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Education Loans
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Details Click Here>> Study Now, Pay Later Banks offer financial assistance on easy terms to help you meet all your higher education expenses in India and Abroad. Arun Singal, a 21 year old graduate from DAV College for men, Chandigarh, gets a kick out of crunching numbers and takes his passion so seriously that he has decided to pursue a two-year master’s degree in professional accounting in Australia. He applied to Melbourne’s Monash University and got through quite easily after clearing the standard IELTS test. So far so good. The next step was to arrange the money to pay for the airfare hostel fees, course fees, books, food.. the list seemed endless and Singal didn’t have the kind of resources to finance all these things. So he approached Punjab National Bank, where he has an account and got a 7 year loan of Rd.15 Lakh at 11.75 percent rate of interest against adequate collateral. Singal will soon be pursuing his dreams in kangaroo land . But he wished he’d taken more, as he estimates his total expenses will touch Rs.24 lakh. Welcome to the world of education loans, which not only take care of the cost of the course you’re taking and books and study material, but also incidentals like travel and Visa, and living Expenses in the University, for study in India and abroad. Let’s take a look at what these loans offer. Courses Financed While the typical education loan finances your quest for a professional qualification, banks also offer assistance that covers everything from kindergarten to high school, from College to doctorates. The Most active segment, though, remains loans for professional and job-oriented courses. More often than not, banks stipulate that the institution offering higher education should be affiliated to University of repute or should be recognized by the Central or a State Government, or a technical board or council like All India Council of Technical Education (AICTE) Some banks also finance diploma education. Vocational training, how ever, isn’t usually covered. Says Sujan Sinh, Vice president (Retail Banking). UTI Bank: “We do make certain concessions if the institute has a good track record and placement history or if the diplomas looks promising. But we don’t cover pilot training AMFI certification, IRDA exams, as they are more in the nature of skill-enhancement courses.” Loan Amount As per the norms specified by Indian Banking Association, banks offer you a loan of up to Rs.7.5 Lakh for education in India and Rs.15 Lakh for studies abroad and typically don’t ask for guarantor or collateral for loan amount of Rs. 4 Lakh or less. In such cases the student loanee becomes the borrower and the father or guardian becomes the co-borrower. The roles are reversed in case the student is a minor. You simply have to produce the offer letter of the institution to the bank, which will then ask for your past educational records and sanction the loan. For loans in excess of Rs.4 Lakh, you will either have to produce a guarantor who isn’t a relative, or offer some security like property and financial instruments like FD’s, surrender value of your insurance policies, Banks insist on collaterial if the loan amount exceeds Rs.7 Lakh . The logic here is simple: The fatter the loan, the fatter the monthly installment. If you don’t get a fat salary after going through the entire education routine, your repaying capacity will be reduced. Explains Sinha of UTI Bank: “Education loans have nothing to do with the current financial status, and essentially assume risk on the future earning capability of a student.” This is why some banks offer loans even beyond Rs.15 Lakh if they feel career prospects are promising enough to enhance future repaying capacity. State Bank of India fo instance , offer loan amount of up to Rs.20 Lakh for studies abroad and 10 Lakh for education in India. Says Rajiv Sabharwal, general manager and head, retail assets, ICICI Bank: “We give loans up to 7.5 Lakh for education in India and Rs.15 Lakh for overseas studies usually, but can sanction more if the course is promising“. Some banks have even broken the Rs. 20 Lakh barrier. Typically the security needed for such loans is 1.5 - 2 times the loan amount and there is a margin of 5 -15 percent on your total requirement. Financial Terms Banks typically levy an interest rate of 10 – 12 percent on the loan and allow a maximum period of seven years for repayment. But there are banks that offer assistance for tenures of up to ten years – like SBI, which offer this tenure for loans above Rs. 7 Lakh. UTI Bank has a maximum tenure of 12 Years. Some Banks also offer a concession of 1 percent on the interest, if the interest accrued during the moratorium is paid. The Banks typically offer a moratorium on the EMI of one year after you’ve completed the course. Or six months after you have got a job, whichever comes first. Other Alternatives You could also look at a personal loan, which has an edge over an education loan, as you can get one without offering any collateral or guarantor, and can do whatever you please with the money, so long as it is legal. All you have to do is show your ability and intention to repay. The maximum loan amount is usually equivalent to 10 times the net monthly income for salaried individuals and 12 months income for the self employed individuals. However, the rate of interest could hit you quite badly – it varies between 12 an 30 percent. Go for this option only if you are not able to get an education loan. Banks also offer loans at competitive rates of interest against securities like Fixed Deposits, property, shares and insurance policies , say Harsh Roongta CEO Apnaloan.com : “The rate of interest on such loans could be as low as 9.5 percent on an overdraft facility. But this loan is difficult to get as the security pledged should be worth at least twice the amount of assistance.” |
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