As a student or someone in their 20s, the only Loan which you should take ideally is an Education Loan. There are a lot of young adults who want to get a Higher Education, yet are limited by resources. Banks act as a Mediator here by providing Education Loans and facilitating financial aid to emerging India.
However, before you sign up for an Education Loan, you need to be aware of the Facts around the Process.
The Reserve Bank of India has categorized Education Loan under Priority Sector Lending. Hence if a Bank refuses to issue an Education Loan, this can be taken to the Banking Ombudsman as a Complaint.
An education Loan is an unsecured loan for the Bank. Bank charges No Processing Fee on Education Loan which is generally charged at 1% on Home Loans, Personal Loans, etc.
Most banks issue a Maximum Loan of 10 Lakhs for Education in India, and for Abroad Education, a maximum Loan of 20 Lakhs shall be issued.
Banks do not charge Margin Fees up to an amount of 4 Lakhs and above that 5% is charged as Margin Fees. Margin Fees is the Amount of Education Fees to be paid by Students and the Loan is issued for the rest of the Amount by Bank.
Banks facilitate a Moratorium Period on Education Loans which ensures that EMIs are not supposed to be paid while you are Studying. This is also called the Holiday Period which includes the Years of your Education and +1 Year. After this period you can repay the loan amount of under 7.5 Lakhs within 10 Years and above that within 15 Years.
The Bank starts charging the Interest as per Simple Interest right from the Date of issuing the Loan. You can also get a Tax Exemption of your Loan Amount up to 8 Years.
Education Loans are never transferred to a Student’s Account. It is directly transferred to the Education Institute you have enrolled for in a Yearly or Semester wise pattern.
You should generally take an Education Loan only if you are going to a great Institute or College. Don’t put yourself under debt for any random College. Don’t take a Loan just for the sake of a Degree Stamp.
Remember your Loan is your responsibility. You should never put that burden on your Parents. Be prepared when you take the loan you have to repay it in the future.
Also, do some research about the Average Placement Package that the Institute provides and if it is worth taking a loan or not. Calculate the cumulative expenses that you are going to bear, not just the Fees, but Living, Travelling, and other expenses too. Do the Math, understand the rate of ROI (Return on Investment) and the years in which you shall be able to recover your Investment.
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