Education Loan: Education Loans are available to pursue courses like MS, MBA, MCA, CPA, USA, CIMA etc. offered by various universities/institutes in India and abroad. Education loan is very helpful to pave the way. PSU or Public Sector Banks offer loans up to Rs.20 lacs for studies in India and Overseas. The education loan scheme that provides financial support from the banking system to deserving meritorious students for pursuing higher studies in India and abroad was introduced in 2001.
If money is not a factor then students can achieve their dream to secure their future by studying wherever they want to, UK or US or anywhere in the world. The average size of the educational loan is less than Rs.3 lakh which means no collateral or guarantee so there is need for protective mechanism for the banks.
Feature:
- The interest rates range between 10-13% (depending on the size of the loan and the collateral provided).
- Female students get a concession from 50-100 basis points.
- Some banks levy processing charges of 1% for overseas loans.
- If the overseas loan amount is more than Rs.4 lacs banks do insist on margin money of 15%.
- Although no collateral is needed for loans up to Rs.8 lacs (other than in case of making parents or spouse a co-borrower) then for up to Rs.7.5 lacs could need a third party guarantee.
- For loan amount above Rs.7.5 usually needs tangible collateral security like fixed deposits, national savings certificate, etc.
- Loan usually covers tuition fees, examination fees, cost of books, equipments like computer, uniform, commuting vehicle (two-wheeler) as well as travel expenditure or passage money for studies overseas.
Process:
- Submission of loan application form, with mark sheet of last qualifying exam
- Proof of admission or scholarship
- Schedule of expenses during the course period
- Bank statement
- Details of assets and liabilities of the co-borrower, etc.
Repayment:
The repayment of the loan starts as soon as the student secures a job or six months, after the completion of the course (whichever is earlier). The repayment tenure is usually between 5-7 years. Person repaying the loan (student or co-borrower – parent/spouse) can claim tax deduction on interest paid on this loan under section 80E.
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