A student loan is an investment in your future. It can help you achieve the dream of a college education whether overseas or in India. You can use a student loan to pay for a range of expenses other than tuition, such as accommodation, books, etc. But most lenders will approve your student loan only after considering your age, credit score, any existing loans, etc. That’s why it’s important to understand a few factors about student loans before you take one out.
- Education loan eligibility criteria
The first thing you need to consider is whether you meet the education loan eligibility criteria set by the lenders or not. Most banks will require you to be an Indian citizen between the ages of 18 and 35 and have an acceptance or admission letter from a recognised institution before they lend to you. Several reputed banks like IDFC FIRST Bank have a simple education loan process and easy eligibility criteria. But it is still recommended to check with the lender to see if your chosen courses, expenses, and universities are covered.
- Secured and unsecured student loan
Student loans are generally available in both secured and unsecured forms. A secured loan will require some collateral, like property, while an unsecured loan does not. The interest rates on secured loans are usually lower, but if you default on the loan, the bank can seize your collateral. Unsecured student loans typically have higher interest rates, but they may be easier to obtain if you don’t have any assets to offer as collateral.
- Interest rates
Education loan interest rates can vary significantly based on factors such as loan amount, repayment tenure, eligibility, etc. The interest rate on your loan will have a direct impact on the overall repayment amount. However, some reputed banks like IDFC FIRST Bank offer education loans starting at just 9% per annum. So, it’s worth considering such lenders to make sure that you get affordable and flexible education loan interest rates.
- Terms and conditions
Make sure you read the terms and conditions of the loan carefully before signing any documents. This includes the repayment schedule, prepayment penalties, and what happens if you default on the loan. Also, there might be some hidden charges that you may not be aware of. It is only by reading the fine print that you will be able to identify these charges and avoid them.
- Concept of margin money
You can consider margin money as a contribution where you have to pay a part of the total expenses yourself while the bank will pay the remaining amount. For example, say your course fee is Rs 15 lakh, but you qualify for a student loan of Rs 12 lakh. Here, you will have to pay the margin amount of Rs 3 lakh by yourself.
Also, some banks may not have any margin requirement up to a certain extent, but it is advisable to always check the margin requirement of the lender before applying for an education loan.
Closing thoughts
Taking out a student loan is a big responsibility as there are certain things to consider, such as the interest rate, repayment plan, and whether you can even qualify for one. But if you are mindful of the crucial factors mentioned above, it can help you finance your education and allow you to achieve your career goals.
