In the Indian scenario, a child’s education is something every parent feels concerned about. Because the quality of education and the kind of people a student interacts with in their formative years can have a significant impact on their life – This is both in the personal and professional spheres of their life.
So naturally, with some parental pressure and a student’s own ambition, the journey to securing a good higher education begins. But in this competitive age, this is no easy task.
At each level, a student is expected to meet a certain benchmark. And for a post graduate course, various challenges come into play. There are multiple entrance exams to be prepared for, interviews to be given, documents to be secured from previous institutes, besides also matching the different academic expectations that institutes have.
All of these things in themselves are a huge hurdle. But on top of this, there is, of course, the concern of finances. Because any course in a reputed institute comes at a considerable cost. If this comes with the cost of having to live in a hostel or place of your own, then there can naturally be some financial worries for the students and their parents.
However, a personal loan for higher education can help a student in many ways.
Personal loans for education – Eligibility
Numerous Indian banks and financial institutions give personal loans for educations. But various things are assessed before approving a loan request. This includes:
- A record of the student’s educational achievements
- Background and reputation of the institute to which a student is applying
- The chances of a student getting a job after completing the course and the possible salary package that the student may be paid
- Credit history of the co-applicants
Additionally, for a loan amount greater than INR 7.5 lakhs, some banks may require some kind of collateral to be given.
Terms of the loan
Banks give education loans for courses in Indian and foreign institutes. In the case of an Indian institute the loan amount given may be of around INR 15 lakhs and for a course abroad the loan may be of up to INR 30 lakhs.
Note that in the case of a loan given for a course in a foreign institute the amount you finally get may be less than what you applied for according to the foreign exchange rate.
Currently, it is possible to do an online comparison of the terms offered by different banks and choosing what is best for you.
Moreover, the rate of interest in personal loan or education can be in the range of 11-15% but this again depends on the various factors such as the loan tenure and amount. The tenure can be of 5-7 years and in certain cases, it can be extended. More importantly, the student pays back the loan only after completing the course. This period when the student doesn’t have to pay any of the loan amount is called the moratorium period.
Note that banks also require the applicant to pay the margin money. This is the difference between the loan amount requested by a student and what the bank paid. Usually, this can be 5-15% of the loan amount. But for a small education loan of INR 4 lakh or less, this margin money may not be required.
Also as per section 80 E of the Income Tax Act, a student can be eligible for tax benefits while repaying the loan.
Thus numerous factors affect the approval of an education loan. It is important that you keep these things in mind while applying for the loan.