Education loan like all other loans comprises of both principal amount and interest but it has an option to postpone the repayment of loan (principal + interest) until the completion of the course. However if you want, you can also start repaying the interest immediately after the month of availing the loan. Typically an education loan has three repayment options.
1. Normally banks allow the applicant to suspend their repayment. Most lenders insist on education loan repayment to start within 1 year of completing the course or six months of getting a job, whichever is earlier.
2. Interest amount can is paid during the course tenure and the actual EMI that includes both principal and interest starts after the course is completed.
3. The EMI starts immediately after the loan is availed. If you opt for this option then the interest rate charged is lower.
The processing fee on an education loan differs from bank to bank. In fact many banks do not charge any such fee but on the other hand there are some private banks that charge as much as 2.25% of the loan amount as processing fee. So make sure that if your lender is demanding for a processing fee then you are not caught in the trap.
Like for any other loan, you have to pay the margin money in education loan too. Margin money is the percentage of amount that the applicant needs to pay while availing the loan. Banks only lend some percentage of the loan amount and the remaining has to be brought by the applicant. The margin for most banks differs from 10% to 25% and this margin also varies according to the loan amount. Generally this margin is better known as a down payment.