Know your loan

Know your loan

An  education loan is an attractive prospect for those aspiring to fulfil their dreams of pursuing higher studies.

Though Education finance has been a stepping stone for many deserving students to accomplish their dreams over the years, some common doubts and ambiguities remain over process challenges, repayment, processing fees, course of choice and financing, and so on.

Given below are 12 quick points that will help you understand education loans better. This will enable you make the best of this proposition and choose from the best available options in the market.

* Before opting for an education loan, the first thing to do is to assess your current available funds. Funding through scholarships, for example, would reduce your upfront loan burden considerably. Once you have shortlisted your choice of programme and Institute/University, speak to the Institute on the scholarship options that you can avail. This applies to Universities in India as well as abroad.

* Check if the Institute that you have applied to has any association or affiliation with banks or NBFCs for education loans. This affiliation expedites loan processing. Specialist education loan providers like Avanse offer special financing solutions for specific Institutes, with concessions in rate of interest and other benefits like easy and quick processing of the loan.

*  Look up for information on your institution, its placement history, average remuneration for campus placements and earning potential after completion of your course. Education financing institutions like Avanse take the expected future income into consideration to arrive at the loan eligibility. Do a rough calculation on the expected monthly income you are likely to draw as a fresh employee and deduct your average living expenses so that you can plan your loan repayment and other expenses. Don’t just concentrate on your school’s overall ranking or graduation rate as starting salaries greatly influence the loan repayment period.

*  After you have decided on the actual amount of loan required, identify a Loan Provider who would not only meet your requirements in terms of the loan amount but also agree to fund your choice of programme. There are lenders who can provide you 100 per cent loan amount without any margin money. While banks provide loans up to Rs 20 lakhs, select specialist lenders like Avanse provide education loans as high as Rs 100 lakhs or Rs 1 crore.

* Check the expenses covered within the loan amount i.e. whether the loan covers complete tuition fees and living expenses for the entire duration of the programme. For example, ascertain whether components like cost of books and study materials, insurance amount and travelling expenses are included in the loan.

* Are you eligible for an Education Loan? This is an important question that needs to be answered. It can be easily checked by visiting the Avanse website. In addition to this, the Eligibility Calculator will help you determine the approximate eligibility value. Do call or get in touch with the Avanse representative for complete details on eligibility.

* Explore whether one's parental income will suffice to meet the eligibility criteria or an additional co-borrower would be required. Avanse accepts more than one co-borrower, thus increasing the chances of securing a loan.

* Do you have sufficient collateral security like House, Flat, non agricultural land or Fixed Deposit, to support the loan? While banks need security equivalent to your loan amount or more, Avanse can process the loan even with 80 per cent of the necessary security. Having said that, it is important to remember that collateral security is always preferable since it also ensures a comparatively better rate of interest.

* Compare not only the rate of interest but also other benefits in terms of easy repayment options, flexibility to pay from abroad, online customer services etc. from your loan provider.

* Obtain a checklist from the lender beforehand and prepare all the necessary papers and documents to ensure expedition of the process. This will help you and also the lender in taking quick decisions, and thereby process the loan. Generally, documents required for any education loan are KYC, educational qualifications, proof of income (of parents) and collateral security document copies.

* Decide the repayment option in consultation with your parents. That is, if you want to start EMI, or simple interest or want to go for moratorium. If you start simple interest payment or Monthly Instalments, it will reduce the burden once you graduate. It is advised not to go for moratorium unless required since it adds to the burden.

*  Know the terms of your loan - what is the interest rate, what is the repayment period, and when precisely will the payments begin.

More importantly, find out what your expected monthly payment will be upon graduation. The official representative of Avanse should be able to guide you on all of this.

Note: It is important to know and understand that any default in EMI payments reflect in your credit report, lowering your credit score for any future borrowings. Another important point to remember is that if parents co-sign on the loans, they are liable for the loan.

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