What To Look For In Education Loan?

You might have heard many people say that higher education is left for upper and upper middle class, people, especially when we take into account expensive courses like management, flying, etc. It is because the cost of education has sky-rocketed in the recent past and is expected to rise even further. This is where education loans come to the rescue to make education affordable for all.

To make a well informed decision on education loans, it is advisable to always compare the interest rates and other comparable factors of various banks and zero in on the most cost-effective option. Some of such factors are mentioned below:

1. Interest rates

Interest rates vary from bank to bank. Some banks provide loans at fixed rates of interest while others provide loans at floating rates of interest. It is in your best interest to compare interest rates of various banks and find out the comparatively cheaper ones. You can do this by using online comparison websites and tools.

Here, a person needs to decide whether he should go for fixed interest rate or floating one. In fixed rate, the rate of interest remains same throughout the tenure of loan; whereas in floating interest rates, the interest rate keeps on increasing or decreasing as per general interest rate scenario in market. Hence, if you feel that market interest rates are going to increase, you must go for fixed interest rates, otherwise floating.

2. Repayment tenure and schedule

Most of the banks have repayment tenure of 5-7 years. In case of education loans, repayment starts after moratorium period, which is 6 months after getting the job or 1 year after completing the course, whichever is earlier.

3. Processing and other allied charges

There are various allied charges other than interest rate that are levied by banks for processing of loan and other services. These charges include processing fees, documentation fees, prepayment and pre-closure charges. These charges vary from bank to bank and differ for individuals studying in India and abroad. Some banks have fixed charges whereas others levy a percentage of loan amounts. It is advisable to compare and find out the lowest charging bank as charges can increase your monthly installment. Also, if you are taking lesser amount of loans, find out whether the rates levied as percentage are effectively lesser for you.

4. Processing time

All banks are operationally different and take different time to process the loans applications. Knowing the processing time of loan is important to know by what time the amount will be disbursed. Here, you can match this time with the time given by the institute to submit fees. One loophole here is that there are chances that banks have mentioned a lesser processing time on their website and take longer in real conditions. For this, you can either get in touch with the existing customers of the bank or check on online user platform about the services of bank.

5. Discounts, insurance and other freebies

Discounts are available for students taking admissions in premier institutes and for girl students. Here, one needs to check whether his institute falls in the list of banks’ premier institutes and whether any of the applicable discounts.

In freebies, some banks offer free insurance along with loans and deduct the premium along with loan EMIs, or else give it for free. Other than this, to attract customers, banks offer various freebies. It is for you to check whether those freebies are worth going for.

So, stay informed, make a wise decision and make education affordable.