The contemporary job market is highly competitive with the predominance of artificial intelligence and automation. A regular education is no longer adequate when it comes to bagging the right job. Additional and highly industry specific academic pursuits are required for developing special skills and industry wise competencies. However, getting good degrees from top institutions both in India and other countries, can be really costly, particularly in fields like management, engineering and medicine among other sectors. In case you do not want to dip into your family savings, you can raise funds in many ways in recent times.
Education loans can be taken from public sector banks, NBFCs, peer-to-peer lenders and Fintech companies. However, before applying, you should carefully work out all the expenses that have to be taken care of by the education loan, i.e. tuition fees, security deposits, living expenses, housing/accommodation, transportation and so on. Once you decide the accurate amount, you have to find the best possible lender for your needs. Seek financial institutions that may have tie-ups with the educational institution in question. You should also check factors like the rates of interest, eligibility criteria, collateral needs, repayment terms and conditions, profile of co-borrowers required, the percentage of tuition fees covered and the moratorium period.
You should also have an idea of the average placement figures from the educational institution where you will enroll at. This will help you conservatively estimate your income in the future, enabling repayment of EMIs accordingly and you can plan the loan tenor as well. Also check whether there are other avenues like financial aid, scholarships, bursary and grants which can help in lowering the loan amount.
Most banks provide education loans for graduate and post graduate studies. There are categorized loans offered by some banks as well. SBI has the Scholar Loan for those who get admission to top institutions like AIIMS, IIM, IIT and NIT. There is also a Global Ed-Vantage loan for studying abroad. Bank of Baroda has the Baroda Scholar Loans for studying globally and the Baroda Gyan Loan for higher studies in the country. The loan amounts may vary between Rs. 50, 000 and Rs. 1.5 crore. Bank of India also has the term insurance coverage which is optional where the premium is an item of finance. In most cases, rates of interest range between 8.5 and 15% for those studying in India. Women have a 0.5% concession across most banks and there are processing and pre-payment charges which may account for 1-2% of the entire loan amount.
The margin money is the loan amount percentage that you will have to shell out. For loans lower than Rs. 4 lakh, most banks do not require margins. However, 5% of the amount is the margin for loans above Rs. 4 lakh if you are studying in India and this is 15% for courses abroad. In case the loan amount is even higher, there may be a collateral or third party guarantee required by banks. SBI, for instance, does not require collateral or third party guarantees for loans up to Rs. 7.5 lakh. However, higher amounts need guardian/parents as co-borrowers along with collateral security. Bank of Baroda also needs third party guarantees for loans above Rs. 4 lakh. Loans above Rs. 7.5 lakh need to be backed by collateral security equivalent to 100% of the amount. Axis Bank also requires third party guarantees or collateral in specific cases.
Education loan tenors range between 7 and 15 years. Repayment commences post the moratorium period which is 1 year post completion of the course or 6 months post getting a job, whichever comes sooner. Banks will start imposing interest once the loan is disbursed and the interest can be repaid steadily during the course period for lowering the overall burden of EMIs. The Pradhan Mantri Vidya Lakshmi scheme offers education loans for middle class and poor students. There is a Model Education Loan scheme for students belonging to the economically weaker sections.
Several NBFCs such as Avanse Financial Services, Credila and InCred offer education loans. These are more flexible in terms of the eligibility criteria and other requirements. InCred offers loans between Rs. 1 lakh and Rs. 1 crore while the others have no upper limits on the loan. Interest rates are dependent on the institution type, co-borrowers and the collateral offered. P2P lenders also offer funding for those who do not qualify for education loans from NBFCs and banks. Funds are available from platforms like Faircent, MoneyTap, CreditMantri and LoanTap among others.