Giving wings to your dreams

Many students dream of studying in top universities. However, it is a known fact that today education at reputed institutions is an expensive affair. Student loans aim to turn this dream into reality.

Understanding one’s requirements and spending capability is the key to successfully accessing an education loan. Student loan is taken to meet a student’s educational expenses and to help them pay their tuition fees, as well as other related expenses such as accommodation, exam and other miscellaneous charges.

Education expenses

While parents often save money to meet the education expenses of their children and young professionals choose to work for some time to save money to do their higher studies, they might still experience a shortage of funds due to the ever-increasing costs and inflation. Education loans help fill the gap between the actual money required and the money at hand.

Author Steve Bivans rightly said, “Let’s put our money where our mouth is; let’s invest in the future by investing in the education of our youth... It’s not charity; it’s an investment in the mental, intellectual, and social infrastructure of our country and our self... So make the right investment today into your child’s tomorrow.”

Before applying for an educational loan, here are the things you need to know:

The documents that you need to have prior to applying for a loan are: duly filled and signed application form along with passport-sized photographs, PAN card, Aadhaar card, academic certificates of previous qualifications, the fee structure for the entire course duration, address proof of the borrower, income proof of the co-borrower and financial letter if any.

Always check whether an education loan is available for your course such as Undergraduate Student loans, Professional/Graduate Student loans etc. Understand why you need the loan, decide on the amount you will need. Also, consider the factors such as the rate of interest at which banks offer loans to the customer — the lower the interest rate, the better the offer.

Banks today can finance up to 100% of the expenditure. Consider a loan which would offer the exact required amount.

Repayment is another major factor. After completion of the course, the student will be responsible for the payments. So, ensure you perform well in your course and get placed in a good company.

The prerequisites to apply for a loan in India are:

The applicant must be a citizen of India.

A co-borrower is a person who takes the guarantee to repay the loan amount in case of any default by the student. While availing student loan, there must be a co-borrower who should be a citizen of India and employed as per RBI guidelines.

To avoid fraud, all financial organisations ensure collaterals are taken for a loan exceeding Rs 7.5 lakh.

Student loans also provide several benefits to the parents and students alike. The whole interest amount can be deducted from taxable income, resulting in income tax benefits. Timely repayment of loan instalments can boost one’s credit score, which could be beneficial for acquiring loans in future.

Financing systems

Apart from banks, there are several financing systems available, which provide the option of paying school fee through instant credit facility and with convenient payback options.

These financial platforms pay the full fees to educational institutions directly and assist parents to convert the amount of the whole fee into affordable instalments.

Also, be cautious that the finance company is not fraudulent. As a customer, check the loan agreement parties. If the loan agreement is not with an RBI registered entity (a simple google search can highlight that), indicates the process of the firm is not regulated and can prove to be dangerous.

(The author is co-founder of a fee financing company)