For students who wish to pursue their studies abroad, there is always an option of getting your education financed if you cannot shell out that kind of money immediately, given our current exchange rate that fluctuates as I write. One of the options that come your way is a Bank Loan. There are many banks that give long term education loan for students going abroad. The best time to search for information on the same is after you are done with your college applications.

While meritorious students often end up earning scholarships, they are often not enough to meet the entire expenditure. So it is imperative to not dismiss the idea of a bank loan. Bank’s education loans cover all education related expenses, such as tuition fee, boarding and lodging in college, supplies such as books, health insurance as well as other living expenses. While the bank doesn’t hand you the amount, they transfer the amount into the account of the university at the start of each year or semester as is the case. To apply for an education loan at any bank, you need the offer letter from the university. Banks offer loans for long term courses, not for short term or vocational. So read the bank’s rules regarding the same.

Also, when your loan amount exceeds 5 lakh, you need another person, called the Cosigner, who signs the loan with you. This person is usually the student’s parent, and they are held accountable in case of debt recovery failure, i.e they have to repay your loan. For students’ loan above the amount of 7 lakh, you have to hand over to the bank papers of some immovable property as collateral. Also, for any education loan above 4 lakh, margin money that is around 5-15% of the loan amount has to be paid to the bank. The maximum loan generated by banks for education abroad is around 20 lakh.

BANK LOAN RATES

There is no uniform rate for all the banks. They offer varying interest rates depending on the amount and other factors. Also Government or state-run banks offer lower interest rates on the loans than the private ones. While most interest rates fall anywhere between 10-15%p.a , they are usually levied on a floating rate basis, i.e they vary according to economic changes such as currency fluctuations.

Documents like Identity proof documents, address proofs, signature proofs will also be required by the bank so keep these handy when you go to apply for a loan.

LOAN REPAYMENT

Bank education loans have a moratorium period, which is a break period after you complete your education or for the duration of your course, only after which you need to start paying back the loan emi. Read the final document carefully after it is drafted and look for important clauses. Be sure of all the loan procedures and contact the bank advisor in case of any confusion. Also, Education loan borrowers can also enjoy tax rebates for the interest they would be paying under Section 80-E of the Income Tax Act, 1961.

Author: Mallika Bhagat