My cousin Vandana who is based out of Ghaziabad was on a short visit to Mumbai recently. As we were meeting after many years, it was obvious that we discussed our children. The discussion involved her son Arjun who completed his B.Tech last year and is an MBA aspirant in a Foreign University with major in International Business. So much so that he has identified the Institution and course also in an Institute in California. So what was the hitch?Vandana confided in me that she found the cost prohibitive (Rs. 30+ Lakh approx.) hence was reluctant about Arjun joining MBA overseas.
Going by my experience at Apnapaisa, I came up with an instant solution – Education Loan.
Vandana was pleasantly surprised at the suggestion and she found it quite feasible too. International MBA with Indian Education Loan – good combination. Moreover it will not burden her financially and will enable Arjun also become more responsible ( hopefully!). Now she wanted the details to proceed in the matter. Now it was my turn to dig deeper to further enlighten her on education loans.
Education loans are gaining immense popularity in the recent times. Here in case of Arjun, Education Loan became key deciding factor for pursuing higher education, and I am sure it is the deciding factor for many Arjuns of this world. Most Nationalized banks, Private banks and Foreign banks provide education loans, the name which needs special mention here is Credila Ltd. (Subsidiary of HDFC Ltd.) which specializes in Education Loans. One of the important criterions for this loan is that student should be over 18 years of age but if he/she is not, then the loan is granted to the parents. So if you fulfill this criteria then proceed with the other factors like does my courses qualify? How much loan can I get? What are the documents required? What will be the repayment schedule? What expenses does the loan cover? Do I have to provide collateral or guarantor?
But most pertinent one is how to select the right lender? You should keep following things in mind like low Interest Rate, No prepayment penalty, Minimum or no collateral requirement and flexible repayment options. Education loan may be viewed as an important means of value enhancement in a person’s career. You can visit price comparison sites like apnapaisa.com to know rates offered by various lenders. Student can also exercise choice between fixed and floating rate of interest.
Coming back to loans, banks generally offer loans for MBAs, Engineering, Medicine and other professional courses whereas normal courses like B.Com or B.A. do not find favour with the banks. Many banks have tie-up with Institutions/ University offering graduate/post-graduate courses /university recognized by UGC/AICTE/Government etc.
The costs covered in the loan include - Fees payable to the college, school or hostel, including tuition fees, examination, library and laboratory fees, purchase of books, equipment, instruments and uniforms, caution deposit, refundable deposit supported by the institution's bills or receipts, travel expenses for studies abroad, Buying computers essential for completion of the course and Any other expenses needed to complete the course, like study tours, project work and theses.
Many find it a cumbersome process to apply for an education loan as it requires lot of documentation. Unlike other loans where the talk of documents relating to say property, might come in at a later stage and may cause delay. In case of education loans, documents relating to admissions are mandatory even before the bank considers the loan application. The bank will verify the enrollment of the student from the concerned institute. One may also require collateral security such as papers relating to property to be mortgaged if the loan amount is above Rs. 4 Lakh. Loans upto Rs. 4 Lakh do not require any collateral or any income proof.
In Arjun’s case, the costs involved are way above Rs. 4 Lakh hence higher amount will be required but PSU banks normally provide Rs. 20 Lakhs as maximum loan amount. That too is a great help towards fulfilling one’s dream of higher education.
ApnaPaisa helps Indian consumers take informed decisions like: Which home loan is best for me? Do I need life insurance? Author can be reached at www.facebook.com/apnapaisa.