With the high cost of higher education, it is common to avail an education loan. If loans are inevitable for middle class families to make housing and vehicles a reality, then education is now in the same category. Rising education costs have compelled parents tmo rely on loans to complete courses that secure their children’s future. According to banking sources, the number of applicants for education loans is increasing every year.
Those availing the loan will be forced to accept the terms and conditions as the consumer’s ability to bargain on interest rates when taking out an education loan is low. At the same time, once you get a job and start earning an income, you will have the ability to ask for a reduction in interest rates.
Education loan ‘refinance’ is an option. Refinance refers to the repayment of an existing loan with a loan taken from another institution. Processing fee is required to repay the existing loan. Refinancing can be done if the loan is obtained from another institution at a lower rate than the existing loan. This option should only be chosen if you are convinced that taking out a new loan is profitable after considering the costs, including processing fees.
Interest rates may vary depending on the loan amount and the college where a student is joining. There is a possibility of a bargaining over the interest on the education loan if you get admission in reputed and high ranking educational institutions. The bank will consider the possibility of getting a good job and the best income potential in terms of salary. Banks raise interest rates when the risk of repayment is high. Banks are willing to lower interest rates if the risk of repayment is low. Banks offer a quarter of a per cent less interest on courses at higher quality institutions. If the admission is not in a better, higher quality educational institution the bank is less unlikely to lower interest rates. Public sector banks are offering a quarter of a per cent interest rebate to female students.
Repayment is required from six months to one year after completion of the course. Even if you do not get a job, you should start repaying the loan one year after completing the course.
If the student is not able to complete the course within the stipulated time, the loan repayment may not start on time. In such a case, the Indian Banks Association has stated that the loan period can be extended till the completion of the course. In case of non-availability of employment or inadequate pay, the loan period is extended by two or three times every six months.
