Key Things to Consider Before Availing an Education Loan

With the rising cost of education, more students are looking to take an education loan to pursue higher education. Several banks and private financial institutions in India offer education loans at attractive interest rates. Whether studying abroad or in India, student loans in India act as a financial bridge, enabling students to achieve their academic objectives. While there are many financial institutions offering education loans, there are a few essential things to consider before applying for them.

Eligibility Criteria
The first thing to check is the education loan eligibility criteria and whether you meet them. The requirements might slightly differ between the lenders, but they are more or less the same. Factors like credit score, income, or any existing loans may be considered by the lender. They might also require a co-applicant, such as a parent or sibling, when applying for a loan. Furthermore, not every course, college, or university qualifies for an education loan. You should check with the lender to learn more about the courses or colleges for which they offer the loan.

Interest Rates

Another crucial factor to consider while applying for a student loan is the interest rate, as it can affect the monthly EMI. You should compare interest rates from different lenders, as the education loan rate of interest can vary significantly between lenders. Typically, the rate of interest varies depending on the course, college, loan amount, and tenure. Additionally, discount interest rates may be available for female applicants or people from reserved categories.

Secured or Unsecured
You can receive education loans with or without collateral. When applying for an education loan, it's important to clarify whether you prefer a secured or an unsecured loan. If you want a secured loan, you need to pledge collateral against the loan amount, such as properties, securities, or deposits. In an unsecured education loan, you can apply without any co-applicant, and there is a flexible repayment option with minimum documentation. Review carefully the loan terms and collateral requirements set by the lender.

Expenses Covered
When choosing an education loan, consider the academic expenses covered by the loan. The expenses the education loan covers include tuition fees, laboratory fees, travel expenses, books, stationery, uniforms, or examination expenses. However, some lenders also cover the insurance premiums as part of their plan. Examine the coverage and exclusions of these education loans. Understanding every facet of the education loan can assist you in preparing financially to achieve your academic goals.

Loan Tenure
Finally, consider the duration of the education loan. Student loans in India have a tenure period of 8 years if you opt for an unsecured loan and up to 10 years if you opt for a secured loan. Longer loan tenure can lead to lower monthly payments, but higher overall interest costs. On the other hand, a shorter loan tenure may have higher EMIs but a lower overall interest rate. It is important you carefully evaluate the financial situation before selecting the loan tenure.

By carefully considering and verifying all these aspects of an education loan, the process of obtaining one can be smooth and easy. With careful financial planning and through understanding of the loan terms and conditions, these loans can open the doors for a brighter future.