Is pursuing a course of your choice abroad one of the priorities of your life? Do you want to be among the top notch professional with a reputed foreign university degree under your belt? Chances are good that to fulfill all these aspirations you will need an educational loan. Staying and living abroad along with the payment for your choice of course require a huge amount of money. With the recent spurt in global economy these costs are rising even further. However, leading banks in India are more than willing to be a part of your dream.
Be it SBI, ICICI bank, HDFC bank, Citibank, Bank of Baroda, AXIS bank and other Govt. and private sector banks, all are lined up to provide an education loan to the deserving aspirant. The innovative products offered by these banks have simple terms and provide the much needed financial assistance in a very short period of time.
With all these banks competing to provide an educational loan for your choice of course, what all things should you keep in mind while applying for an educational loan from banks in India? Here are the 6 most important factors that you should compare before taking any education loan from banks.
1. Interest rates
The first and the foremost is the interest rates charged on the education loan. This interest rate is the primary factor that earns money for banks and so they want it to be higher, but the competition in the loan market makes the bank keep it to a level where the education loan seems affordable to the customer, while it earns money for the banks too. Whether the interest rate charged on your education loan is fixed or floating is also a matter of concern. Generally, the value of fixed interest rates is higher than the floating interest rates. Going for floating interest rates in this low interest regime is always a better option.
The interest rates also depend on the amount of education loan one wants, keeping in mind all the realistic requirements, a judicious comparison of various offers from leading banks will certainly help the student find an education loan that pinches the least.
2. How the interest is charged?
Though the banks defer repayments, but they start charging the interest immediately after the disbursal of the loan. How this interest is charged will determine the amount of interest you will pay. Enquire carefully whether it is charged on a daily reducing balance, or on a quarterly reducing balance. The interest rates charged on loans thus keep accumulating until you start the repayments. This can significantly increase the repayment burden. If the bank providing education loan gives an option to pay the interest portion of your education loan immediately, use it by all means.
3. The waiver period
The third most important thing to watch out is the waiver period. Banks providing education loans generally don't expect the student to pay until he gains employment after completion of the course. Check this out carefully, does your education loan provider gives you such an option? The whole idea is to get comfortable financially before the bank asks you for a repayment.
4. Fees and other costs
The fees associated with the education loan such as processing fees, administrative fees, documentation costs etc. should be minimal.
5. Collateral, guarantee or security
There is a collateral clause with all the educational loans from banks in India provided the education loan exceeds a value of 4 lacs. This figure can vary from bank to bank but it is generally a norm. Make sure to ask the bank about collateral requirements and have it ready before the disbursal of loan.
6. The down payment
A down payment also has to be made with every education loan, ranging between 5%-20% of the loan amount depending on banks this money has to be paid upfront.
Comparing interest rates, various fees, collateral requirements, and down payment requirements across various banks will help you find out an education loan that fulfills your higher education dreams without burning a big hole in your pocket.