07 May 2019 | 5 min read
Education cost is on the rise. While overall education is getting costlier, getting a higher education is beyond the reach of people with an average background. Prestigious and renowned institutes whether domestic or overseas have high course fees. It will be difficult to build a career in such a situation if not aided by education loan.
How Does Education Loan Works?
An education loan can be taken by the direct relatives of the student or by the student himself/herself. Direct relatives for education loan means parents and spouse of the student. The education loan covers the total cost of studies or course along with other related expenses. Loan amount, repayment term and other rules might vary from lender to lender.
The student is liable to pay the education loan after completion of the education. While some lenders might require you to repay right after the completion, others offer a relaxation period for loan repayment.
Having said that it is time to consider some aspects that differentiate one lender from another. Without much of the talking, let’s jump right into our core topic – how you can compare education loans to make the best choice.
Total Expenses Cover
When you are looking for the right financial aid to support your higher education, you should check the total expenses covered. There are various education loan options available in the market. But they might not offer full coverage.
A good education loan should offer at least 90% of the educational expenses including all the related expenses such as exam fees, uniform fees, etc. You must check the total amount offered to the applicant before selecting the right education loan for you.
Courses covered by educational loan varies from lending institute to lending institute. You must compare various education loans to check whether your desired course is included or not. But if you choose an education loan that covers a wide number of courses, you can have more freedom with your choice of courses.
Repayment terms are another crucial aspect that you must consider while zeroing down to the best education loan for you. You must read the repayment terms offered by your lending institute carefully. Mostly banks and other financial institutes start the loan repayment after the course is complete. However, there are many lending institutes that offer relaxation period over a loan repayment. This relaxation period can be 6 months after getting a job or one year after completion of course.
Interest rates are the factors you must keep in mind while comparing various education loans to select the one for you. Generally, interest rates are low for educational loans. But the government offers schemes which further reduces the interest rates. These schemes are offered to public banks and selected lending institutions. You must check these government offered education loan schemes as well to ensure the lowest interest rate.
All education loan has basic eligibility criteria which include Indian citizenship, age of 16-35 years and proof of admission. Apart from these basic eligibilities, a student might have to fulfill some additional eligibility. These additional eligibilities depend on the lending institution offering the educational loan. You must test educational loans on terms of eligibility criteria.
When you are looking for the right education loan, you must ensure that you do not have to follow an elaborate documentation process. A critical documentation process can be tiring and harassing. Sometimes it is seen that loan is delayed due to its documentation process. Therefore, you must ensure the education loan you want to has a short and clear documentation requirement.
You might find a long tenure preferable due to lower EMI pressure. But you must keep in mind that the longer the repayment tenure the higher total interest payable. You should compare the tenure and impact on interest caused by it.
Apart from the above-mentioned aspects, you must also keep in mind the tax benefits offered by the educational loan. You must select and list down a number of good educational loans in the market and then compare them to choose the right one for you. When it comes to education, choose nothing but the best.