Education Loan November 5th, 2016 by

How Helpful are Education Loans for Studying Abroad? Find Out Now.

The number of students opting for higher education abroad has increased exponentially in the past two decades. Also, there is a drastic increase in the number of students opting for overseas education loan due to increase in the expenses of quality education abroad. Today there are numerous lenders offering loans to students.

Things look slightly better now with the Reserve Bank of India announcing welfare measures, which include the speedy disbursal of loans to deserving and meritorious students. This article looks at some of the top Indian banks, which offer study abroad loans.

Some Points to be Noted

  1. Family comes First:

Remember if you can get your parents to support you by being a joint-borrower it may help you. See the financial capabilities and liabilities of your family and then opt for this feature.

  1. Knowledge is Power:

When you plan to buy a new mobile phone, you spend a lot of time researching on the features and value for money and the credibility of the brand. This is all for a phone that in all due probability like all other modern technology will be obsolete in a couple of years. Now an education loan is an investment; a few lakhs more and 0.5% less interest and a longer repayment period may help you a lot. So please take your time; research thoroughly; ask for quotes from multiple banks and then select the most favourable bank.

  1. Read the Fine-print:

‘The Devil lies in the details.’

Be sure to read the fine-print and get clarity on the rate of interest that will be levied, if the rate will be impacted by the base rate (determined by the RBI), the tenure of the loan and when repayment should begin and any pre-payment charges. Be sure to check if there is a provision for extension of the tenure in case there is an unforeseen delay in the completion of the course and your ability to secure a job.

  1. Benefits for the Economically Weaker:

The government-managed banks offer some benefits in the form of interest-subsidy for students coming from the economically weaker strata of society. Please check with the bank if you are eligible for any additional benefits.

What does an Education Loan Cover?

Typically an education-loan covers the following expenses:

Accommodation charges, expenses related to the purchase of books and equipment, examination and library fee, travel expenses, and insurance premium for the student.

Note – The bank does not pay you any money; the loan amount is credited directly into the institution’s account at the beginning of each semester or year as stipulated by the institution.

Courses for which Loans are Offered

Students aspiring to study all regular undergraduate, postgraduate and doctoral programmes offered by reputed institutions are eligible for an education loan. Usually short-term courses in soft-skills, catering, animation, English-study, etc, are not considered for education loans.

Most banks also do not offer loans for those students who want to take up a vocational course – this is very important as a number of Indian students plan to complete a vocational course in a TAFE institution in Australia and then progress to a full-time degree. Please double-check and confirm with your bank if the course that you aspire to study will be covered by your bank loan.

Remember the education loan has to be paid back with interest; so focus on your studies to get a good academic score; secure a relevant job and be honest and pay back your loan on time. If you default on your loan your credit-ratings will take a hit, which will have a negative impact in the future. Also remember to apply to relevant scholarships; whatever money that comes that way will be an additional support to meet your academic expenses.

A hike in tuition fee here, a hike in tuition fee there, and a hike in tuition fee everywhere! Every year as Universities around the globe increase their tuition fees, you can’t help but cringe — given our current exchange rate. But let that not demotivate you! When there are ways to overcome these obstacles and live your study abroad dream, why stop now? What you need to remember is that you are making a lifetime investment with your study abroad experience. So let’s have a look at how to make your dream a reality through the educational loan.

Now, don’t go dismissing the idea of applying for an educational loan just because you nailed a scholarship. Sure, your hard-earned scholarship will come to your rescue but it will most definitely not cover the overall cost of your education abroad. So you most definitely will have to consider applying for an educational loan. We know you feel educational loans are complicated monsters, but we assure you they are nothing to be scared of.

So wondering what kind of coverage the education loan will offer? It will basically cover your tuition fees, book and any supplies fees, room and board fees, transportation fees, health insurance fees, and also your living expenses. It should take care of all your education-related expenses. The bank won’t actually hand you the money but will generally credit it into the University’s account at the start of each year or semester as required. Interesting? Read on for more…

To help you get started, we want to spell it all out for you — the basics of the educational loan…

1 2 3…Go!

Once you receive the offer letter from your dream University, apply for an educational loan right away. To be able to do this, you must research your loan options thoroughly during the lull after you’re done with your University applications and are awaiting your offer letter anxiously. Make use of this in-between time period effectively. This is definitely not the time for you to take a break!

Interest to Compare!

As you run a research on loans from leading banks, you will find that they offer loans with varying rates of interest. We recommend you to take your time to compare the different kind of loans that are on offer and run a thorough comparison. A helpful tip: state-run banks have lower interest rates in comparison to private ones (if you didn’t know that already).

Don’t set all your hopes on just one though — we think it’s best for you to apply to multiple banks, in case your loan application were to get rejected by one.

