As the cost of education rises, banks have started increasing the loan amount. State Bank of India has raised its loan amount by five times and now offers an education loan of up to Rs 1.5 crore for those going abroad to study. But, be cautious when taking an education loan. In most cases, it's the first debt an individual takes in his life. Don't be lax about repayment, as it can hamper your credit score even before you start earning. Here are a few points that can help you zero on options that suit you best
Maximum loan (India): Rs 10 lakh
Maximum loan (abroad): Typically, most banks have a limit of Rs 20 lakh and a few are offering a loan of up to Rs 1.5 crore
Interest rate (India): 9.4-13.5% (varies with lender)
Interest rate (abroad) : 10.8-13.5% (varies with lender)
Collateral: Not required for loans up to Rs 4 lakh
For loans between Rs 4 lakh and Rs 7.5 lakh, lenders might ask for a third-party guarantor. This can be waived if they are satisfied with co-borrower's net worth or repayment capacity
For loans above Rs 7.5 lakh, lenders may ask for additional tangible collateral security like property, mutual funds, bank deposit, insurance, etc.
Watch out for: Choose a university that extends placement opportunities, as you might have to get a job within six months of graduation, to start repaying the loan
Check whether the university/institute has tie-ups with banks or non-banking financial companies (NBFCs). Such tie-ups speed loan processing and result in a lower interest rate
Consider getting a loan before admission. A pre-approved loan serves as proof of funds and strengthens your application
Enquire about the margin money (what you need to pay out of your pocket). None is typically required for loans up to Rs 4 lakh; above Rs 4 lakh, 5% is required for domestic courses and 15% for courses abroad
Repay interest during moratorium period. Maximise tax benefits by repaying entire loan within eight years
NBFCs vs banks: NBFCs charge higher interest compared to banks
NBFCs can disburse loans in 5-10 days; public sector banks might take three-four weeks
PSBs may ask for proof of admission at the time of applicatio