Sunday, 27 March 2016

“Educational Loans @Your Doorsteps for Your Overseas Education” ―Professor M.S.Rao

"Choose a job you love, and you will never have to work a day in your life." — Confucius

If you intend to pursue overseas education but don’t know how to approach banks for educational loans, this post helps you have a fair idea on educational loans and the precautions you must observe while taking educational loans.

You can pursue educational loans through your consultant who has tie-up with a particular bank. If you have already paid consultancy fee to your overseas consultant, it is advisable to go through it.  If you don’t hire any consultant, you can approach both private and public sector banks to get the details of loans with rate of interests. They will guide you how much they can fund and the margin money you must have. When you approach private banks, find out the rate of interest and hidden costs involved in it. Usually the marketing executives from private banks don’t reveal everything to you. Hence, you must clarify your requirements to avoid hassles later. Here are some dos and don’ts that you must observe while taking education loans for your overseas education. 
  •  Read the brochure carefully before applying for educational loan to avoid springing last-minute surprises by your bank.
  • Compare the rate of interest from different banks. Find out the hidden costs involved. Some banks present rosy picture by promising moon and finally you end up finally paying more interest. Hence, be careful with banks. Have your queries clarified by the bank representative. If required, talk to his/her immediate manager to find out the facts. It helps you avoid burning fingers.
  • Ensure that you hit on the right bank with the right educational loan scheme to suit your needs.
  • Be careful with fluctuations in currency.
  • Take loan with protections. Don’t look only for rate of interest but look for flexible repayment terms as well.
  • You should pay EMI on time to avoid high penal interest.

If you approach private sector banks there is often a processing fee for your educational loan. Here are some details of bank loans from various sources for your reference.

Eligible expenses for education loan: Fees payable, accommodation charges, exam and library fees, reasonable expenses for books and equipment including computer, travelling expenses abroad and other reasonable expenses required to complete course.
Quantum of finance: Rs. 10 lakh for study in India and Rs. 20 lakh for study abroad. Banks may consider lending higher amount in special cases at their discretion.
Security: (a) up to Rs. 4 lakh- No security, parents to be joint borrower (b) between 4-7.5 lakhs- along with parents collateral security in form of third party guarantee (c) Above 7.5 lakhs- Parents to be joint borrowers+tangible collateral security of suitable value required.
Moratorium period for repayment: Course period + 1 year or 6 months after getting job, whichever is earlier
Margin money: Nil for loan up to Rs. 4 lakh. 5 percent and 15 percent respectively for study in India and abroad on loan above Rs. 4 lakhs.
Tenure of loan: 10 and 15 years for loan up to Rs 7.5 lakhs and above respectively

If you pay simple interest on the principal during the study period, your EMIs will be reduced to a large extent. Many banks also give a 1 per cent interest concession to those who repay the interest debited during the moratorium period.

Tax benefits: Under section 80(e) of the Indian income tax act, a person can exempt the amount paid against the interest of the education loan – either for self or for his/her spouse or children – for eight years from the year(s) he starts to repay the loan or for the duration the loan is in effect, whichever is more.

Research shows that there has been a sharp rise in the number of loan defaults. Hence, avoid the myth of viewing educational loans as a financial assistance which is not to be repaid.


Govt. of India encourages loans on education and housing provided you meet the requirements. Hence, you must plan ahead; do research; get the details; shortlist the best university as per your financial capacity; ensure funding from your bank at reasonable rate of interest; make room for contingencies; prepare yourself mentally; network with others; learn and work smart to acquire overseas education.

Good luck!

"All great changes are preceded by chaos." — Deepak Chopra


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Professor M.S.Rao, India
Founder of MSR Leadership Consultants India
Recipient of 10th International Prestigious Sardar Patel Award―2015
21 Success Sutras for Leaders: Top 10 Leadership Books of the Year (San Diego University) Amazon URL:

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