When applying for an Education Loan
In its purest form education loans means a loan where you do not have to repay the principal portion of the loan during the time when you are doing the course. In fact some lenders will even allow you a complete holiday period (no interest payment as well) during the course period. In such cases the interest is calculated and added to the principal portion of the loan and the repayment begins in EMI after you complete the course. Here are some things to keep in mind when applying for an Education Loan.
No security is required if the loan amount is less than Rs. 4 lacs though parents will be asked to stand guarantee. For loans above Rs. 4 lakhs a personal guarantee is required from a person (can be your parents or siblings or somebody else) whose income and repayment capacity is acceptable to the lender. Also for loans above Rs. 7.50 lakhs the lenders will require an acceptable collateral security such as a residential house, jewellery, securites etc.
Education loans are a risky business for the lenders hence they are extra careful while providing education loans. Many times they come up with ingenious reasons for not accepting your education loan application. Go to a nationalised bank branch in the area where you are staying and they will have to consider your application. They will need to provide reasons for rejection of your loan application in writing. If they refuse complain to the higher authorities in the bank via their websites and if no satisfactory response is received in 4 weeks time you can also complain to the banking ombudsman.
Typical courses such as MBA, engineering and medicine are funded more easily than say a course in non traditional area such as product design which the bank may not be familiar with. So if you are looking for a loan for a non traditional course allow enough time for the sanction and disbursement process.
Collect all the accredition papers for the course you are doing. For example it will be difficult ot get an MBA course funded unless it is approved by the AICTE (off course well known courses such as the Indian Business School in Hyderabad will be an exception) .
Your past academic performance is important too. So prepare a summary of your academic track record with all the back up documents. A good acadamic record will help in getting you a loan.
If the total parental income is less than Rs. 4.50 lacs you are eligible for complete interest subsidy during the course period. Though the scheme has not yet taken off you should make an attempt to request your bank to get you this subsidy. If they get it they will need to pass it on to you. So even if it takes a little time please persist in your request.
Of course, if you can provide collateral security such as a residential house it is relatively easier to get an education loan. TIP : The bank can takeover an existing home loan from another lender as well as provide you an education loan on the security of the same house provided the value of the house justifies both the loans.
Get your credit report Apply online at http://www.cibil.com/accesscredit.htm and follow the instruction given there to get a copy of your own and your guarantor’s credit report. Check your credit report thoroughly to spot errors. If need be, use our advisory services on CIBIL Report to get any errors corrected. Remember any errors in your credit report can reduce your chances of getting a good education loan offer.