SBI education loan

 The RBI is responsible\r\nfor deciding the lending criteria for banks in India. It has decided to include\r\nEducational loans as a priority sector in lending from banks. The Education\r\nloan is like any other loan for which the bank looks for the credit-worthiness\r\nof the borrower before lending the loan to them. A student might not have a\r\ncredit history. Thus, banks look at the CIBIL score of the parents who are the\r\nco-signer for the student borrower.  They\r\nalso 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 insists\r\nthat the banks grant the Education loan to meritorious students. The word\r\nmeritorious is a relative term which is assumed if the student has qualified\r\nfor the entrance exam to professional and technical courses.

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2. It also considers\r\nstudents who have secured admission to good colleges in terms of their\r\nplacement history thus reflecting the future employability of the students\r\nthrough their campus recruitment.

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3. Section 80E of the\r\nIncome-tax Act claims that the interest part of the loan can be claimed as a\r\nsubsidy while filling for the Income Tax. Apart from this law, the CSIS scheme\r\nprovides full interest subsidy during the moratorium period for the\r\neconomically weaker section.

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4. Loans must be\r\ndivided into secured and unsecured loans depending on the amount granted. For\r\nloan amount less than 4 lakhs, no collateral is required while for loan amounts\r\nabove 4 lakhs, a security deposit is required in the form of collateral.

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5. Banks also offer a\r\nmoratorium period just after the completion of the course during which the\r\nborrower might look for a job to start repayment soon after the completion of\r\nthe period.

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 Interest Rates

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 Interest rates decided\r\nby the RBI depends upon whether the Education loan is intended for studies in\r\nIndia or abroad. Students securing admission to high rated Educational\r\ninstitutes in India need to pay a comparatively lower interest rate. Interest\r\nrates mainly comprise fixed and floating rates in general. While banks in India\r\nprovide loans at a floating rate of interest for study in Indian colleges,\r\nforeign 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 the\r\nBank. They are very competitive and lower than business loans. For NBFC\r\nthe study loan for abroad is generally based on their Prime Lending Rate. The\r\nPLR changes with the Cost of Funds for the institutions.

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 Loan Repayment

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 RBI rules for\r\nEducational loan repayment include paying back the loan in the form of EMI as\r\nsoon as the moratorium period gets over. According to experts, EMI of a person\r\nshould not exceed fifty percent of one’s salary. The repayment should be\r\ncompleted within a maximum tenure of 8-15 years soon after the grace period. In\r\nrare cases when a student obtains another loan for a course taken up soon after\r\nthe original course completion, the repayment period can be extended depending\r\non the time until the next course is completed.

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Conclusion

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 Though the RBI rules\r\nfor education loans have been made much more reliable in terms of interest and\r\nrepayment factors making Education loan affordable for all, parents should also\r\nlook out at a variety of factors such as the possible hike in interest rates,\r\nEMI 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 future\r\nearning potential of the Student. Hence the student loan is futuristic and has\r\ninherent risks. We at EDU LOANS understand each lenders risk taking appetite\r\nand hence look to guide you to the best loan available to you based on your\r\nprofile.

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