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3. The education loans can fund your higher education. The process is simple
and if followed can offer you access to funds to pay your fees and other
expenses. One must pay off his education loan to remain creditworthy.
After students pass out from schools, funding their higher studies is both a
momentous event and a dilemma faced by parents. The costs of higher
professional education have gone through the roof. Education loans come in as
much-needed financial succour to help talented and meritorious students
realise their dreams of studying in reputed professional institutes.
The most alluring feature of education loans is that they can be repaid after
the completion of the particular educational course. This loan generally covers
all expenses incurred towards the tuition and other fees, library charges, hostel
and mess charges, cost of books and equipment, maintenance, caution
fund/building fund/refundable deposit and cost of passage (for studies
abroad), etc.
Here is a lowdown on the entire education loan process.
4. How to apply
Students applying for education loans can approach public sector (nationalised)
banks and private sector banks that offer educational loans for professional
studies in India and abroad.
However, before approaching these banks, it is crucial to have sufficient prior
knowledge about the various education loan schemes and their pros and cons.
Also, all the possible expenses should be calculated, whether it is tuition fees or
boarding and lodging expenses, before you avail an education loan. It will help you
to arrive at the precise amount you need to take as loan.
The second step is to finalise the financial institutions from which you should take
the loan – government banks, other government financial institutions or private
sector banks and institutions. Government loans are highly subsidised and require
the interest to be paid after completion of education in easy-to-pay instalments.
But,some reputed financial institutions also offer loans at competitive interest
rates. You should do a thorough research on all the terms and conditions regarding
the moratorium and repayment periods, etc, when you apply for an educational
loan.
5. To be eligible for an education loan,
you should be an Indian national
and must have obtained admission
to an approved professional or
technical course at a leading
educational institution in India or
abroad through stipulated entrance
tests or the due selection process.
The lenders prefer students who
have a consistently good academic
record. The loan applicants should
have an earning parent or guardian
as a co-applicant to the loan. The
exact amount of educational loan is
subject to the individual repaying
capacity of the parents or student.
Loan eligibility
6. The education loan process
Once banks receive applications for an educational loan, they determine
the period of the loan that normally does not exceed five years as well as
the margin money that has to be paid by loan-seekers. Generally, for a loan
above Rs 4 lakh, you have to furnish the minimum down payment
(payment from your own sources) of five per cent for studies in India and
fifteen per cent for studies abroad. However, the requirement for the
minimum down payment is dispensed with in case of loans below 4 lakh.
The course for which the loan is being taken should justify the amount of
loan. Mostly, lenders grant the maximum amount of Rs. 10 lakh for studies
in India and Rs. 20 lakh for overseas professional education.
7. Planning the loan repayment
Generally, Overseas education loan have a repayment period ranging
from five to seven years and the EMI starts from the first year after the
course completion or six months after the loan applicant secures a job.
But, in some cases, the repayment period starts within six months of
course completion. In case a student finds it difficult to service the loan,
it is advisable to request the lender to re-schedule the repayment period
or seek for a moratorium period.
If you secure a well-paid job on completion of the course, the repayment
can be accelerated to repay your debts as early as possible. Thus, you can
maintain your credibility and good track record, as well as save on your
first earnings. Significantly, students can prepay educational loans
without attracting any penalty.
8. Implications of moratorium period
Students need not pay interest during the moratorium period. But, there is a
cost. For instance, if you avail a loan amount of Rs 5 lakh with the
moratorium period of three years and loan repayment period of seven years
at an interest rate of 13 per cent per annum, a simple interest is calculated
on the disbursed amount from the date of disbursement. A compounded
interest payment starts from the first EMI date.
Source:
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