Young Indian minds have always aspired to be on the top. Making way through series of tough entrance exams, they finally secure their dream of studying in the top B-Schools of the country.
But as we know, the price of studying in such world renowned institutions is quite heavy, ranging from Rs1Lakh to Rs 30 Lakh and even above. So much to say that, students who work and save all their money may still not be able to finance even their tuition fees, apart from food and accommodation, transportation etc. In these situations, banks prove to be quite helpful, apart from their parents’ savings But Personal loan is not always quite a feasible option for this purpose. Education loan will help in fulfilling all your needs.
Margin:
Mostly, banks do not ask the student to submit a margin, if the student has applied for a loan of Upto Rs. 4 Lakh and for those who want to acquire more than Rs Lakh need to pay 5% of the amount as the margin money. However, banks such as Union Bank of India and Central Bank of India and a few other banks have completely waived off even this option under special educational loan schemes.
Collateral:
Students’ loan applications and their corresponding collateral security required, if any, are mentioned below :
1. Students’ applying for a loan up to Rs 4 Lakh – no collateral is required.
2. Students’ applying for a loan which is above Rs 4 Lakh and below Rs 7.5 Lakh – collateral in the form of third party guarantee
3. Students’ applying for a loan which is above Rs 7 Lakh – 100% collateral security as per the loan amount required.
Except for the first point, all other options, along with the collateral security will be considered depending upon the future income generated by student after placement.
However, even here, there are a couple of exceptions. SBI Scholar Loan – for students of certain premier business school (except Indian School of Business) – as well as the Central Bank of India-IIM scheme do not ask for any collateral. Under SBI-ISB loan scheme, the certificate will remain in the custody of SBI during the currency of the loan. The student can also provide a third-party guarantee (TPG), preferably of an earning sibling of the student or a person known to the bank.
Moratorium period:
The time period during which students need not pay the loan amount either after 1 year of their course completion or 6 months after securing a placement, which ever be the earliest, is called a moratorium period. This period offer differs from bank to bank. For example, the moratorium period under the SBI-ISB scheme is up to three months after the completion of the course. The time-frame is higher at six months (after course completion) under SBI Scholar scheme. Similarly, loans extended by the Union Bank of India to ISB students features a moratorium period of 18-24 months or soon after placement, whichever is earlier.
Repayment period:
This too is differs from each banks’ policy. Generally, it is seen that the educational loan repayment can stretch upto 7 years and institutions like Credila Financial Services offers repayment period of up to 10 years.
Well, the key tip that we can advise you is to save as much as you can in the holiday period of your loan repayment. And also most banks offer a 1% concession on these loans during the moratorium, enabling borrowers to consider the banks’ offer for you to service the interest component. If your parents are in a position to finance just the interest component then you can avail a tax relief – easing a lot of burden off your shoulders.