Pursuing higher education is a well-planned life event for many students and for their parents. As the competition in the job market is increasing and the demand for skills in different sectors of the economy is dynamic, loan for education is crucial, especially for the growing middle class in India.
Currently, one can easily online apply for an education loan in India. Banks seek the attention of students and parents with their offers on some occasions. As the decision involves a thorough understanding of each terms and conditions set by the lenders, there are a few aspects which a loan-seeker must look at during the process.
Loan amount– According to your need, check if the particular bank is matching your maximum loan amount request. One should compare the amount offered by as many lenders as possible.
Interest charges: What is the charge your lender has fixed as the interest for the loan repayment.
Repayment period– The maximum time period offered by the bank to repay the loan.
Moratorium period– It refers to the loan repayment holiday when the borrower does not make monthly instalment payments on the loan borrowed. As per govt’s ‘Model Education Loan Scheme’ one year moratorium is provided for repayment after completion of studies in India or abroad.
Expenses covered– Check what are the expenses your proposed loan is promising to cover. Usually, tuition, hostel fees, travel expenses for students studying abroad, cost of books etc. are covered. However, one must check each detail properly to ensure their requirement is fulfilled.
Processing charges– Banks charge fees for processing the loan amount. Check the amount carefully and compare between the lenders.
Collateral– Whether your loan amount needs some collateral.
Loan margin– Also known as margin money, it is the portion of the total cost that is the student’s own contribution while availing an education loan. The remaining amount is then paid by the lender in the form of an education loan.
Courses– Check whether your loan provider is ready to sanction you a loan for a course you are opting for.
Institutes– Check if there are any clauses related to certain institutes in India or abroad.
The interest paid by individual borrowers (students) for the purpose of higher education can be deducted under Section 80E of the Income Tax Act of 1961.
What is Vidya Lakshmi portal?
Vidya Lakshmi portal has been developed under the guidance of the Department of Financial Services, (Ministry of Finance), Department of Higher Education (Ministry of Education) and Indian Banks Association (IBA).
Students can view, apply and track the education loan applications to banks anytime, anywhere by accessing the portal. The portal also provides linkages to the National Scholarship Portal. The scheme envisages loans up to Rs 7.5 lakh for studies in India and up to Rs 15 lakh for studies abroad.
For loans up to Rs. 4 lakh no collateral or margin is required and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs 4 lakh the interest rate will not exceed PLR plus 1 percent.
The loans are to be repaid over a period of 5 to 7 years with provision of grace period of one year after completion of studies.
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