education loan Archives -

How to Repay Your Education Loan?

Sun, 23 Apr 2023 11:43:45 +0000

The Buyt Desk

An education loan is a specific-purpose loan given to complete higher education. It can run for as long as 15 years but the loan can be paid off early to reduce interest payments. Education loans have a unique ‘Moratorium period’ feature that allows borrowers to select not to pay the EMI for up to 1 year from the study completion or 6 months from beginning a job. But, this period varies based on the bank policies.

When you should start repaying an education loan?

Start repaying a loan as early as possible. The Sooner you finish the loan better it is so you can use that money to reach other financial goals. Also, the moratorium period has some interest. The interest rate of an education loan is too high. Hence, if you don’t repay the principal amount, the interest will keep accumulating. This results in an increasing burden of interest and rising overall loan costs without reducing the due loan amount. On the other hand, starting education loan repayment early can help you in earning a good credit score.

Best tips to repay the education loan

Here is how to repay an education loan with limited income.

Go with a higher loan tenure

Choosing a secured education loan helps in getting a tenure of 10 or more years. The longer tenure provides a more comfortable loan repayment margin by reducing the monthly EMI installment. Start repaying the loan in the moratorium period. To reduce the overall interest rate and repayment cost, try to allot some resources towards interest prepayment, primarily during the moratorium period.

Start part-time job

Start planning your loan repayment while studying. Take out some time from your study schedule and start working part-time or as a side hustle. For example, providing graphic design services, teaching some courses, online selling your art, and others. This helps in improving your income and start paying a loan when you’re pursuing your studies.

Look for a balance transfer

Consider the bank loan transfer to avail of low-interest rates. Try to negotiate with your current bank for a cheaper interest rate as much as possible. If they don’t agree to that, use the amazing facility of a balance transfer.

Selecting a lender that provides a low-interest rate on your loan balance amount helps in saving a significant portion of the interest amount. Having the same EMI will help you in saving further on interest payments. This will reduce the tenure to some extent and prevent interest obligations.

Live economically

Lifestyle inflation in tandem with your earning can make whole efforts of increasing your income in vain. So, try to live economically with only the basic necessities till you repay the education loan amount. Create a defined budget with all necessary expenses like clothing, food, rent, and others. Get rid of all the unwanted expenses. Find out the difference between your desires and requirements and give priority to the latter.

Get a loan only for the beneficial course

Avoid taking a loan for a costly course that promises to be an airstrip for a worthwhile salary package in the future. Evaluate your interest first. If your interest is in a course that is expensive, go for it while considering its present and future scope. Determine the rules and regulations for working in the nation, immigration regulations, visas you can apply for, and other important factors. This will help you in repaying the loan while being completely satisfied and happy with your job profession.

More saving

Save some amount from your monthly salary and use it in the future for your education loan prepayment. For more savings, you can start fixed deposits (FDs), open a savings account, or a recurring deposit (RD). Financial experts always recommend saving as much as possible and limiting spending for a time till the loan tenure. It will help in timely and easy paying the loan.

Use tax benefits

Students taking an education loan from Indian banks can make the best use of tax benefits under Section 80E. Under this section, borrowers who have taken up and repaid the education loan are eligible to get a tax deduction on the interest paid on that loan.

Process of repaying the education loan

Education loan repayment is not a highly challenging process. You only have to contact your bank manager who will note down your account details and start the loan repayment process on the mode of auto deduction. For more associated information, you can look for different education loan schemes launched in India.

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Want an Education Loan? Get These Documents Ready

Wed, 15 Jun 2022 08:20:56 +0000

The Buyt Desk

The cost of education is rising every year, but the lack of resources has never hindered the way of education seekers and will not do it even today and in the coming time. Students with not sufficient funds or those that are self-reliant have the option of loans, especially the education loan. We discuss the process of getting an education loan and the documents you must have to apply for the loan.

