Things You Need To Know Before Applying For Education Loan For Higher Studies
Approximately, Rs. 1 crore is what my friend spent over two years to get her daughter educated in the renowned London Business School. This information could very well be resonating your bit of story too. Everyone wants to be in one of the top educational institutes for their higher studies, the cost of education is, however, increasing rapidly. In fact, the cost of higher studies at reputed institutions is already quite high. In such condition, the education loan comes as a savior for those who aspire to study in esteemed institutes but do not have a strong financial background.
As an ambitious student, you may be ready to take on any challenge to get admission into your dream college – for you are sure it will be the ticket to your dream career. And, your parents too may not be wanting to leave any stone unturned to fulfil your dream. But, more often than not, financial crunch poses a major hurdle.
Increasing admission and tuition fees, accommodation, travel, and living expenses do require a handsome amount of fund. In such a scenario, education loans come as a respite, but, it is wise to consider multiple factors before applying for.
What to Consider When Applying For an Education Loan
The sphere of education loan is so dodgy and has many questions in the air like criteria, interest rates, how to apply and repayment. Here in this article we have discussed few basic things that you need to check before applying for a study loan.
Is Education Load Expensive and difficult to avail: Increased number of defaulters in the past years have led banks to increase the interest rate to 12-14% from the previous 9-11%. In addition, if you apply for a loan above Rs. 4-lakh, you will have to provide either a guarantor or security as collateral or both.
So, apply for an education loan with parents as co-applicants to maximize your chances of getting a loan. But, ensure that they have maintained a high credit score, failing which your loan may get rejected. You can also consider opting for a personal loan for education, as personal loans do not require any collateral.
College Placements – Claims vs Reality: Many colleges promise 100% placement with a high salary, but in reality, it could be quite the opposite. Also, there are many courses such as liberal arts and humanities which do not have high placement rate. In such scenarios, it will be difficult for you to repay the education loan.
So, you must work smart by doing a complete background check of the college and course you are applying, talking with alumnus, researching on job prospects, in addition to keeping the window for part-time jobs open.
Single education loan may not be sufficient: Most of the banks offer Rs. 10-lakh for domestic education and Rs. 20-lakh as the maximum loan amount for foreign universities. This amount may not be sufficient to cover the entire cost of your education; moreover, foreign universities also require you to buy an insurance cover, thereby adding to the overall cost.
Thus, make a detailed budget and factor-in aspects like the possibility of getting scholarships and student grants, part-time work options and average salary packages. Here, personal loans could also be a wise option.
Consider the impact of your education loan on future credit needs: As a student, if you avail an education loan, it becomes your first credit. Thus, if you miss timely payment of EMIs on your education loan, it will negatively reflect on your credit history impacting all future loan approvals and interest rates. So, ensure that you do not default in payments.
As an afterthought, you must research well and plan smartly before taking an education loan so that you can repay it without much burden.