Higher education in other countries is really expensive. Private universities' fees are always higher than those imposed by public colleges. Therefore, students in India seek educational loans to finance their education abroad. Because so many banks offer education loans, it can be difficult for parents and students to choose the right one.
Here is a broad description of the loan process.
In conjunction with the Indian Bankers Association (IBA) and the Reserve Bank of India, the Indian government has devised a Comprehensive Educational Loan Scheme (RBI). The scheme covers all courses in Indian and international institutions and colleges.
An education loan covers your course tuition and any other costs associated with your education, such as study materials, lodging, travel expenses, and equipment costs. The loan amount you are eligible for is determined by the course fee and your family's total income.
Any student, with the support of their parents or guardians as co-applicants, can apply for an education loan. The education loan will be reimbursed one year after you complete your studies or six months after you obtain employment, whichever comes first.
All of the essential KYC documents, such as proof of address and identification.
Your letter of acceptance to college.
The fee structure of your course.
Salary slips, bank statements, and tax returns are examples of income papers.
The margin percentage is 15% for educational loans in the US.
Depending on the value of your loan, your bank may require a third-party guarantee or even collateral. A bank-owned insurance policy can be used as collateral. Your policy's premium may be deducted from the amount of your college loan.
Education loans are processed by public banks in 12-15 days, while private banks take 10-12 days. The processing time for NBFCs is between 8 and 10 days. Expenses are covered - Public bank education loans cover 90-100 percent of the costs. Private banks cover 85% of the costs, while NBFCs cover 100%.
Question 1: Is there a tax benefit for taking out an education loan?
Answer: Under section 80E of the Income Tax Act, you will receive tax benefits on the interest you pay for your education loan and deductions on the principal amount.
Question 2: Is there a requirement for collateral on an education loan?
Answer: The amount of collateral or security required varies by bank. The majority of banks follow the broad pattern outlined below:
Question 3: Are any collaterals required for loans up to Rs.4 lakh?
Answer: A third-party guarantee is necessary for loans of Rs.4 lakh to Rs.7.5 lakh, but there is no need for collateral or security.
However, for loans beyond Rs.7.5 lakh, security/collateral is required.
Question 4: Will I be punished if I pay off my student debt early?
Answer: The prepayment penalty policy differs from bank to bank. Generally, banks do not punish borrowers who pay off their loans early.
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Updated on Dec 12 ,2022
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