Guidelines in Applying For an International Student Loan

 The RBI is responsiblernfor deciding the lending criteria for banks in India. It has decided to includernEducational loans as a priority sector in lending from banks. The Educationrnloan is like any other loan for which the bank looks for the credit-worthinessrnof the borrower before lending the loan to them. A student might not have arncredit history. Thus, banks look at the CIBIL score of the parents who are thernco-signer for the student borrower.  Theyrnalso look at Mortgeable collateral as a security for study loans abroad.

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 RBI guidelines for Education loan:

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 1. The RBI insistsrnthat the banks grant the Education loan to meritorious students. The wordrnmeritorious is a relative term which is assumed if the student has qualifiedrnfor the entrance exam to professional and technical courses.

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2. It also considersrnstudents who have secured admission to good colleges in terms of theirrnplacement history thus reflecting the future employability of the studentsrnthrough their campus recruitment.

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3. Section 80E of thernIncome-tax Act claims that the interest part of the loan can be claimed as arnsubsidy while filling for the Income Tax. Apart from this law, the CSIS schemernprovides full interest subsidy during the moratorium period for therneconomically weaker section.

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4. Loans must berndivided into secured and unsecured loans depending on the amount granted. Forrnloan amount less than 4 lakhs, no collateral is required while for loan amountsrnabove 4 lakhs, a security deposit is required in the form of collateral.

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5. Banks also offer arnmoratorium period just after the completion of the course during which thernborrower might look for a job to start repayment soon after the completion ofrnthe period.

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 Interest Rates

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 Interest rates decidedrnby the RBI depends upon whether the Education loan is intended for studies inrnIndia or abroad. Students securing admission to high rated Educationalrninstitutes in India need to pay a comparatively lower interest rate. Interestrnrates mainly comprise fixed and floating rates in general. While banks in Indiarnprovide loans at a floating rate of interest for study in Indian colleges,rnforeign loans are offered at fixed interest rates. Education loans to study abroad for banks are generally based on the REPO rate or the MCLR rate of thernBank. They are very competitive and lower than business loans. For NBFCrnthe study loan for abroad is generally based on their Prime Lending Rate. ThernPLR changes with the Cost of Funds for the institutions.

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 Loan Repayment

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 RBI rules forrnEducational loan repayment include paying back the loan in the form of EMI asrnsoon as the moratorium period gets over. According to experts, EMI of a personrnshould not exceed fifty percent of one’s salary. The repayment should berncompleted within a maximum tenure of 8-15 years soon after the grace period. Inrnrare cases when a student obtains another loan for a course taken up soon afterrnthe original course completion, the repayment period can be extended dependingrnon the time until the next course is completed.

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Conclusion

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 Though the RBI rulesrnfor education loans have been made much more reliable in terms of interest andrnrepayment factors making Education loan affordable for all, parents should alsornlook out at a variety of factors such as the possible hike in interest rates,rnEMI rates and repayment options available before taking up a loan. Study loan for abroad is one of the few retail loans which takes into account the futurernearning potential of the Student. Hence the student loan is futuristic and hasrninherent risks. We at EDU LOANS understand each lenders risk taking appetiternand hence look to guide you to the best loan available to you based on yourrnprofile.

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