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Simple steps to apply for an Education Loan


So you finally made it to a college and are looking for ways to finance your education. Here is an article that will help you understand the basics of the applying for a student loan and also put a better grasp on the basics of applying to a student loan.

Things to remember before applying for a loan
Students must keep certain things in mind before applying for a loan.

Arrow You must carefully analyze whether the course you are going to be taking the loan against has ample job opportunities in the future.
Arrow Know this, a bank loan of up till four lakh will does not require any collateral and so banks are often more than reluctant to give students that option and add an unnecessary risk.
Arrow You ought to know that private banks are not liable to follow Government of India guidelines, so it is always better to take a loan from the a nationalized bank than a private one.
To begin with, let us see, who can apply for an education loan?
An education loan is issued, by government and private banks, to students who are taking admission in professional courses like engineering, management and medicine. Although there might be some exceptions but mostly banks do not offer loans to students from art and humanities.

The variation in the interest rate is mostly from bank to bank but nonetheless, most of the banks offer a 10 to 14 per cent interest rate. You must keep in mind to go through the documents and look for hidden interest costs especially if you’re applying with a private bank.

What all and how much will the loan cover?
When applying for a loan, remember that the loan will not cover the entire amount. As a rule, banks pay for about 75 to 80 per cent of your total cost, that too till a certain limit. Most of the banks set 20 to 30 lakh as their upper limit on the loan to be given out.

Until recently almost all banks had been giving loans. Now, most privatized banks have stopped giving out loan but on the contrary, all most all public sector banks do give out loans to students.

In order to process the loan, the students are required to apply for and produce valid documentation to the bank. Address proof, identify proof, PAN card, income proof of the sponsor (parent or guardian) and income tax returns of the sponsor act are required for documentation.

In case your loan amount is more than four lakh or if your institution/ college is not recognized by the bank, then the bank will require a collateral along with proof of tax paid on the collateral (like property mortgage).

In case of your institution is recognised by the bank for pursuing a postgraduate course, like IIMs or IITs, the applicant can apply for a loan without the need for a collateral arising.

For those who are applying for an education lean to study abroad, are required to submit a valid documentation along with the university’s documents stating your admission approval and the course cost, accommodation and collateral costs.

Processing time
In order for the bank to process your loan, it takes time. In order to process your application, a nationalized bank can take up to two months although a private bank may process it between a week also.

Paying back
Although, most banks will not ask for a repayment until your course is completed. It takes as long as six months after the completion of your course or when the applicant starts his/ her job, whichever happens earlier.