Before you go ahead with the admission procedure, knowing which education loan variant will be suitable can help you stay better prepared when you have to arrange the funds.
The Class 10th and 12th board results have now started to come out after months of uncertainties owing to the pandemic-necessitated lockdowns. Many universities are also preparing their graduation final year results. It’s high time for students and their parents to finalise the plans for higher studies factoring in the costs of their preferred courses. They ideally need to be proactive about their research and take stock of their financial preparedness as students could miss the admission opportunity in their preferred colleges if they are not ready to pay the college fees on time.
That said, an education loan could be immensely helpful amid the admission rush to meet any financial deficit. You may not have finalised the college yet, so your money requirement may vary depending on where you get the opportunity. Before you go ahead with the admission procedure, knowing which education loan variant will be suitable can help you stay better prepared when you have to arrange the funds.
Education loans for domestic undergraduate and post-graduate programmes
Let’s suppose you are planning to pursue your higher studies in India. In that case, you can approach a bank to get a domestic education loan. Before approving the loan, the bank would check several eligibility criteria such as marks obtained in Class 12 or graduation, income proof of the applicant/co-applicant, admission letter from the college, etc. Banks usually allow loans for admissions only in a college or university approved by the UGC, AICTE, the government, etc., and in reputed autonomous institutions like the Indian Institutes of Management, Indian Institutes of Technology, Indian School of Business, etc.
The interest rate and loan amount on education loans for domestic education may vary depending on the type of course, the institution category being premier or non-premier, etc. Most banks offer a higher loan amount and charge lower interest rates on education loans for institutions like the IIMs and the IITs. Besides, if you are looking for a loan of up to Rs 4 lakh, you may not need to pay any margin money. If your loan requirement is more than Rs 4 lakh, you may need to pay a margin of around 5%. Lenders also allow a moratorium period of six months after getting employment or one year after the completion of the course, whichever earlier, to start the repayments whose terms may also vary from lender to lender.
Education loans for foreign undergraduate and post-graduate programmes
Banks and financial institutions also provide education loan facilities for studying abroad to pursue graduation or post-graduation courses. The college where you want to take admission should be on the lender’s list of eligible institutions. The loan amount may vary depending on the type of course, college, etc. It is important to note here that the loan eligibility norms for the same college and course may differ from one lender to other. Also note, education loans are available only for Indian nationals, irrespective of whether they want to pursue studies in a domestic or foreign institution.
Most lenders allow scholarship or assistantship as a margin against the education loan when you plan to study abroad. The requirements of repayment under education loans for foreign studies may vary from education loans for domestic studies. Most banks allow the maximum repayment tenure of 15 years irrespective of the education loan taken for a domestic or foreign college.
Course-specific education loans
Education loans may also vary depending on the type of course you are planning to pursue. Course-specific loans are available for undergraduate and post-graduate professional courses like medical, law, engineering, etc. The fund requirements may vary depending on the type of the course; for example, fund requirements for MBBS and MBA courses can be very high compared to other courses; therefore, banks usually allow greater loan facilities for courses that require more funds.
Education loans and collateral requirement
If the loan amount exceeds Rs 7.5 lakh, banks usually ask for collateral to secure the loan. However, for admissions in premier institutions like the IIMs, ISB, IITs, etc. where the loan requirement is higher, most banks allow a collateral-free loan. While the processing fees could be in the range of 1%-2% of the loan amount for non-premier institutions, most banks waive off these charges for admissions in premier institutions.
A few other important things to keep in mind
You should be ready with a concrete plan if you’re planning to pursue higher studies with the help of an education loan. You’ll also be well-advised to compare different bank offers based on eligibility norms, interest rates, processing time, loan charges, etc. Once you’ve shortlisted a few options, you should inquire with each to find out the applicable terms and conditions associated with a loan to fund a course in your preferred college. If you don’t meet the eligibility requirements of banks, you can also check with NBFCs which could offer simpler eligibility requirements for education loans albeit at slightly higher charges.
Irrespective of the type of lender you choose, ensure you have complete clarity about the documentation requirements to avoid any unpleasant surprises later. Most importantly, carefully evaluate the future prospects of your chosen course in your preferred college so that you’re comfortably capable to clear the education loan in time. Wish you all the very best!
(The writer is CEO, BankBazaar.com)