component of the education loan availed by a student from a bank upto
moratorium period (i.e. course period + one year after completion of the course
or six months after getting employment, whichever happens earlier) where the
student's overall family income is not more than INR 6 lakhs per annum. This
scheme is monitored by the Indian Banks Association.
Additional interest rate benefits are also provided to female students
and students from OBCs making education loans huge enablers for the growing
middle class.
Here's a look at some FAQs to taking an education loan:
How do I calculate my education loan ability?
You need to know how much surplus income you have and measure it against
your rate of interest and tenure of the loan. There are several online
education loan calculators that allow you to key in this information providing
you with the eligibility amount and your EMI.
Does education loan limit depend on the degree
applied for?
Education loan limits are usually determined by your financial
eligibility of repayment and the sector from where the loan is being taken. For
example, a scheduled bank may offer a maximum of INR 30 lakhs (where an
undergraduate degree can cost upto INR 150 lakhs), but a private financial
institution like Credila can provide a loan to cover the entire expense as long
as other requirements are met.
What documents do I submit, to get an education
loan?
Education loan is divided into three stages – Eligibility (do you
qualify), Sanction (how much will you get based on the information you have provided
and post verifications) and Disbursement (releasing the education loan). Once
you have the following documentation, you should be set to make your
application through any of these processes:
Deciding on the co-applicant (it is recommended
that parent/s become the co-applicant) and guarantor (if required)
Completed application form
Photograph, ID, address proof
Academic documents to the highest qualification
Admission-related documents
6 months bank statements
Proof of Income (IT returns
of co-applicant and/or guarantor)
Collateral documentation
The paper work between banks can vary based on collateral, guarantors
and other internal requirements. It is best to get this clarified from your
financial institution.
What is the collateral I need to pay?
Education loans upto Rs 4 lakhs are usually collateral-free as
stipulated by the government. For higher education loans,
applicants/co-applicants will need to provide collateral either in the form of
fixed deposits or property mortgaged with their respective institutions.
What is the repayment time?
About 5-7 years with scheduled banks and up to 10 years in private
financial institutions. This excludes the moratorium period which usually
refers to the course period and one year after completion of course or six
months after getting employment whichever happens earlier.
Can you suggest a few banks or schemes from where I
can secure my education loan?
It is best to approach a bank where you, or your family already have an
existing relationship. Alternatively, nationalised banks under the IBA can
provide competitive interest rates and applicable government schemes can be
availed through these banks. Financial institutions dedicated to the provision
and service of education loans can process loans across various income brackets
very quickly.
Can I avail an education loan for any country?
In most cases, yes. However, some banks/financial institutions may have
a reference list of universities from that country which they recognise, or
they may ask you to furnish information authenticating the university
institution of study.
Source | Daily News Analysis | 23 October 2016