Documents Required to Apply for Education Loan

Education loan is just like any other loan borrowed from a bank. Therefore, the borrower has to submit certain documents to the lender so that lender gets to know the borrower. Although different banks have different documents requirement, except a few, most are the same. These are –

Know Your Customer Document – The documents like Aadhar card, driving license, and PAN card is used for the purpose.

Address Proof – The address proof must be the latest. The applicant can submit the Aadhar card, water or electricity bill, voter ID card, house agreement paper, passport, etc., as address proof.

Proof Of Academic Qualification – The academic certificate of 10th and 12th standards are the basic. Along with that, the documents required are, applicant need to submit the result of his last academic qualification issued by the educational institutions and the competitive exam result.

Admission Proof – The applicant also has to submit proof of admission to the institute for which he is applying for the loan.

These are the documents a loan applicant has to submit. While taking an education loan, the applicant does not have a source of income, thus, the loan requires a co-applicant. Co-applicants act as a guarantor in education loans. A co-applicant can be a parent, guardian, or any other person having a source of income.

The lending bank requires documents of the co-applicant as well. The documents include,

When the Applicant Is Salaried

Income proof for the last three months.
IT returns of 2-3 months or the copy of Form 16. All these documents must be acknowledged by the income tax department.
Co-applicant’s bank account statement for the last six months.
Details of co-borrower liabilities and assets.

When the Applicant Is Self-employed

Proof of his business address.
16A form (TDS Certificate).
The last two years IT returns (If the applicant pays tax).
If the applicant is a professional, then his professional certificate like doctor, lawyer, CA, etc.
Six months bank statement of co-applicant.
Details of co-applicant liabilities and assets.

Education loan is an unsecured loan, which means the borrower does not have to keep collateral for the loan. However, it is only up to a threshold of Rs7.5 lakh. If the loan amount is more than the threshold, then the education loan also needs to be secured by collateral. In that case, the applicant has to submit certain documents for collateral as well. It includes:

Ownership of property.
Receipt of registration.
Allotment letter.
Address proof, such as tax copy, electricity bill, etc.
Approved building plan by the government.
Completion certificate, OC, etc.

These are the documents most education loan lending banks require. Besides this, some banks might ask for a few more documents which are not difficult to produce when you have these in hand.

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Consequences of Defaulting an Education Loan

Tue, 04 Jan 2022 12:17:53 +0000

The Buyt Desk

Education loans help students to fulfil their dream of higher education. Lack of funds should not be a hindrance to further studies and thus an education loan is helpful in fulfilling the fund requirement. Even working professionals can get an education loan for taking up a course for the advancement of their career. The concept with education loans is that students get the fund to finance their education, and they return it after completing education in instalments. COVID-19 has resulted in many hardships and loan defaults are on a rise. Education loan default has consequences not only on the borrower but also on the co-borrower of the loan.

How Defaulting Education Loan Can Impact The Borrower

Collateral: The loan above 7.5 Lakhs is secured. That means the borrower has kept collateral to get that loan. In case of default, the bank liquidates the collateral asset to recover the loss.

Spoil CIBIL Score: CIBIL is the summary of credit records of a loan borrower. The low CIBIL score makes you ineligible to get a loan from any bank or NBFC. Furthermore, recovering the CIBIL score is a time-taking process, and it also calls for lots of effort.

Interest Rate – The delay or missed EMI payment increase the interest rate of the loan. Additionally, the bank will add fines which makes the repayment amount huge.

Guarantor/Co-Signer – In case you fail to pay the loan amount, the burden will go onto the co-borrower/guarantor. And if you continue to miss the payment, the CIBIL score of the co-borrower will come down, jeopardizing the future of both of you.

Legal Action – After the long skip of payment, the bank will treat you as an NPA, i.e. non-performing asset. Once it happens, you will start getting calls from banks and other bodies for the amount recovery. Banks have collection companies to get the money bank. If your name comes on their list, you might get into big trouble.

It is not like after facing all you can get away with the loan, you will still have to pay back the loan amount. Thus, it is better to look for an alternative than avoid the situation. Banks provide multiple options for amount repayment if you have a valid reason to give.

