Education at the domestic institutions has become more expensive these days and also there is an increasing trend of students going abroad for higher education. These are the primary reasons why more and more students are opting for the facility of educational loan in India. The leading banks of India have facilitated such loans for deserving Indian students, making it much easier for students to procure such loans and fulfill their dreams of getting excellent higher education. However, students need to keep in mind certain factors before deciding which educational loan package they should pick up.
Here is a list of 6 things to consider when taking out student loans in India:
1. Rate of Interest
Rate of interest is the primary consideration to bear in mind while finalizing a student loan in the country. The high level of competition among different banks has ensured that there is a healthy ROI on students’ loans available in the Indian banking sector. Students would also find out whether the interest charged on the loan is fixed or floating. Preference should be given to floating rates as fixed ones tend to be on the higher side. The rate also depends on the amount of loan to be taken.
2. Waiver Period
It is also important to consider the waiver period as the main clause of the student loans is that students are not required to make repayments until they get a job after completing their education. The waver period varies from bank to bank and the place where the students get the highest waiver period gives them convenience of getting settled before starting to pay back.
3. Down Payment
A down payment has to be paid at the time of taking education loan, which may vary between 5% and 20%. Since the amount has to be paid upfront, the borrower needs to consider the most convenient option among the available ones.
4. Mode of Charging Interest
Different banks may charge the interest on education loans using different modes. Some may base it on daily reducing balance while others may go for quarterly reducing balance. This may lead to accumulation of interest and the burden of repayment may increase in the long run. Therefore, you should choose a student loan where you get the option of clearing the interest part at an immediate basis.
5. Collateral or security
Another thing to consider while taking out student loan in India, is the fact that whether a bank is asking for security or collateral and to what extent. Most of the banks ask for the collateral if the loan amount exceeds a value of Rs 4 lakhs. This factor determines the choice of a student while taking a loan.
6. Fees and Other Charges
When a student loan is to be procured, it is accompanies by several fees and charges such as processing fees, documentation charges and administrative charges, which raise the loan cost to a considerable extent. Students should approach those banks for loans where these costs are minimal.
A student needs to compare the student loans from various banks on the basis of the factors mentioned above, so that he can find the one which exerts least pressure on his pocket, yet paves the way to fulfillment of his educational goals.