Education loans offer assistance to students who may have the drive and the necessary qualifications but not the required funds. As cost of education keeps going higher these loans may come as a great relief to a large number of students. Just like any other loan these loans are given based on the applicant fulfilling certain requirements and meeting the eligibility criteria. Education loans are generally available at concessional rates and require minimal formalities to be completed for the loan to be sanctioned. The idea behind this is that no deserving student should be denied an opportunity to fulfill his/her dream for higher education due to lack of funds.
As we said earlier that the banks do try and make the borrowing process simple for applicants but one has to still comply with the formalities and submit the required documents so that they can get the loan sanctioned. Though each lender may have slightly different eligibility criterion the basic requirements remain same. Each lender has a list of institutions and courses for which they will sanction a loan. They may require a co-applicant to ensure that the amount that they lend is safe. The co-applicant will also have to meet the eligibility criteria set by the lender. The co-applicant is usually a parent, guardian or spouse. If the co-applicant does not have a healthy credit history then getting a loan with bad CIBIL score could pose a challenge for the student.
When it comes to an education loan being clear about the amount you will require is important. The loan would be required not only for the tuition fees but for the living expenditure too. It may be possible that the applicant may be able to pay some amount as down payment or they may require the entire amount as loan. Another aspect that needs to be factored in is the living costs; if one gets hostel accommodation then obviously the expenditure would be less as compared to a situation if one were to live outside on their own. Each bank may have a cap amount that they will extend as a loan; this will vary for a course within the country and for getting education abroad. So one has to strike the right balance between their requirement and what the bank can offer.
As we said in the paragraph above we stated there is more than the tuition fee that has to be paid by the student for or his education. There are hostel fees; if hostel is unavailable then one might have to make arrangement for living and boarding on their own, if one is travelling abroad then there is airfare to consider and so on. Thus it is important that you check which expenses your education loan covers and what it does not, so that you make the right kind of arrangement.
Unlike many other loans there is no requirement to begin repayment immediately after the loan is procured. The lender expects repayment for the education loan after the student finishes the course or starts working. There is moratorium period usually ranging from six months to one year depending on the bank’s policy. Thus depending on what your loan agreement says you could start repayment six months to one year after you finish you course or get a job. However it is not a good idea to delay the repayment and one should start it as soon as possible. Before getting the loan make sure you are sure about when the repayment needs to start.
The most obvious cost of any loan is the interest; this is a significant burden and one needs to have full clarity about it before signing the dotted line. The current education loan rates range from 9.75% to 13%; thus you should do your homework well before choosing from where to borrow. While the interest rate is important so are the other conditions like the eligibility criteria, moratorium, what the loan covers and so on. So it important that one pays attention to the loan interest rates as they directly impact the EMIs for a long time without losing focus of other important aspects. Apart from the interest rate you need to also know about the processing fee that needs to be paid for the loan. The processing could also burn hole in your pocket so be sure you check about this before you decide from where to borrow.
Before taking any loan it is vital to have full clarity about all the aspects so that one gets sufficient amount to fulfill their requirements without having to pay too much. Hopefully the above aspects can help you make an informed decision.
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