Education is one of the most fundamental necessities of a person. But education is not always affordable. For this, services like education loans have proven to be a means to fulfill people’s academic pursuits. In this article, we will break down different aspects of Education loans in terms of its feature, advantages, and its working to help you better understand them.
Who can apply for an education loan?
Anyone willing to pursue education makes them eligible to apply for a loan. It doesn’t matter if you took an academic break or worked for a few years in between. Neither does age matter. Be it abroad or within the country, securing admission to a university makes you eligible to apply for one.
If you are one of those students applying for a loan without any work experience or academic break then you would need to make one of your parents or guardians a co-applicant.
Key feature of education loan
- Securing an education loan takes more than just having admission to a university. Parents’ income source, your university, and your previous academic track record will all be considered while making a decision.
- This loan can be of secured nature or unsecured. Although getting an unsecured loan is very difficult. Many banks do not have the option to apply for a unsecured loan especially if you are planning to study abroad.
- Education loans are given by the government, banks as well as private financial institutions.
- The rate of interest is much higher as compared to other loans. It can range between 10% to up to 14%.
- Education loan is one of those few kinds which offer a mortarium period. This indicates that you do not have to make the installment payment right now as a student. After the course is over, you will have an extension of up to a year during which you are not required to make any installments. As a result, if your course lasts a year and you receive an extra year, your total mortarium term will be 1+1 years.
- If your financial institution can only grant say 80% of the amount you need, you will need to provide proof of the remaining 20% of funds available with you to get the loan sanctioned.
Advantages of education loan
- It gives to the moratorium period. This reduces the stress of paying back immediately and gives you time to find a job.
- Education loans don’t just cover your course fees. From your living expense to local traveling and accessories such as your mobile and laptop can also be claimed under this. This means your loan-sanctioned amount will be more than your university fees.
- The tenure of these loans could be up to a decade long. This gives you ample time to repay your debt.
- It reduces financial strain on your family. With all the features and facilities it provides, it makes it easy for you [student] to repay the loan. Hence it makes your family free of financial strain.
- If you get into a prestigious or a premium institution many banks offer a lower rate of interest as well grant loans without collateral.
- The government provides tax benefits on the interest component of the loan paid.
How does it work?
- Apart from your parent’s income proof and your academic document, you need to provide detailed expense estimation with evidence. Based on the evidence you provide a final amount is determined. This is the amount you need to sustain yourself during your course duration. Based on your documents, the institution will determine how much loan amount can be sanctioned.
- On meeting the criteria and getting approval the bank doesn’t directly disburse the amount into your account. Usually, the major expenses such as your course fees and hostel fees are directly paid by the bank. For the remaining expenses such as groceries and traveling they transfer a lumpsum amount into your account.
Finishing lines
While obtaining an educational loan is an excellent strategy to cover the cost of tuition in the event of a shortfall, applicants should always consider their financial situation before doing so. Also, before choosing a bank to provide your education loan, examine all terms and conditions. To know about banks associated with the government for education loans as well as to apply to those banks refer vidya lakshmi portal. If you wish to learn about other types of loans you can click here.