Pursuing higher studies is important for having a prosperous future. However, a significant monetary investment is necessary to pursue a course at a reputed college or university. Hence, an increasing number of people today fund their higher education with a loan. Education loans or student loans allow an individual to pursue their desired higher education course at the educational institution of their choice.
What exactly is an education loan?
An education loan is a fund arrangement provided by banks and non-banking financial companies (NBFCs) for students to pursue their academic goals. Students can avail of this loan to finance their higher education. In addition to the tuition fees, the education loan amount can cover course materials, lab fees, living expenses and other associated costs. In the majority of cases, the repayment of education loans is deferred for the duration of the course. It starts once the student has completed the entire degree.
Based on location, education loans can be of two types:
· Domestic Education Loan: This education loan is meant for students planning to pursue higher education at an institute in India.
· International Education Loan: This education loan is for students wanting to study abroad. Many financial institutions offer education loans for abroad studies at affordable interest rates.
There are many lenders present across India that offer both domestic and international education loans. As they tend to have varied schemes and loan terms, it is not always easy for a student to find the right loan option. Here are some of the key elements a student must focus on to identify the best possible education loan as per their needs and budget:
· Secured or Unsecured: Firstly, interested borrowers need to think about whether to apply for a secured or unsecured education loan. Such loans are typically available in both variants. In case one opts for a secured loan, they have to pledge collateral against the loan amount. The choice between secured and unsecured loans must be made with a lot of thought and deliberation as it can have a significant impact on education loan interest rates and eligibility.
· Interest Rates: Much like any other loan, one has to bear interest expenses and processing charges for an education loan. Student loan interest rates can vary from one lender to the other. Many factors may impact these rates, including the chosen university and course. The credit rating of a student and their academic track record are also likely to influence the interest rates available to them. Borrowers should compare education loan interest rates offered by multiple lenders and shortlist the most budget-friendly options.
· Loan Repayment: Education loan repayment terms usually differ for diverse lenders. Most lenders provide a moratorium period for the repayment of education loans. Under this, the loan repayment shall start after the completion of the relevant academic course. On the other hand, for education loans without a moratorium, the loan EMI payment cycle starts immediately after the disbursal. Students must be well-versed with the education loan repayment terms before applying for it.
· Margin Money: Margin money in education loans implies the down-payment amount the borrower has to make. It typically is a certain percentage of the total cost of education/course. Many lenders do provide up to 100% funding for a course and hence, shall not charge a margin amount.
Following the factors mentioned above in your loan search process will make it simple to find an education loan scheme that effectively aligns with their requirements.
