Have you ever felt that your dream job isn’t possible because you cannot ‘afford’ the investment for education needs? Blogger Bunny is here to talk about Education Loans and give you all the must-know information. So, education loans will no more be a tedious or mystery process after reading this introduction to education loans.
In the last 10-15 years, we have seen a spark in the costs of education as well as career aspirations of students keen to achieve higher studies from top institutes in India or even abroad. There arises the need for a loan which is still now the most acquired and respectful facility among other borrowing verticals. Education loans are a type of loan that is available to finance the expensive studies of a student. It acts as a support system behind every student’s success. Education loans are most common in lower and middle-class families which are taken in regard to support higher education expenses. These loans help them to pursue the education which they dreamed of.
Introduction – Education Loans
High investment in the banking sector has led to the release of a large number of funds for educational purposes. Education loans, nowadays, are easily accessed by a large number of students who have dropped their idea of gaining higher education because of financial shortcomings. Many private and nationalized banks are taking an active part in framing a student’s career.
Introduction to Two types of Education Loans:
Federal student loans:
The federal government sponsors the student loans for federal students.Firstly, the borrower has to complete a free application for federal student aid (FAFSA). The applicant’s status, particularly in regard to their parental dependency different information may be required to complete the application. A credit check is not done in this application process.
The principal amount of the loan depends on the cost of attendance at the school the student is planning on attending. Once the application is complete now their work is to identify the financial aid package that the student is eligible for.
Private student loans:
In some cases, the loan received by the federal government may suggest the borrower; apply for additional funds through private lenders. These loans involve a more standard application process. A credit check is required in this type of loan. Borrowers can directly approach to private-sector lenders for the loan. The approved amount of loan is first disbursed to the school which the student is attending to cover any pending bills, the remaining amount is then sent directly to the borrower.
What does an education loan typically cover?
- Tuition fees, exams, and library fees.
- Books and necessary equipment like a laptop.
- Hostel fees / other accommodation charges.
- Any other expenses needed to complete the course (on a case to case basis).
What are the eligibility criteria?
- You should be an Indian resident between 16-35 years of age.
- The collateral security might be necessary depending on the loan amount.
- Depending on your financial status, there should be a co-applicant.
- The co-applicant could be anyone among parents, spouse, siblings, in-laws, uncles, etc.
What documents do you need to have?
- Copy of admission letter from the college, with the fee structure.
- Mark sheets of SSC, HSC, and graduation.
- Bank statements for the preceding six months.
- Income documents (of self and co-applicant is applicable).
- Grade sheets of any entrance exam like GRE/GMAT/TOFEL.
- KYC documents (recent photo, proof of age, identity, residence, and signature).
What are the interest rates? Are there any other expenses?
- Interest rate ranges from 9% to 18% p.a.
- Processing charges could be between nil to 1.5% of the loan amount.
- There could be other charges/ penalties which would be available on the bank’s website.
Factors that influence the amount of loan an applicant is eligible for:
It is the most important factor that affects the amount of loan; it shows the credibility and financial status of the borrower. If the borrower has not the good financial status of the borrower in the society. If the borrower has not good financial status, then he is not worthy to get the loan as after taking it he will not be in a position to pay that.
Credit score plays a vital role in determining the amount of loan raised. Timely payment of credit card bills and EMI’s on existing loans reflects positively on your credit score.
Value of collateral:
Collateral here means secondary security in place of primary security. There should be some collateral security available to minimize the risk of lenders in case the borrower fails to pay the sum.
Academic history of student:
The student’s academic record also matters in issuing the loan his certificates and documents are perfectly verified. Then, a loan is provided. The lenders actively see the student’s excellence in a particular area to pool their risk.
I hope that by reading this blog on Introduction to Education Loans, something will instill in your mind. Obtaining an education loan is not a gigantic task. It’s an easier way to attain success. As quality education is a dream of every student for a complete and successful life, irrespective of any financial constraints. If you are interested, do visit our blog on introduction to – TOP 5 Banks that Provide Education Loans!
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