The higher interest rate which usually depends on the borrower and their credit-worthiness, some top-up loans, also ask to provide additional collateral.
Even though more and more students travel abroad for higher studies, the cost of such education is touching the sky. Along with that, the depreciation of the rupee against the dollar affects a large number of people, especially those who have expenses in foreign currency. People with children studying overseas, and those who plan to send their wards abroad for studies, usually take an education loan to fund their expenses for foreign studies.
However, these expenses keep increasing, and most times such parents/students fall short of money and apply for an additional education loan to fund expenses.
In such a situation when one needs some excess money, one could also opt for a top-up education loan to fund one’s study abroad. This loan can be taken from your existing bank, from where you have already taken an educational loan. As the bank already has your details, it is easier for you to get the loan approval without much hassles.
Sanctioning an additional top-up loan depends on the maximum loan eligibility along with the current outstanding amount the borrower has. For instance, if you were eligible for a loan of Rs 30 lakhs and you had opted for a loan of only Rs 20 lakhs only, you still have Rs 10 lakh that you are eligible to opt for. Also, from the Rs 20 lakh, if you have already paid Rs 8 lakhs, your total eligibility also increases to 18 lakhs.
Sometimes instead of your own bank, other banks, NBFCs (Credila, Avanse) also could give you a loan at a better interest rate. This could also be an option in case your current bank refuses to approve the additional funding requirement. Experts say, instead of taking a fresh loan altogether from the new bank, try opting for a transfer of your existing loan from your old bank to the new bank. Note that all banks do not offer top-up loans, and the sanctioning of an additional loan depends on the bank’s policies.
In the case of a secured loan, the education loan amount is linked to the cost of education, and the value of the collateral provided by the borrower. Keep in mind that the rate of interest on a top-up loan is higher than existing loans. Depending on the lender the top-up loan can be either at a fixed or floating rate, and the interest rate varies between 12-15 per cent on these loans. Various other factors like the loan amount availed, experience, loan tenure, market conditions, student’s academic record, and the educational institute, are considered while deciding the interest rate for the loan.
The higher interest rate which usually depends on the borrower and their credit-worthiness, some top-up loans, also ask to provide additional collateral. With additional collateral, the Loan To Value (LTV) ratio of the borrower also increases, which might help the borrower bag in a competitive rate of interest.