Things You Can Do To Save Yourself From This Situation

Talk To The Bank Manager – Do not avoid facing the bank. Instead of missing communication from the bank, if you choose to talk to bank representatives, they might give you some ways to come out of the situation. If you fail to pay the EMI for a valid reason, the bank may reconstruct your loan and let you pay lower EMI by increasing the loan tenure. The maximum time a bank can give for repaying the loan amount is ten years for an amount less than 7.5 Lakhs. For an amount over 7.5 Lakhs amount, the repayment tenure is 15 years.

Ask For The Deferment Period – If you are going through economic hardship, like unemployment, leaving a job, etc., you can approach the bank and ask for a deferment option. It allows you to stop making payments for some time if you qualify for the same.

If you have already defaulted on your education loan, it is advisable that you contact someone in the industry and look out for help to avert legal trouble. The bank may also offer you a one-time settlement option in exceptional cases. You can choose that as well for refinancing.

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How to Apply For an Education Loan on Vidya Lakshmi Portal?

Fri, 17 Sep 2021 08:39:05 +0000

The Buyt Desk

To get an exciting head-start for a well-paying job, quality education is a must. And in developing countries like ours, higher education in premier institutions comes at a cost. The government-run institutions have a cut-throat competition, and private premier institutions are no doubt pricey.

And if any student is contemplating for education abroad, the expenses become even higher. Thankfully, education loans are there to give wings to dreams. The government of India has a comprehensive Education Loan scheme for students vying to study in premier institutions of India or abroad.

Who is Eligible For Education Loan in India and How to Apply?

The education loan is available to any Indian citizen who has secured admission in a recognized institution for higher education through any medium, entrance exam or merit basis, and age not exceeding 35 years.

When applying for an education loan, you must explore all the options available, compare different products, and run a thorough check.

The government of India has started a portal for education loans, Vidya Laxmi, sharing a common platform with the Department of financial services, Department of higher education and Indian banks association (IBA). You can apply for an education loan on this portal by filling a form known as CELAF. A student can apply to a maximum of three banks through Vidya Laxmi. Vidhya Laxmi covers all types of courses offered in schools, colleges and universities.

The Benefits Of Education Loan?

The rising cost of education is making more and more parents/students go for the education loan. And there are many advantages that education loans offer to students.

The processing time of the education loan is faster than other loans.
There is a competitive rate of interest. Some premier institutions have a tie-up with banks, which helps getting the loan at a cheaper interest rate.
Some banks offer this loan to female students at a low rate of interest.
A few banks offer interest concessions to students who are willing to pay the interest amount during their study period, called the moratorium period.
Parents get exemption in income tax under section 80E for the period of eight years.

Documents Required for Education Loan

The mark sheet of the last qualifying exam, if applying after 10+2, then mark sheet of 10+2, if applying after graduation, then the graduation mark sheet.

Proof of admission in the course.
If getting any scholarship, then letters confirming the same.
A detailed statement that covers the cost of education.
ID proof of parents and students.
The age proof, income proof, residence proof of the parent or guardian.

For receiving the first disbursement of the loan, you need to present the following documents:

A demand letter issued by the institute.
Documents for collateral security.
Disbursement request, loan agreement and sanction letter with the sign of applicant and co-applicant.
For overseas students, Form A2.

For a loan value less than 4 Lakhs, you don’t need a guarantor or security. For a loan above 7.5 Lakhs, you need collateral.

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Education Loan- When and Why?

Sun, 29 Nov 2020 09:24:31 +0000

By Shweta Khanna Bhandral

Career Counsellor & Founder, The Future Skills Company

A better life is not only about dreams, passion, and a right career choice but also money and sometimes a lot of it is required. However, if you have the first three things sorted money should be the least of the problems, with readily available education loans today. Almost all the banks today are offering an education loan.

But before you take the plunge, you must answer these three questions-

When to take education loan?
How much education loan to take?
How does education loan help?

I spoke to a few professionals who are now doing very well for themselves. All of them took education loan at different stages of their education and career.

