Education is of prime importance in today’s time; it not only helps one go an extra mile in life, but is good for personal growth as well. However, with the cost of education rising at a rocketing speed, not many students in India are privileged to avail the finance required. For such students, opting for an education loan is the right choice as it helps them pursue their higher education without having to worry about the funding. With education loans, students in India can opt to pursue higher education from premier institutions that have a high fee. However, an education loan can land one in a big debt trap if it is not managed well. Below are a few things you should know before opting for an education loan in India.
What is an education loan?
An education loan is a loan you can avail to fund higher education expenses of your own or your child or your spouse. Even if you are a legal guardian to a student, you can take the loan to fund their education expenses as well. The loan can be availed to fund higher studies at a college or university in India or abroad.
Eligibility criteria and documentation for the loan: The eligibility criterion for an education loan is more or less the same as that of a personal loan. The requirements can vary from lender to lender, but basic eligibility criteria check of credit score, income, existing liabilities, age, residence type, etc. is done. The eligibility and documentation requirement for education loan may also vary depending on the nature of your job i.e. salaried or self-employed.
Have a repayment plan: When you take an education loan, it is important that you have a budget plan in place to ensure you are able to repay the loan on time. When you have a loan in your name or on your parent’s name, budgeting is an important part and it is always a good idea to pick up a job as soon as your course is complete. Paying off the loan before the end of the tenure helps you stay stress-free before the EMI burden takes a toll on you. You can also use the extra cash or bonus to make part payments.
Secured or unsecured loan: Decide whether you want to opt for an unsecured loan or a secured one as the loan type can have a significant impact on the interest rate, loan tenure and even the loan amount. Student loans are generally available in both variants. Secured student loans will require you to pledge a collateral like your home, jewellery and other assets, whereas unsecured loan amount is offered solely based on your credit score, income, age and other factors. Also, the interest rate for a secured loan is low in comparison to unsecured loans.
Loan tenure: Banks, NBFCs and digital loan lenders in India offer education loans for tenure ranging from 8-10 years depending on the nature of the loan. Loan tenure is usually high in case of secured loan. There is also an additional moratorium period i.e. tenure of around 6-12 months after the completion of the course that requires you to pay only the loan interest and not the loan EMI as a whole. This period also varies from lender to lender.
Choose the right lender: When looking for an education loan, applying with the right lender is important to ensure you don’t end up paying a high overall amount and can get the loan amount at a low interest rate. You can apply for an education loan upto Rs. 10 lakh with Credit Fair at ZERO interest rates and minimal documentation.