#FinancialBytes: Applying for education-loan? Here's what you need to do
What's the story
With education becoming expensive and the cost of higher education skyrocketing, education loans have become a necessity for students.
Education loans can come in quite handy and students looking to get quality education can opt for these loans without worrying about the cost of education and repay after completing their course.
Here's what students need to do before applying for an education loan.
#1
Find out whether education loan facility is available or not
Before applying for an education loan, students should do proper research and find out whether loan is available for the course and college of their choice.
While loan facility is available for most courses and colleges, especially reputed colleges and popular courses, it's advisable to approach shortlisted colleges or banks and know if the course they are interested in is covered by loan.
#2
Choosing a good course and reputed college is essential
Students should realize that the reputation of colleges/universities and popularity of courses/programs matter a lot for sanctioning of education loans.
The institutes they choose should have good reputation and the course should be well-known. This will improve one's chances of loan approval as it increases the bank's faith that the applicant will find a job in time to repay the loan.
#3
Do proper research, choose banks with low interest rates
Before finalizing an education loan, students must do proper research and shortlist a few banks and know the interest rate charged by each lender to compare them.
They should have an idea about various factors due to which the interest may vary, including the loan amount, repayment tenure, etc.
One should choose the bank that offers the lowest interest rate to reduce their burden.
#4
Know whether the bank requires a collateral or guarantor
Students should also check if the shortlisted banks require any security collateral or guarantor for approving the loan.
However, collateral is generally required only if the amount of the education loan is big. Public banks typically do not need collateral for loans of up to Rs. 7.5 lakh while private banks and financial institutions provide collateral-free education loans of up to Rs. 4 lakh.
Information
#5: Ensure you have enough savings for down payment
Most banks provide 100% loan if the amount is below Rs. 4 lakh. However, if it exceeds Rs. 4 lakh, applicants have to pay 5% in advance (15% down payment for international loans). Students must ensure they have enough funds for the down payment accordingly.