For most parents, one of their most important goals is to educate their children in best possible manner. This is regardless of their current income levels. Parents don’t want money to come in way of giving proper education to their children. But with rising costs, it is increasingly becoming difficult to fund children’s education without resorting to education loans.
Many children now prefer to study abroad in search of better career opportunities. But since the tuition fees and living expenses in foreign countries are very high, it’s tough to realize this dream without access to adequate education loans. Banks recognize the need for funding foreign education and are willing to lend liberally to deserving candidates.
A course in foreign universities can cost anywhere between Rs 25 lacs and Rs 75 lacs. Banks don’t offer the full amount as loan and want the borrowers to pitch in with some amount of their own. The loan given by banks is used to cover tuition fees, examination fee, library, hostel charges, money for purchasing books, instruments, travel expenses, etc. Since the amount being lent is fairly large, banks want adequate collateral (generally property) to reduce the risk of default of loans. In many cases, banks also want the borrowers to bring in additional guarantors to further reduce risks. It is worth noting that default in case of education loan effects credit histories of both the borrower and the co-borrowers.
Interest rates on education loans in India range from 10% to 14% and it depends a lot on the college, course choice and employability of the borrower after course completion. As for repayment, those taking education loans get a moratorium of six months to a year after course completion, before they need to start repaying.
As already mentioned, banks do not give the entire amount that is required. So a loan might not be sufficient to meet the full cost of the educational course. But nevertheless, it’s of great help and makes sure that money doesn’t come in way of child’s education and also does not mis-balance parents’ personal finances.
