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5 Factors to Consider In Comparing Educational Loans

How to Compare Educational Loans

Educational Loans Interest rateWith the demand in the desire of Indians becoming global citizens, the trend of availing educational loans is on raise. Indian middle-class families stand in a tough position to send their children for education abroad because they are liable to meet various tuition fee, lodging and other expenses related to their education which is much above their earning levels. Education loan becomes a bridge to fill the financial gap between the deserving students and higher education abroad. It is important for the prospective student to conduct a research and compare the education loans offered by institutions.

Educational Loans Interest rate

There are many banks offering study loans with the interest rate ranging from 9.70%-13.45% depending on your repayment capability and credit score. Apart from comparing the interest rate charged by them, you should check if the interest rate is calculated on the diminishing balance or flat rate. It is advisable to choose the banks that charge interest rate on diminishing balance.


Lending institutions have a cap on expenses covered for the education abroad. Few banks cover total travel expenses whereas few limit it to 10% of the educational loan. Few banks do have a cap on the amount that covers other expenses related to books and stationary. Have a thorough check all the expenses covered and limits on each one to select the study loan that fits your requirements at the best.

Grace period

Educational loans don’t levy the stress of repayment on the student during the course period.  Few banks start the repayment period just after 6 months of completing the course and few waiver it for the period of one year to let the student find the better paying job to repay the educational loan. Choose the institute that has a longer grace period.

Collateral and guarantor

To reduce the defaults in the educational loan, many banks demand collateral or guarantor for the loans above 4 lakhs. It is important you check these requirements of the lending institution before you apply for the loan. The lender also takes credit score into consideration while approving the loan, higher the credit score, higher will be the chances of approval.

Down payment

Every big loan like a home loan and car loan needs down payment from the borrower and student loan is not an exception. You need to submit 5-20% of the loan towards the down payment and these requirements vary from one bank to other. This is one of the important factors you should consider while approaching the lender


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