Important parameters to take into account for your education loan procedure

The cost of a quality education is increasing with each passing year. As a result, most of the students end up taking an education loan It’s a good decision, not only will you get the funds you need to cover the cost of your studies but applying for such loans has also become much easier over the years.

However, this does not mean you take the application process lightly! Education loans involve a lot of money and that’s why you need to get everything right during the application process. This article will help you in this regard by going over some important things to take into account which need to be considered about education loan procedure to ensure things go smoothly.

List of Institutes eligible for a loan

It is important to check the list of institutes whose students are eligible for a loan from the respective lender. The applicant should check this list on the website of the lender before applying for the loan and verify whether his desired institute is included or not.

Expenses covered

The applicant should check what expenses are covered by a lender for calculation of loan amount. This will decide what expenses the applicant is supposed to bear on his own. The applicant should then decide the lender based on his financial situation. If higher level of financing is required, NBFCs are suggested as they usually offer 100% financing, ensuring you do not have to pay anything from your own pocket.

Interest rate, margin amount

The applicant should check the interest rates offered by various lenders and make a smart choice. Another factor that matters along with the interest rate in the education loan procedure is the margin amount. Margin amount is the part of total amount that the applicant has to pay on his own. Different lenders offer different margin amount. The applicant should make a decision based on his/her present financial condition. Again, NBFCs hold the upper hand in this regard as very few of them require any margin money. As mentioned earlier, they all offer 100% finance.

Moratorium period

Moratorium period is the time period between the completion of the course and the beginning of repayment of loan. Lenders will charge interest during the moratorium period which is why it is an important factor to consider. The applicant can choose a loan program that gives high moratorium period to give himself some time to gain employment after the completion of course. It can also be selected to avoid repayment during the training period of job as the salaries are usually low during that period.

Foreclosure penalty

Foreclosure penalty is the additional interest rate the lender charges for closure of loan before the completion of selected tenure. This situation may arise when the applicant gets a high paying job allowing him the finances to pay off the loan in advance.

Collateral security

As the loan amount increases beyond a certain limit (different for different lenders), the lenders expect the applicant to pledge any of their assets as collateral security. The applicant should find out the amount beyond which the pledge of an asset becomes compulsory and make a decision based on the same. For the third time, NBFCs have the edge again, they rarely require collaterals which is a boon for students who have a bright future but no assets to offer as collateral.

As discussed in this article, a lot of parameters should be taken into account during the education loan procedure. We hope this article has helped you to identify these parameters and make an informed decision. Wishing you all the best!

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