EDUCATIONAL LOAN

Awdhesh Nagar


Gaurav Rastogi


NIKHILGUPTA


Fin Corp


Shruti


EDUCATIONAL LOAN

Education is one of the most important aspects of life and everyone wants to get the best and the parents want to give the best education to their children. However, the cost of education is increasing and a study suggests that in India, it is increasing at a rate of 15% per year. With this increasing cost, no matter how much you save, there is always a shortfall in the amount needed to complete the education, be it in India or abroad. Here comes the utility of education loan.

The eligibility requirement varies with the financial institutions, however, the basic requirements remains the same, which are, applicant must be a citizen of India, have completed high school (12 th class) and have secured admission to a recognised full time or part-time course in India or abroad. The student is the primary borrower, whereas the parent, spouse or sibling can be the co-applicant. There is no age limit, as per RBI but some banks may have age restrictions.

Education loan covers the basic cost of education, i.e., course fee, registration fee, exam fee, expenses towards accommodation and other miscellaneous fees charged by the institution. In some cases personal expenses are also covered which are needed to complete the education.

The financial institutions need to have the admission letter, fee structure, previous exam grade card/ statement of marks and degree (if applicable), in addition to the ITR, payslips, salary details, bank statements etc. of the co-applicant. At times they may also like to have the property papers as collateral/ mortgage/ guarantor, if the loan requirement is more than the eligibility limit. The loan amount is paid directly to the host institutions towards the fee and other expenses (on an yearly/ half-yearly basis) and the amount for personal expenses, if approved, is credited to the beneficiary account annually. The student needs to submit the grade card/ statement of marks every year, to be eligible for the next instalment to be paid. If the performance is not satisfactory, the financial institution may stop disbursing the approved loan amount.

The rate of interest is usually higher than the normal borrowings such as home loan and is usually in the range of 3-4% higher than the MCLR rate of the bank. The loan repayment period starts when one get a job or after one year of completion of the course, whichever is earlier. The repayment period is 5-7 years which may be extended. However, during the duration of the course, the borrower need to pay the interest on the amount disbursed.