While most students in India take an education loan for their postgraduation or going abroad. Dheeraj Khanna had to take a loan for his graduation. He says, “I would not advise children to take an education loan for graduation unless it is the only option left.” At the same time, he also tells us that, one good thing that education loan does is initiate the habit of saving. “Initially managing EMI and monthly expenses with the salary was difficult, but gradually it became a habit. Even after paying off the EMI, the saving continued,” says Dheeraj.

Education loan is an excellent way to make the child take on responsibility and understand the need to manage personal finance. In a way, it is good debt. A debt that is helping you to not only invest in yourself for a better future but is also teaching a good habit like saving.

While taking an education loan, you must keep three things in mind:

1) Understand how the course will help you

First, the course you are taking up should be worth the time, effort, and money. It would help if you researched enough about how your growth prospects will change for the better after the course. Gauge the post-course job scenario and arrive at a decent ROI figure.

2) Check the credential and reputation of the Institue where you are planning to go

You should gather all the information about the institute where you intend to study. Is it good enough? Do companies recognise the institute/course? Please find out about the alumni and talk to them about the institute.

3)Do your Math

Must understand the cost of the course. Do the financial calculation depending on the current pocket and future earnings. Do not forget to prepare yourself for the worst-case scenario, like an economic crash.

Vikas Kapoor, who took an education loan for his MBA, believes that education is an investment. He says, “It is something which can give you a decent return on investment for a lifetime. A better salary, different job function, premier institute tag/alum and a reliable network, which can all help you in your growth. And hence taking an education loan (the interest on which is not high), makes a lot of sense. If you get a good salary hike (40-50% is minimum), with paying only 7-8% post-tax benefit interest, the math is for you to decide.”

Vikas took a loan after working in the IT industry for about five years. With a need and desire to upskill himself Vikas considered all his options, looked at the course fee, duration, employability, probability of admission and location. He then chose a premier institute with a moderate price in India rather than going for a mid-average institute with higher fee abroad. His saving was not enough to fund his MBA, so he took a loan of 70% of his course fee. Did his loan become a burden for him to pay back? Vikas tells us, “the education loan rates are not too high in India and the repayment period is also longer (my case was seven years max). Long term payment equates to lower EMIs, which are easier to pay. Interest on education loan gives you a deduction on your income u/s 80E of IT act, which also helps. I got a decent increase in salary post my MBA; hence it wasn’t a burden to pay back the loan.”

Two things that you should not do when taking an education loan.

Going in for the maximum loan is not a good idea. The more money you loan from the bank, the more time you will take to repay it with interest. Make it a point to sit down and calculate how much borrowing should be enough for you.
You need not necessarily take a loan from first ones to offer, or with the bank that has a tie-up with the institute. Compare what different banks have to offer. Go for the one with the lowest interest rate.

Taking a loan for studying abroad is a different ball game altogether. If a child wants to study overseas after 10th, then the burden of loan comes entirely on the parents. The college/university education is expensive abroad, so one must encourage the child to aim for a scholarship. Also, evaluate if going abroad is worth it. If you have not planned for your child’s education from early on, it could be very tough to arrange funds and any such loan could put a big dent on your retirement plan.

World over education loan is the most significant contributor to consumer debt, second only to the home loan. This trend is catching up in India since more and more children want to pursue their higher education from abroad.

Depending on your course and available funds what you borrow can be anywhere from $30k to $150k. If you borrow a considerable amount, you might have to cut down on a lot of expenses to pay back the loan. Shaishav Singh tells us, “In my case, I was able to save more in 2 years than what I spent in my two years of education. I was positive on return on investment.” The caution you should take here is pick up a loan with the worst-case scenario in mind. Shaishav explains further, “I had options of better-ranked universities which were more expensive, but I opted for a lower-ranked with a decent program where I had scholarship just because I did not want to borrow what I cannot pay.”

Follow some personal finance discipline once you get a job. Saving money to pre-pay the loan sooner should be your goal. There is nothing better than a debt-free life.

