Students applying for education loans may get relief from the banks as banks are about to increase the repayment period of education loans. Indian Banks' Association has issued a circular stating that the tenure of student loans will be extended to10 years or even to 15 years in cases of higher loan amounts. At present, students are required to pay off the loan within a period of seven years.
The finance Minister had recently urged banks to make education loans available to students on easy terms and conditions and at lower interest rates. In addition to this, banks have also been advised to advance short term education loans between Rs. 20, 000 to Rs. 1, 50, 000 to students who need funds for vocational courses.
However, in cases of defaults in repayment, the effect of the defaults on the student's credit profile will be negative.The credit profile of an individual has an effect on the interest rates offered by banks to him on various loans. Explaining this, Mr. Arun Thukral, managing director of CIBIL said, "If a student defaults on the education loan, it will negatively impact her credit history and score and may impact the chances of getting a loan in the future like the dream home or the car she aspires."