Pursuing higher studies has become extremely competitive and on the other hand it has become expensive too and is like an investment. Apart from your academic background the cost of education also plays a very crucial role whether you are applying for a course in India or abroad. Since it is a big profit making business for credit lending institutions, there is a tough competition amongst lenders and they use various marketing gimmicks to lure students.
So before you take education loan from any bank, have a look at important points to consider before selecting educational loan:
- Interest rate: This is the most important factor to be taken into consideration when applying for educational loan. A small percent difference can save you good amount of money. So always compare interest rates on educational loan with various banks and choose the cost effective one. Also check when the interest rate is reduced the same has been reflected in your account. You can now register and start searching and apply for education loan through Indian government’s official portal called as Vidya Lakshmi portal.
- Fees covered: Normally the loan amount offered varies depending on whether you will be pursuing education in India or abroad. Rs. 10 lac is the loan amount capped for studies in India and Rs. 20 Lac for abroad. But irrespective of the country, make sure the loan covers various fees such as hostel, library, laboratory, book purchase and others.
- Repayment terms and conditions: Ideally lenders assume that student will start loan repayment within 6 months of completion of the course. However there could be various reasons when a student is not able to start paying EMIs such as no campus placement, other financial obligations etc. So in such cases, check with the bank’s terms and conditions on various charges or action they can take in situations when a student is not able to make a payment.
- Insurance cover: Many banks mandate students to avail insurance cover for education loan which involves additional charges. So get this checked beforehand.
- Pre-payment charges: A good high paying job is what the student dreams for after completion of education so that they can repay the education loan as early as possible. However, if you have sufficient amount of money and want to repay the loan amount early in order to save money on the interest, then check with the bank whether pre-payment penalty is involved. If yes, then do a careful calculation on the cost effective option.
- Moratorium extension: There might be situations when student may not be able to repay the loan immediately after completion of the studies or even after he/she starts earning. In such situations banks apply late payment charges. So check with the bank beforehand for the option of extending moratorium period. Normally repayment starts one year after the completion of study or six months after getting a job.
- Other charges: Apart from interest rate, there are various fees involved which are overlooked by the loan seekers and they come to know about it after they are charged. These include processing fee, prepayment and late payment charges, converting loan from floating to fixed and vice-versa.
- Loan closure: Finally the happiest moment, when you are about to close the loan. It simply eases off the burden. You will have to provide a written application to the bank. They will then provide you with the account statement and letter which states that the account is closed successfully and a No due certificate. But the most important thing to collect from the bank is the collateral security, if taken by the bank when applying for the loan. Also, if you are located abroad and want to close the education loan, then check with the bank whether someone on your behalf can complete the formalities with the bank. Check out education loan rejection reasons.