Loans to make education affordable
Student Loans
Many banks offer loans for higher education. Satkam Divya gives you the low down on what to keep in mind when you apply for a study loan
You might have heard many people say that higher education is for the upper and upper middle class people, especially when we take into account expensive courses like management, flying, etc. It is because the cost of education has sky-rocketed in the recent past and is expected to rise even further. This is where education loans come to the rescue to make education affordable for all.
To make a well informed decision on education loans, it is advisable to always compare the interest rates and other comparable factors of various banks and zero in on the most cost-effective option. Some such factors are mentioned below:
Interest rates
Interest rates vary from bank to bank. Some banks provide loans at fixed rates of interest while others provide loans at floating rates of interest. It is in your best interest to compare the interest rates of various banks and find out the comparatively cheaper ones. You can do this by using online comparison websites and tools.
Here, a person needs to decide whether he should go in for a fixed interest rate or a floating one. In a fixed rate, the rate of interest remains the same throughout the tenure of the loan; whereas in floating interest rates, the interest rate keeps increasing or decreasing as per the general interest rate scenario in the market. Hence, if you feel that market interest rates are going to increase, you must go for fixed interest rates, otherwise floating is best. (Refer to Table 1)
Repayment tenure and schedule
Most banks have a repayment tenure of 5-7 years. In case of education loans, repayment starts after the moratorium period, which is six months after getting the job or one year after completing the course, whichever is earlier. (See Table below)
Processing and other allied charges
There are various allied charges other than interest rate that are levied by banks for processing of loan and other services. These charges include processing fees, documentation fees, prepayment and pre-closure charges. These charges vary from bank to bank and differ for individuals studying in India and abroad. Some banks have fixed charges whereas others levy a percentage of loan amounts. It is advisable to compare and find out the lowest charging bank as charges can increase your monthly installment. Also, if you are taking lesser amount of loans, find out whether the rates levied as percentage are effectively lesser for you. (Refer to Table 2)
Processing time
All banks are operationally different and take different time to process the loan applications. Knowing the processing time of the loan is important to know by what time the amount will be disbursed. Here, you can match this time with the time given by the institute to submit the fees. One loophole here is that there are chances that banks have mentioned a lesser processing time on their website and take longer in real conditions. For this, you can either get in touch with the existing customers of the bank or check on online user platform about the services of bank.
Discounts, insurance and other freebies
Discounts are available for students joining premier institutes and for girl students. Here, one needs to check whether his or her institute falls in the list of the banks’ premier institutes and whether any of the other discounts are applicable to him or her.
Some banks offer free insurance along with loans and deduct the premium along with loan EMIs, or else give it for free. Other than this, to attract customers, banks offer various freebies. It is for you to check whether those freebies are worth going for. (Refer to Table 3)
So, stay informed, and make a wise decision to make your education affordable.
(The writer is Business Head, Rupeetalk.com)
