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As you gear up for your university admission, you will start to realize that being able to fund your education is as important as gaining admission in your dream university. An education loan will mostly probably be your choice.
For many programs run by recognized institutions abroad, banks offer loans (a minimum of Rs 20 lakhs for studies abroad). Depending on the bank, the amount offered may be larger. India Overseas Bank, for example, offers Rs 25 lakhs for higher studies abroad and State Bank of India can give up to Rs 30 lakhs.
Watch Out For Interest!
Most importantly, you should remember that interest rates vary from bank to bank so you may want to run an overall check before you settle for a loan. Currently, the interest rates are between 11% to 14%. All these loans are offered on a floating rate basis, meaning you will have to be prepared for increased or decrease rates in the future. Stay well informed about all of these details- you wouldn’t want any sudden surprises here!
The Margin Money
If your loan exceeds Rs 4 lakhs, you will have to provide the bank margin money, which is generally 15% of the loan amount. To your advantage, even scholarship money is considered a part of this. For loans between Rs 4 to 7.5 lakhs, all you need is a guarantee of a third party but for loans over Rs 7.5 lakhs, you will have to provide the bank with an LIC policy or documents of immovable property you possess.
Yikes! Will the Rupee Fall?
The loan will be sanctioned in Rupees so be prepared for a slightly lower amount if the Rupee value falls at the time of disbursement. What happens at the time of disbursement is that the bank will offer you the equivalent amount of your loan amount in foreign currency based on the exchange rate at the time of disbursement.
What You Need!
All set for a loan yet don’t know where to begin? Have a look at our general checklist for an education loan.
ID Proof:
Some materials that you may use for ID proof are:
- Voter’ s Identity Card
- Driving License
- Passport
- Pan Card
- Aadhar Card
- A signed letter from a recognized public authority or public servant verifying your identity and residence.
Address Proof:
Some materials you may use for address proof are:
- Telephone Bill/ Water Bill/ Electricity Bill
- Passport
- Bank Account Statement
- Ration Card
- Aadhar Card
- Voter’s ID card
- Issued by a government department- an allotment letter
Signature Proof:
Some of the materials required to prove this are:
- Your PAN card
- Your Passport Copy
- The Banker’s signature verification
- Your driving license with your signature and photograph
Don’t Holiday!
When it comes to education loans, most banks have a moratorium period or holiday period, only after which you will begin paying the EMI for your loan; the moratorium could last for the course duration and for the time period up to which you find employment. Rather than letting the interest rate make the EMI pile up for the future, it would be highly advisable for you to start paying off the loan right from the moratorium period from your study period. This will ensure that your EMIs are lower as well as the stress you will go through post graduation. You can then spend time planning for more important things when you graduate.
These are just some of the very basics of an education loan at most of present day banks. Research well and make a well informed decision for a future with less financial burden! Your future should be about more than just paying back loans and worrying about your EMIs!
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