Things You Need To Know About Education Loans

By Author: Neha Sharma
Total Articles: 170
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A country can progress with the youth in its right place. Education plays an important role in empowering the youth. However, the cost of education is increasing and according to studies cited in Economic Times, it’s rising at an average of 15% per annum. An education loan helps in fulfilling the dream of a higher education to many students. Keeping this in mind, the University Grants Commission (UGC) also has made many schemes having tax benefits and lower interests for the deserving youth.

What is covered: An education loan covers the course fees and any other fees related to college studies that can include exam fees, books, accommodation and other miscellaneous fees.

What is the eligibility: Any student who is an Indian citizen and is admitted to a college in India or abroad recognized by a competent authority can apply for this loan. The maximum loan amount varies for India and overseas and depends on the lending authority. High school should be completed for the student. The important documents generally include admission letter, fees structure from the college and mark sheets of X, XII and graduation ...
... (if available by then).

Types of courses covered: A student can apply for all the courses listed under UGC. It can also be taken for full-time courses, part-time courses or vocational courses. It even includes graduation or post-graduation courses in medical, architecture, hotel management, engineering, etc. Check the bank website for the list of courses covered under a particular scheme.

Loan details and security requirements: A student can get an educational loan to finance 100% of its higher education. However, it depends mainly on the loan amount. For up to 4 lakhs, there is no requirement of margin money as per government guidelines and bank structures. Other than this, currently for studies in India, 5% and for studies abroad, 15% of margin money is to be paid by the student. Similarly, there is no security or collateral requirement for loans up to 4 lakhs. For loans within 4 lakhs to 7.5 lakhs, a third-party guarantee is required. For loans above 7.5 lakhs, there are security requirements.

Interest rates and repayments: Government schemes and guidelines have considerably reduced the interest rates for student loans. There is also income tax waiver on the accumulated interests after taking a loan. Repayment starts only after the course is completed and some banks also offer 6 months relaxation after the course is completed. The period of repayment can be from 5 to 7 years which can vary depending on the lending authority. Generally, during the course, just a simple interest is charged that reduces the burden of Equally Monthly Installments (EMI) on the student thus making it easy to pay the future payments.

Students should check the charges of processing, pre-payment and late payment EMIs before applying for a loan. Other than this, a good loan that is paid in its estimated time provides due financial experience to a student and also helps to build a good credit score.

Author bio:

Neha Sharma is a student pursuing her CA. She loves to write on topics of her interest. Having spent considerable time researching about educational loan, she has explained the important aspects of it.