I wish to take up a loan for higher studies abroad. Is collateral a necessity? How much loan can I get without any collateral? If security is indeed required, what are the options that I have? Which are the best banks for educational loans?
Although it is not necessary to provide a collateral for education loan, Your rate will be lower and you will be available for a higher amount if you provide one.
Usually, no security has to be submitted for Education Loans taken up to Rs. 4 lakhs. Third party guarantee has to be furnished for loans between Rs. 4 lakhs and Rs. 7.5 lakhs and tangible collateral security is required for loans above Rs. 7.5 lakhs. You can approach any bank for an Education Loan. The eligibility criteria might differ from one bank to another. However, some of them are:
• Any individual aged between 18 and 35 years can avail an Education Loan to pursue studies at any approved university abroad.
• Students can get Education Loans for management courses, engineering courses, medicine, and graduate and post graduate degrees, arts, architecture, pure science, hotel management, etc.
• The expenses covered under an Education Loan include tuition fees, exam fees, lab and library fees, caution deposit, travel, books and equipment, projects and study tours.
• Borrowers have to bring in a margin of 5% to 15% for loans taken for foreign studies.
• During the moratorium period, borrowers have to pay the interest with the principal payment starting when the loan tenure begins.
• Education Loans can be repaid in monthly instalments through ECS or via post-dated cheques to the bank.
• Generally, banks sanction Education Loans with tenure to up seven years, inclusive of the moratorium period.
• A co-applicant has to be selected for education loans taken for full time courses. Co-applicants can include siblings, spouse, parents or other family members.
• Banks will sanction a maximum of Rs. 20 lakhs with the moratorium period and up to a maximum of Rs. 10 lakhs for loans without a moratorium period.
• The Central Government has also introduced an interest rate subsidy scheme for repayments done during the moratorium period for the benefit of the poor.
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