Education Loan FAQs
Students from various disciplines can now take their first step on the path to success and fuel their dreams for professional or technical education in India or abroad with financial assistance in the form of Education Loan offered by banks so that nothing can hinder their progress.
Almost all banks in India offer education loans on attractive interest rate and easy repayment options and hence there is a huge demand for loans to cover education expenses.
What is rate of interest for the Educational loan?
Different banks offer different interest rates for education loan which also vary from scheme to scheme. The student seeking education loan is advised to first check interest rates offered by different banks which will help him/her to choose the lowest among all.
How is the educational loan disbursed?
Approved Educational Loan of an applicant will be disbursed in full or in suitable instalments to the educational institution or vendor of books or other instruments taking into consideration of the requirement of funds and/or fee schedule which will be assessed by the bank directly.
What are the different types of collateral that can be offered under education loan?
There are 2 different types of collateral that can be offered under education loan which are following-
Moveable Collateral - Fixed Deposit
Immoveable Collateral - House, Bungalow, Flat, Shop, Non-Agricultural Land.
If the person has enough money in the bank even then should he apply for an education loan or should he use his own money?
Yes, he must avail loan even if he has enough money for higher studies either with him or with his parents. Following 3 points support this :
- Increasing cost of education
- Reducing financial burden on parents
- Income Tax Benefits under Sec 80E of income tax act
What is co-borrower? Who can become a co-borrower?
The Co-borrower is a person who agrees to co-sign and execute the loan agreement alongwith the main applicant. Family members generally become a co-borrower due to risk involved in it. Further, following points are mandatory to become a co-borrower :
- He should be an Indian citizen.
- He should provide required collateral security.
- He should be able to pay the interest in the moratorium | holiday period.
- He should be able to repay the loan with interest if the student makes any default.
What is moratorium period in education loan?
Moratorium period means the sum total of the study period and grace period.
Why is the guarantor required?
A guarantor under an education loan is required because if the applicant defaults in repayment of the loan due to any reason, the banks recover the same from the guarantor.
Can student's friends become the co-borrower?
Student's friends cannot become co-borrower because banks' policy does not permit for the same. Only family members or guardian can become co-borrowers in an education loan application.
Can student's friend become a co-applicant?
Student's friend cannot become the co-applicant.
From where can I take an educational loan?
The loan is available from almost all branches of different banks providing education loan.Some banks also offer onlineeducation loan facility.
If my father is currently working in the U.S., can he become my co-borrower?
Yes, he can become your co-borrower. For this purpose, he should have an NRI account and the collateral security given by him should be in India.
What is the period for approval of my education loan application?
The time taken by most of the banks is maximum 15 working days from the date of submission of the loan application by you. Point to note here is that your loan application alongwith all the required documents have been submitted in full.
Can banks refuse to accept applications, if the marks of the student are less than 60%?
No, they cannot refuse.If any student has got admission on merit basis, he/she is eligible for education loan under IBA scheme.
If I have some complaint, where should I go?
You have to meet the Regional Manager of the bank from where you have taken loan, in case you have any complaint from the bank regarding not following the guidelines, delay in disbursement, harassment, etc., and submit your complaint in writing. Further, if the complaint is not resolved in certain reasonable time, you can also lodge the complaint with the Chairman of the concerned bank and also to Reserve Bank of India (RBI).
What is a holiday period?
A holiday period is the maximum period provided to the student before he/she starts paying the loan's Equated Monthly Instalments (EMIs) to the bank.
This period is generally between 6 months to 12 months after the student has got an employment or he has completed his course, whichever is earlier.
How is the margin amount calculated?
A bank has the option to either give whole amount of the total cost of studies or a fixed percentage of the total cost as loan. This difference between the total cost of studies and the loan given is called a margin. This margin is paid by the applicant out of his/her own pocket.
An example to understand the margin is suppose a bank offers a loan for an M.B.B.S. course and the margin is 15%. Then the bank will sanction the loan as 85% of the total cost of the course and the remaining 10% will be borne by the student directly.
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