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You might be wondering whether or not you’ll get to know everything related to education loans. Let me assure you, dear reader, that in just 7 points, you will get the answers to the seven most commonly asked questions. These questions are asked by students who have big dreams to be fulfilled but lack behind because of financial status. Or by those who want to complete their higher education in India by themselves. For taking a student loan, the foremost thing you should have is Self-confidence. How to get education loan easily
Let us first discuss the different types of student loans:
‘What are the different types of educational loans?’
Educational loans are the financial aids that are issued for getting educated.
A student can get a loan from a reputed bank or scholarships and grants from an institution for completing his/her studies. One thing to keep in mind is that loans taken have to be repaid one day or the other. Different types of education loan in India are discussed below:
1. Federal loans: These are loans that are issued by the government. It includes state loans that are managed by individual states. And the institutional loans that are issued and managed by the college or the university respectively. Federal loans provide the best terms and conditions for student borrowers.
‘All the Federal Reserve can do is make loans against collateral.’- Ben Bernanke.
2. Private loans: These are loans that are issued by the private banks. The terms and conditions provided by private banks are harsher than the federal ones. They may impose higher interest rates than other banks. We can say they are less student-friendly as compared to federal ones.
3.Subsidized loans: These are the type of loans where government plays a crucial role. The time period, for which you are in school or college, the government pays your annual interest. This means you are getting a subsidy on your loan. And once you complete your studies, you can pay back the loan amount as well as the interest which government was paying on your part.
4.Unsubsidized loans: As the name suggests, it is not a subsidized one. This means either you have to pay the monthly/annual interest while studying or you can pay your interest after the completion of your studies along with the amount to be repaid. It is advisable to pay your interest during your study time. This is because if you repay at the end of the loan period, you have to pay the increased interest and the loan amount altogether. This will create a burden for you at the end of your study session as the loan provider keeps on adding the interest till the date of repayment.
Next thing about education loan in India?
‘What is the use of taking an educational loan?’
There are a number of uses but I am discussing few of them:
A student who wants to do higher education and is not able to get support from parents/guardians understands the importance of a student loan. These loans not only help a student to achieve his goals but also help to build our nations’ future.
Education loans are helping our country to get educated and developed. These are helping a meritorious student to prosper in his/her life.
Apart from loans remember: ‘You need the courage to reach the peak, whether it is the peak of Mt. Everest or your career.’- Dr. Abdul Kalam.
Do you want to know how much amount can be issued as an education loan in India? If yes, then read on.
‘How much amount you can get on loan for your education and at what interest rate?’
You must be thinking ‘what does interest rate mean?’
Interest rate determines the percentage of your loan balance that increases every year. You’ll understand this with the help of an example: If you take a loan of 10,000 rupees with a 5% interest rate on it. You have to pay an annual interest of 500 rupees (5% of 10,000) till the period you have taken the loan for. And at the end of this period i.e. at the time of repayment of the loan, you have to give 10,000 plus the interest amount.
You can get a minimum of 50,000 rupees and a maximum of 10 lac rupees as a student loan for studying in India.
For studying abroad you can get up to 20 lac rupees from Indian banks as a loan.
In banks like SBI (State Bank of India) the rate of interest charged is 11.5% p.a. for loans up to 7.5 lacs. And above 7.50 lacs interest rate charged is 10.85%.
Many banks offer 0.5% concession in the interest rate for girls who want to pursue higher education.
There is 1% concession for the full tenure of the loan if the student pays the interest at correct durations.
Different banks and institutions charge a different rate of interest. Private Banks charge more than the Federal ones. Moreover, the amount issued as loan sometimes depends on the requirements of the borrower.
Read on. 4 questions are still left to be discussed which will let you know everything about education loans.
‘What are the various eligibilities required to get education loan in India?’
1. The student should be a citizen of India.
2. A student who has taken admission to a recognized institute by entrance test or based on merit is eligible to take a student loan.
3. Admission should be in a career-oriented course like medical, engineering, etc. at a graduate level.
4. A worthy and meritorious student who wishes to prove his/her capabilities avails an education loan easily than a weak student.
5. The student has to pursue an approved course and from a recognized institution or university.
6. He/she should have original certificates of his last attended Institute before taking a loan for higher education.
7. You should have ID proof, statement of liabilities, bank account statement, admission proof, mark sheet of last qualifying exam, income proof of guardian, address proof, etc. for becoming eligible for taking a loan.
Don’t you want to know about the terms and conditions? Read the next question.
‘What are the various terms and conditions kept by a bank at the time of issuing an education loan in India?’
1. A margin of 5% is charged by the Indian Banks for loans above 4 lac rupees.
2. All the above-mentioned documents and details that are required for getting a loan should be true. These documents are thoroughly checked by the bank officers who take 15-20 working days before giving approval for passing a loan.
3. Parent/guardian of the student is considered as a co-applicant for taking a loan. They are the primary debtor.
4. For certain cases, third party guarantee is also asked by the bank. This acts as a security for the bank if the student and parents are not able to repay the loan amount.
5. Sometimes a bank may ask for additional security as a part of terms and conditions. This can be any proof of policy signed with the same bank or any other recognized bank.
6. The bank may demand the student to assign his/her future income in favor of the bank to meet the installment obligations as terms & conditions.
Want to know more? Then read on.
‘Do you know what the UGC has planned for the students who want to do higher education?’
UGC is the University Grants Commission of India. UGC has planned a Comprehensive Educational Loan Scheme. The government of India (GOI) has framed this scheme in association with Reserve Bank of India (RBI) and Indian Banker’s Association (IBA).
What does this scheme offer? And what else UGC has done in this field?
According to this scheme, every deserving citizen of India should get the required finances for higher education in India and abroad.
This scheme offers a loan of up to Rs.7.5 lacs for studying in India and up to Rs.15 lacs for pursuing higher studies in abroad.
The loan can be repaid over a period of 5-7 years according to this scheme. This period can be extended to one more year as a grace period after the completion of studies.
UGC has also encouraged various colleges and universities to provide grants to praiseworthy students.
RBI has issued certain guidelines for all commercial banks for giving loans. Various loan schemes are also being launched.
Few commercial banks offering such schemes are Allahabad Bank, Bank of Baroda, Canara Bank, Indian Bank, various State Banks, etc.
‘What are the expenses which are considered for education loan in India?’
A loan provider considers few expenses. On the basis of this consideration, the amount of loan, loan period and sometimes the rate of interest is decided.
Here is a list of those expenses:
1. Hostel fees or the accommodation charges.
2. College or school tuition fees.
3. Expenditure on books and equipment required.
4. Expense on uniform and caution deposit along with receipts by the Institute or the shopkeeper.
5. Purchase of any other item like chart papers, files, other stationary, etc. usable for education.
6. Project work or study tour expenses.
7. There can be much more depending on the rules and regulations followed by different banks.
After reading and understanding all the seven questions along with their answers I hope you have come across all the relevant information related to the students’ education loan in India.
I will suggest you take a loan from government banks rather than the private ones whenever you plan to take one. This is because the terms and conditions imposed by private banks are stricter than those by the government banks. You can also search for banks that are offering schemes of your interest. Read all documents, terms & conditions before taking a loan from any bank. And remember, ‘Shorter the tenure of the loan, better it is.’
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