"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.
Conclusion
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
Reference
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Leadership Consultants India
Recipient
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