Suitable for a student loan
- The applicant must be a resident of India.
- The applicant must be between 16 and 35 years old.
- The applicant must have either obtained admission to one of the designated educational institutions or a college approved by the bank.
- Most of the government and some of the major private institutions are recognized by the relevant competent government agency and are usually included in the list of approved educational loan institutions.
Keep in mind that: The education loan covers the full school fees until the completion of the course and is paid directly from the bank to the institution (the money is not handed over to the students).
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All costs of room and board incurred by the students (including moving to another city for study) must also be included in the student loan.
List of Expenses Included in the Student Loan
A student loan covers almost all types of study costs that a student incurs. Almost all banks in India provide loans that cover tuition fees as well as other institution costs. It is better if students can check in advance whether the bank or financial institution of their choice will cover all costs or not, to avoid inconvenience later.
Study costs covered by a student loan
- Without registration
- Tuition fees
- Capitalization costs
- Exam fees
- Counseling Fees
- Laboratory Fee
- Hostel fee
- Library fees
- Transportation costs
- Food (junk) costs
- Study visits and study travel costs
Non-academic expenses covered by a student loan
- Construction costs
- Student insurance
- Refundable Caution Money
- Transport and commuting costs
- Laptop, 2-wheeler
- Equipment and project costs
- Student welfare contribution
- Entrance Exam Fee (GMAT, TOEFL, LSATS, MCAT, GRE, SAT exam and so on)
- Costs during the flight (study abroad)
List of things to keep in mind before applying for a student loan
Choose your institute carefully
Most Indian banks and financial institutions have a list of accredited universities and usually limit themselves to making loans to the universities or colleges listed with them. They also have a few blacklisted universities for which applications are turned down. If your chosen institute is not in the bank’s list of pre-approved universities, it is better to look for banks or other institutions that provide education loans based on the reputation of the institute. Such banks consider certain factors such as rating, job placement, infrastructure before approving an education loan.
Students who intend to study in India can apply to Universities recognized by the Government, University Grants Commission (UGC), Institute for Mediation and Conflict Resolution (IMCR), All India Council for Technical Education (AICTE) and so forth. For those who intend to study abroad, the reputation and reputation of universities should be sought.
Maximum amount for student loan
For higher education in India, one can take out a loan of up to Rs 75 lakh with a maximum repayment term of up to 15 years. If you are looking for education abroad then the maximum loan amount available to students is Rs 1.5 crore with a maximum repayment period of 15 years.
Interest and processing costs
The interest rate for education loans in India is between 8.50% – 15.20%. Some banks offer interest rates at discounted rates if you pay the interest on time. Few banks even offer an allowance for female applicants at a rate of 0.5 percent.
One should also check for processing fees which are sometimes refunded based on the bank from which you purchase the loan amount. Some lenders set the processing fee between 1% – 2% of the full loan amount. In the case of public and private banks, the processing fee varies between Rs 5,000 – Rs 10,000.
Keep in mind that: You may incur additional costs during the loan application process, such as administration and service fees.
Determine the marginal amount
Marginal amount refers to the amount one has to pay and it varies between 5% – 15% based on various factors such as the assessment of the institute, the location, the subject. Bank usually finances 80% – 90% of the total amount needed for education, the rest is to be collected by you (or parents) from your saved money. Some banks and financial institutions even offer to pay the full fee based on the student’s academic background and performance over the years.
Collateral and co-applicants
As per the RBI standards, if your loan amount is less than Rs 4 lakh, you are not required to provide any collateral nor do you need to arrange anyone as a third party guarantee or as a co-applicant. If your loan amount exceeds Rs 4 lakhs, your bank may ask you to arrange a co-applicant. Banks will seek collateral if the loan amount exceeds Rs 7.5 lakhs.
In the case of a student loan, banks usually give a grace period (time frame during which you have received a loan but have not yet started paying off) and therefore it is better if you can plan and pay interest during this term, as the interest is set at a later date. moment will accumulate. simple interest basis during this period. If you start paying your equivalent monthly installments (EMIs) during the moratorium, you can prevent the loan amount from increasing.
About the author
Archana is a content writer at GoodReturns. She has been writing articles on investment planning and personal finance for over two years