 

Let’s have a quick look at study abroad loan details from some of our country’s top banks, shall we?

 

Bank of Baroda offers loans of up to Rs 20 lakhs with a margin of 15%. Loan amount of upto Rs.7.50 lakhs is to be repayed in max 120 installments. Loan amount of above Rs.7.50 lakhs is to be repayed in max 180 installments. Repayment holiday is course period +1 year or 6 months after getting job, whichever is earlier.

Rate of Interest:

Loans upto Rs.4 lakhs : Base Rate + 2.50%

Loans from Rs.4 lakhs to Rs.7.50 lakhs : Base Rate + 2.50%

Loans above Rs.7.50 lakhs : Base Rate + 1.75%

Security:

Upto Rs.4.00/- lacs : No security

Above Rs. 4.00 Lacs and up to Rs. 7.5 lacs: Collateral in the form of a suitable third
party guarantee alognwith assignment of future income.

Above Rs.7.5 lacs: Tangible collateral security equal to 100% of the loan
amount along with assignment of future income

Canara Bank offers loans of up to Rs 20 lakhs with a margin of 15%. repayment starts a year after the course is completed or six months after landing a job, whichever is earlier. Loan with interest can be repaid in EMIs i.e. you can take 10 years to repay loan amount up to INR. 7.5 lakhs and 15 years if the amount is more than that.

Rate of Interest:

If the loan you have taken is less than INR 4 lakhs, no interest will be levied.

For loan sum more than that,15% for studying abroad.

Security:

Loan is provided conjointly to the applicant and his/ her guardian.

There is an agreement that future earnings of the student will contribute to loan repayment.

No collateral is required if the loan amount is less than INR. 4 lakh.

For loan sum between INR. 4 lakh and INR 7.5 lakh, guarantee from a bank-approved third party may be required. To avoid this, the borrower can offer security of palpable assets (covering the loan amount) in its stead.

If the loan amount is more than INR. 7.5 lakhs, the security worth the same is required as collateral.

Axis Bank offers up to Rs 20 lakhs. There is no margin for loans up to Rs 4 lakhs. For loans above Rs 4 lakhs, the margin 15% for pursuing courses abroad.

Rate of Interest

The interest rates for Corporation Bank Education Loan are as follows:

  • 12.10% for loan amounts of Rs 4 lakhs or below
  • 13.10% for loan amounts of Rs 4 lakhs – 7.50 lakhs
  • 12.60% for loan amounts above Rs 7.50 lakhs

Only simple interest is charged during the repayment holiday or moratorium period.

Girl students get a concession of 50 bps on the interest rate (which includes 25 bps for SC, ST and women students) for all education loans. Physically challenged students get a concession of 0.50% for all education loans.

Security:

Third party guarantee and/or collateral security may be asked for in appropriate cases

  • Additional security in the form of an LIC Policy in favour of the Bank with the sum assured being at least 100% of the education loan amount may be required.
  • Annual premium for the same may be included while computing the loan requirement and future income of the student needs to be assigned in favour of the Bank to meet instalment obligations
  • Tangible collateral security of suitable value acceptable to bank alongwith the assignment of future income of the student for payment of installments.

Credila (of the HDFC Bank Company) offers up to Rs 20 lakhs. They have different schemes for Indian students, based on their study destination.

ICICI Bank offers up to Rs 20 lakhs and has an annual interest rate of 11% – 15%. There is no margin for loans up to Rs 4 lakhs. For loans above Rs 4 lakhs, the margin 15% for pursuing courses abroad.

Indian Overseas Bank offers up to Rs 40 lakhs and charges an annual interest rate of 15% with a margin of 15% (above 4 lakhs). Repay the loan in equal monthly installments for a maximum period of 5 – 7 years excluding holiday period. Rate of Interest is about 11.0% to 12.25%.

Security:

For loans upto Rs. 4.00 lakh – Co obligation of parents . No security.
For loans above Rs. 4.00 lakh and up to Rs.7.50 lakh – Co obligation of parents together with collateral security in the form of suitable third party guarantee.
For loans above Rs.7.50 lakh – Co obligation of parents together with tangible collateral security .Collateral security in the form of NSC /KVP/ LIC Policy/ Immovable properties/ Bank Deposits in the name of student/Parent/Guardian or any other third party with suitable margin. Wherever the land/ building is already mortgaged the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount. In case the loan is given for the purchase of computer , the computer has to be hypothecated to the bank..

State Bank of India offers up to Rs 30 lakhs with an annual interest rate of 13.75% for amounts between Rs 4 – 7.5 lakhs and 11.75% for amounts above Rs 7.5 lakhs.

Disclaimer – Please contact the concerned bank for specific details of loan eligibility, rates of interest and repayment terms and conditions.