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A to Z of Education Loan

Wed, 21 Oct 2020 05:13:44 +0000

By Dheeraj Agrawal, Communication Professional

The rising cost of higher education has made education loans a necessity. If you are planning to pursue higher education in educational institutions like IIM, IIT or ISB, or get a degree from foreign institutes like Oxford or Harvard, then a hefty amount is required. And, you can get this huge amount as an education loan. But it is important to take care of some things before taking an loan.

Who can get education loan?

Education loans can be given to every student who has qualified for higher education to enroll in a reputed educational institution in the country and abroad. The bank also asks to show the intimation letter of the educational institution before sanctioning the loan. Banks transfer the amount of education loan not to the student’s account, but directly to the account of the educational institution. Most banks also ask for a bailable or guarantor for a large loan. Usually, the parents of the student become the guarantor or co-applicant of the loan, and it is the responsibility of the guarantor or co-applicant to repay the loan if the student is unable to do so.

What are the expenses that an education loan covers?

Education loans usually include tuition fees for your course, hostel charge, examination fees, laptop costs and travel costs. But rules may differ from bank to bank. Most banks give 70 – 95% of the cost of education as education loan. In India, you can get a loan of a maximum of Rs 75 lakh, which has a maximum repayment period of 15 years. Also, remember that banks charge up to 2% of the loan amount as a processing fee.

Who will give you an education loan & all about interest rate

You will get a loan from most banks and non-banking finance companies of the country. But the loan terms of every bank or financial institution like interest rate, processing charge and documentation can be different. Interest rates on education loans can range from 6.90- 15 % annually. It is usually cheaper to take education loans from government banks.

Rate of Interest on Education Loan

State Bank Of India	6.90 – 9.30%
Indian Bank	8.60 – 10.60%
Canara Bank	7.85 – 9.85%
Punjab National Bank	7.30 – 9.80%

The interest rates on education loans are dependent upon various factors – whether the loan is secured or unsecured, how is the reputation of the educational institution, tenure of the loan. For example, the interest rate on loan for IITs will be lower, while for NITs, the interest rate on loan of the same amount will be slightly higher. Many banks and financial institutions give additional rebates in interest on loans to girl students and women. Also, many times banks have tie-ups with specific educational institutions, and students who enroll in them get additional discounts on education loans from those banks.

Whether the candidate has to provide collateral security for education loan will be based on the loan amount. Like SBI offers a loan of up to Rs 7.5 lakh with no collateral security but parent/guardian have to be co-borrower in this. If the loan crosses Rs 7.5 lakh then collateral security is required.

The government has created a website named Vidya Lakshmi to help the students trying to get an education loan. Vidya Lakshmi is a one-stop solution to check the interest rates of various banks; you can even apply to banks for the loan. A total of 38 banks are registered with Vidya Lakshmi portal, and 127 loan schemes are being offered. Students can apply to 3 banks for an education loan through a single loan application form.

3 Things to keep in mind regarding the repayment of an education loan

-The interest of education Loan is exempted under section 80 E of Income Tax Act. The best part is there is no limit on the amount of interest, that is, the entire amount of interest you have paid is deducted from your taxable income. However, this rebate is available for a maximum period of 8 years, so students should try to repay the loan in this period only.

-Every education loan comes with a moratorium period which means that every loan has a relief time window wherein the applicant doesn’t have to pay the EMI of the loan. Rules may differ from bank to bank and usually, a period of up to 12 months after the completion of the course or up to 6 months after the employment is given. But this period is not interest-free, and interest keeps getting accumulated on your loan. That is why its advisable to start the repayment as soon as the course gets over and try to keep the moratorium relief as short as possible to lessen the burden of interest.

-EMI of an education loan should not be more than 30% of the expected future salary. For this, it is necessary to find out the average placement salary of the students of the institution where you are going to study. This will help you to decide what should be the duration of your education loan. And even if you have to take an education loan for more than 8 years, do not hesitate. Considering a salary increase, you will be able to prepay this loan within 8 years.

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