How to get an educational loan

A hike in tuition fee here, a hike in tuition fee there, and a hike in tuition fee everywhere! Every year as Unis around the globe increase their tuition fees, you can’t help but cringe — given our current exchange rate. But let that not demotivate you! When there are ways to overcome these obstacles and live your study abroad dream, why stop now? What you need to remember is that you are making a lifetime investment with your study abroad experience. So let’s have a look at how to make your dream a reality through the educational loan.

Now, don’t go dismissing the idea of applying for an educational loan just because you nailed a scholarship. Sure, your hard-earned scholarship will come to your rescue but it will most definitely not cover the overall cost of your education abroad. So you most definitely will have to consider applying for an educational loan. We know you feel educational loans are complicated monsters, but we assure you they are nothing to be scared of.

So wondering what kind of coverage the education loan will offer? It will basically cover your tuition fees, book and any supplies fees, room and board fees, transportation fees, health insurance fees, and also your living expenses. It should take care of all your education-related expenses. The bank won’t actually hand you the money but will generally credit it into the Uni’s account at the start of each year or semester as required. Interesting? Read on for more…

To help you get started, we want to spell it all out for you — the basics of the educational loan…

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Once you receive the offer letter from your dream Uni, apply for an educational loan right away. To be able to do this, you must research your loan options thoroughly during the lull after you’re done with your Uni applications and are awaiting your offer letter anxiously. Make use of this in-between time period effectively. This is definitely not the time for you to take a break!

Interest to Compare!

As you run a research on loans from leading banks, you will find that they offer loans with varying rates of interest. We recommend you to take your time to compare the different kind of loans that are on offer and run a thorough comparison. A helpful tip: state-run banks have lower interest rates in comparison to private ones (if you didn’t know that already).

Don’t set all your hopes on just one though — we think it’s best for you to apply to multiple banks, in case your loan application were to get rejected by one.

Let’s have a quick look at study abroad loan details from some of our country’s top banks, shall we?

• Bank of Baroda offers loans of up to Rs 20 lakhs with a rate of interest per annum of 12% for loans above Rs 4 lakhs.
• Canara Bank offers up to Rs 20 lakhs with a rate of interest per annum of 12% for loans between Rs 4 and 7.5 lakhs and 9.5% for loans greater than Rs 7.5 lakhs.
• Axis Bank offers up to Rs 20 lakhs and its rate of interest per annum ranges from 13.75% to 15.75%.
• Credila (of the HDFC Bank Company) offers up to Rs 20 lakhs and its rate of interest per annum is 13.5%.
• ICICI Bank offers up to Rs 20 lakhs and has an annual interest rate of 15%.
• Indian Overseas Bank offers up to Rs 40 lakhs and charges an annual interest rate of 15%.
• State Bank of India offers up to Rs 30 lakhs with an annual interest rate of 13.75% for amounts between Rs 4 – 7.5 lakhs and 11.75% for amounts above Rs 7.5 lakhs.

For more details, approach the bank or visit their website online. The current interest rates fall on an average between 11% to 14%; however most of these are offered on a floating rate basis. In other words, be prepared to face increased or decrease rates later. Be careful, you don’t want the bank to spring any last-minute surprises on you, so read through all related info with utmost care.  

Eligible?

The first thing you should check as you begin to shortlist banks is the eligibility criteria. Most banks offer educational loans for long-term programs by reputed institutions. Short-term ones (such as English language programs) are usually not covered. For those planning to study vocational courses at a TAFE institution in Australia — educational loans don’t cover these either. So be well read, it really helps to know all the teeny weeny details here.

Your Cosigner!

In general, when your student loan exceeds Rs 5 lakhs, you will be required to have a cosigner. A cosigner is a person (mostly a parent) who has to sign the loan with you, agreeing to pay your debt, in case you fail to do so. Your cosigner will be on the hook for your debt and so this is a very big commitment and not to be taken lightly.

Must-Know Loan Facts:

• You will have to provide the bank, margin money for student loans exceeding Rs 4 lakhs which is usually 15% of the loan amount.
• For student loans about Rs 7.5 lakhs, you will generally have to offer the bank an LIC policy or a few documents of immovable property in your name.
• Be prepared for a slightly lower loan amount at the time of disbursement, as it may be affected by the exchange rate at the time of disbursement.
• Your loan will have a moratorium period or holiday period, only after which you will be required to start with your EMIs. This period could last up to the duration of the course or up to the time period till you find employment and varies from bank to bank.
• Completing your KYC or (Know Your Customer) is an important part of the loan-process.
• This will help the loan-provider feel assured that the student has the ability to repay and that documents provided are accurate.

Be Ready!

Get in contact with the bank and obtain a checklist from them beforehand to have all documents and papers ready and be prepared for application. Also check to see if the Uni has any tie-ups with banks for educational loans — if so, it could expedite the whole loan process.

Your Application Check List:

Run a check to see if you have these. You will be needing some of these listed below.

Identity Proof:

• Driving license
• Passport
• Pan card
• Voter's identity card
• A signed verification letter from a recognized public authority or public servant for your identity and residence.
• Aadhar card

Address Proof:

• Passport
• Bank account statement
• Ration card
• Aadhar card
• Voter’s ID card
• Telephone bill/ water bill/ electricity bill
• Allotment letter issued by a government department

Signature Proof:

• The banker’s signature verification
• Driving license
• PAN card
• Passport copy

Know Your Clause!

We urge you to take your own time to really go through the loan agreement’s fine print before you sign it. Keep your eyes open — a few things you should be checking for include the interest structure, pre-payment details, or if there is any option for you to extend it in case you are unemployed after graduation. If you have any questions, you should get in touch with the bank advisor. Be clear of the whole loan process and understand its clauses.

These are just a few facts you should be aware of, while approaching a bank for a loan. And that said, we hope you have a better picture of how to secure a loan. 

And if you are looking for any other kind of assistance to get into your dream Uni, don’t hesitate to get in touch with us. We, at Hotcourses India, would love to be of help!