Recently one of the students who approached iCudB for study abroad guidance was granted a loan for INR 2,00,0000 by Credila and will be now flying to the USA to complete his studies.

For more details, approach the bank or visit their website online. The current interest rates fall on an average between 11% to 14%; however most of these are offered on a floating rate basis. In other words, be prepared to face increased or decrease rates later. Be careful, you don’t want the bank to spring any last-minute surprises on you, so read through all related info with utmost care.

Eligible?

The first thing you should check as you begin to shortlist banks is the eligibility criteria. Most banks offer educational loans for long-term programs by reputed institutions. Short-term ones (such as English language programs) are usually not covered. For those planning to study vocational courses at a TAFE institution in Australia — educational loans don’t cover these either. So be well read, it really helps to know all the teeny weeny details here.

Your Co-signer!

In general, when your student loan exceeds Rs 5 lakhs, you will be required to have a co-signer. A co-signer is a person (mostly a parent) who has to sign the loan with you, agreeing to pay your debt, in case you fail to do so. Your co-signer will be on the hook for your debt and so this is a very big commitment and not to be taken lightly.

Must-Know Loan Facts:

You will have to provide the bank, margin money for student loans exceeding Rs 4 lakhs which is usually 15% of the loan amount.

For student loans about Rs 7.5 lakhs, you will generally have to offer the bank an LIC policy or a few documents of immovable property in your name.

Be prepared for a slightly lower loan amount at the time of disbursement, as it may be affected by the exchange rate at the time of disbursement.

Your loan will have a moratorium period or holiday period, only after which you will be required to start with your EMIs. This period could last up to the duration of the course or up to the time period till you find employment and varies from bank to bank.

Completing your KYC or (Know Your Customer) is an important part of the loan-process.

This will help the loan-provider feel assured that the student has the ability to repay and that documents provided are accurate.

Be Ready!

Get in contact with the bank and obtain a checklist from them beforehand to have all documents and papers ready and be prepared for application. Also check to see if the University has any tie-ups with banks for educational loans — if so, it could expedite the whole loan process.

Your Application Check List:

Run a check to see if you have these. You will be needing some of these listed below.

Identity Proof:

Driving license

Passport

Pan card

Voter’s identity card

A signed verification letter from a recognized public authority or public servant for your identity and residence.

Aadhar card

Address Proof:

Passport

Bank account statement

Ration card

Aadhar card

Voter’s ID card

Telephone bill/ water bill/ electricity bill

Allotment letter issued by a government department

Signature Proof:

The banker’s signature verification

Driving license

PAN card

Passport copy

Know Your Clause!

We urge you to take your own time to really go through the loan agreement’s fine print before you sign it. Keep your eyes open — a few things you should be checking for include the interest structure, pre-payment details, or if there is any option for you to extend it in case you are unemployed after graduation. If you have any questions, you should get in touch with the bank advisor. Be clear of the whole loan process and understand its clauses.

These are just a few facts you should be aware of, while approaching a bank for a loan. And that said, we hope you have a better picture of how to secure a loan. Do you? Share your comments and views with us! We would be happy to hear from you.

And also, if you are looking for any other kind of assistance to get into your dream University, don’t hesitate to get in touch with us. We, at iCudB, would love to be of help!

Requirements

Education loan for India is also available for students wanting to study in Indian colleges. There is, however, some difference in the requirements for overseas and Indian education loans. In general, when applying for a study loan, you must keep in mind the following criteria:

A co-applicant is a must (could be parents, a sibling or a spouse)

For loans between Rs.4 – 7.5 lacs a third party guarantor is required

Collateral needs to be provided for student loans above Rs.7.5 lacs

Loan repayment commences 6 to 12 months after course completion

If a student goes abroad, lender recovers the remainder from co-applicant

Lenders have their own criteria developed for the upper limit of the loan, the interest rate to be charged and the period and mode of repayment.

Lenders usually have some pre-approved courses and institutions and usually sanction education loans on the basis of the quality of the institution, relevance of the course to career options, credit worthiness of the guarantor or co-applicant.

Education Loan for Abroad usually Cover

Tuition fees

Charges for examination, library, laboratory and hostel

Cost of purchasing books, equipment, instruments and uniform

Travel expenses for study abroad

Caution money, refundable deposit, etc.

Study tours, exchange programs and project work

Documents Required

Mark sheet for last qualifying examination for school and graduate studies in India

Proof of admission to the course

Schedule of expenses for the course

Copy of letter confirming scholarship, if any

Copy of Foreign Exchange permit ( if available)

Two passport size photographs

Statement of borrowers bank account for last six months

Income Tax assessment order not older than two years

Brief statement of Borrowers Assets and Liabilities

If not a customer of the lending bank provide proof of identity and residence