10 Hidden Charges in Education Loan You Must Know

Education in India or overseas is a costly affair and abroad education continues to be in demand by Indian students and quality of education is one of the main reason for it. The most preferred destinations being USA, Australia, Germany, Singapore and few others. However with quality comes higher expense which includes various fees, travel expenses and many others. However what makes abroad education costly is the interest rate charged by the banks. Without financial support getting abroad education is next to impossible especially for students from middle class background.

However what many parents/students overlook are the various charges (which vary for each bank) apart from the interest rate whether loan is taken for pursuing studies in India or foreign country. Many times bank do not disclose these charges, so customers are at risk. Even if loan disbursement is successfully done, these charges will further put strain on your wallet.

  1. Loan processing fees: You have to pay small amount of fee to the bank to process the loan. Normally this charge is between 1%-2% of the sanctioned amount.
  2. Prepayment charges: If you wish to end your education loan earlier then the scheduled tenure then banks use to charge prepay penalty. However as per RBI’s notification, no banks will charge pre-payment penalty.
  3. Late payment: This is most common and is charged for any type of loan or credit card. Also remember that frequent late payment will hurt your CIBIL score which increases the chances of credit denial in the future. So always make sure to pay your EMI on time.
  4. Interest type conversion: If you plan to change from one loan type to another i.e. fixed to floating or vice-versa then you will have to pay small charge for this. Although in this case, you are at profit but still changing the interest of a borrower is loss making for the bank.
  5. Loan cancellation: If you cancel your education loan due to any reason then banks will charge a small fee for cancelling the fees and this is a percentage of the total sanctioned amount. Ideally this charge is less than 2% but applicable tax will further increase the pain.
  6. Stamp duty: Any type of loan processing involves various documentations and stamp duty is nothing but the duty paid to the concerned authority on different documents used in the loan process. This charge varies for each state in India.
  7. Loan rescheduling: If due to some reason you are not able to pay the monthly EMI then banks offer rescheduling option i.e. your repayment period and EMIs will be rescheduled. However there is a fee involved for this which is upto Rs. 1500.
  8. Cheque or ECS swapping: Changing the account from one repayee to another who is a co-borrower of the same loan account also carries a fee.
  9. Bouncing charges: There are many options to pay the EMI. However parents or students prefer paying through cheque/electronic clearance system or direct debit. But remember that if the payment bounces then there is a charge for the same along with tax. So before repayment, make sure to check your bank balance.
  10. Other fees charged are for getting duplicate copy of no due certificate, account statement.

In addition to the above mentioned hidden charges in education loan, it is your duty to read every terms and conditions of the loan to avoid any problem in the future.

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