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Choosing a Educational Loan Right

Educational Loan

Educational LoanHigher education is a launching pad for the bright future of any student in the Indian middle-class family.  The advent of technology has made the world a global village and increased opportunity for the Indian students to pursue their education in the countries abroad.  The desire of students to pursue their higher education in the foreign countries has made educational loans a popular option.  The scope of the educational loan in India is just not limited to higher studies abroad; banks are offering this loan to pursue any higher education within the country as well.  With a wide number of banks offering educational loans to help the students to pursue their higher education, considering key factors before taking the final call is very important to enjoy the benefit to the fullest.

Interest rates

 Your research for finding the right loan should start at comparing the education loan interest rates charged by different lenders. Apart from comparing the interest rates offered by different banks, you should know how this interest rate is charged. Know whether it is flat fixed interest rate throughout the tenure of the loan or reducing balance interest rate.  Choose the education loan interest rates based on your specific needs.

Repayment tenure

Educational loan repayment has long loan tenure. There is no need for the students to service the loan till he/she completes the education. Banks will give a grace period, which allows hitting the desired job, according to their interests. Some banks restrict this grace period to 6 months whereas some banks offer it for a period of one year. Make sure you check this waiver period for repayment of the educational loan before you apply with the lender. Higher the waiver period, better are the chances for you to find a right job that you are interested in and you can comfortably pay the educational loan.

Costs covered

Educational loan in India can be availed to address any expense related to higher education that is being pursued, but, lenders have a cap on the amount that can be used for various educational needs. Some banks cover entire travel charges whereas some banks restrict it to a certain percentage of loans. Same is the case with the cost incurred for purchasing books and other expenses. You have to check all these factors and choose the lender that can address your needs perfectly.


Most of the banks ask you to pledge collateral if your loan amount exceeds 4 lakhs to subside the risk of defaulting educational loans for abroad. one should know collateral requirements of the lender before applying for the loan. Few lenders demand guarantor step-in as co-applicant of the borrower. The credit score of the guarantor plays a key role in the approval of the loan in this case.

 Down payment  

Last but not the least, down payment is an important factor that should be considered while choosing the educational loan for abroad. Banks demand 5%-20% of loan towards the down payment of the loan. you should compare down payment requirements by different banks before applying for the loan.

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