How to choose the best education loan

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Best education loan
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How to choose the best education loan
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Keep these five things in mind when you approach
a Finance Institution for money to finance your
education. 

• Education loans have made life easier it is one
  of the popular means to fulfill academic dreams
  these days. Education costs have become extremely
  expensive and often even after planning
  appropriately, one tends to fall short of funds.

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1. Eligibility for loan

• Most courses in India / Abroad offered by
  recognised educational institutions, qualify for
  loan, however, it makes sense to check with
  popular banks on the eligibility to avail loan,
  even before you embark on the procedure to apply
  for the course. Further, most banks have a
  maximum loan amount that is extended -- typically
  for studying in India, the maximum limit could be
  around Rs 10 lakh (this could vary from bank to
  bank and on a case-to-case basis) the maximum
  limit for studying abroad could be up to Rs 20
  lakh.
• For loans up to Rs 4 lakh, one normally does not
  require pledging any collateral, co-obligation of
  parents / guardian would be enough. For loans
  exceeding this amount, the bank could call for 5
  per cent to 15 per cent margin for safety
  purposes. For domestic studies, the margin amount
  could be lower as compared to overseas education.

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2. Fees, tenure and moratorium

• Like any other loan, education loans too come
  with their baggage they have processing fees,
  administrative fees, documentation costs etc.
• The tenure of education loan could range from
  three to seven years. The moratorium period or
  the gestation phase (the period wherein one need
  not pay the EMIs) is often equivalent to one year
  in addition to the course period or six months
  after getting job, whichever is earlier.

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3. Interest rates and their chargeability

• The primary factor that one should be looking at
  whilst choosing an education loan is the interest
  rate. Like other loans, here too there is the
  option of floating rate / fixed rate. Depending
  on ones outlook towards interest, one could
  choose the rate that is appropriate.
• If one anticipates interest rates to take a
  downward turn in the coming years, then one
  should opt for the floating rate interest rate,
  on the contrary if one expects it to move up, one
  should go for the fixed rate. If the tenure is
  close to seven years, then it is highly likely
  that one would see both up-down cycles of the
  interest rates.

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4. Understand pre-payment charges

• In all likelihood, you may end up with a well
  paying job at the end of the course. You may also
  want to rid yourself of the loan liability that
  you are now required to lug around with. Most of
  the other loans have a pre-payment penalty clause
  built in (recently waived off in case of home
  loans) and one should diligently check regarding
  this clause.

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5. Documentation and eligibility of individual

• Alongside a duly filled application, the bank
  would call for the following documents passport
  size photos, address proof, age proof, copy of
  the mark sheets of the qualifying examination,
  course admission letter, course fee which is
  shown in prospectus and guardian's / parents'
  income proof.
• An individual planning to borrow should be an
  Indian national, between 16 to 26 years age. The
  co-obligator in the loan should have a steady
  source of income and the ability to repay in case
  of default from the primary party (the student in
  this case) and the course should be recognized by
  the Government.
• Choosing an Best education loan could be a tricky
  affair, it would do some good to do your homework
  and also check with the educational institutions,
  if they have any tie-ups, because this could in
  the least help one to reduce paperwork
  significantly.

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