Education loan: 5 smart things to know

Keep the following points in mind before taking an education loan.

1) Banks provide education loans to pursue academic and job-oriented courses approved by them. They cover the tuition fee, hostel expenses, books and useful equipment, travel for overseas courses and other expenses essential to completing the course.

2) The maximum amount of the loan ranges from Rs 10 lakh for Indian courses to Rs 20 lakh for studies abroad. Banks may consider a higher loan depending on the course. Margins are required for loans more than Rs 4 lakh.

3) Parents are required to be joint borrowers for all loans. If the loan amount is more than Rs 7.5 lakh, tangible assets are required as collateral security. For loans between Rs 4 and Rs 7.5 lakh, a third-party guarantee may be required.

4) Repayment commences one year after the course ends or six months after the candidate gets a job, whichever is earlier. The EMIs are calculated with a tenure not exceeding 10 years for loans up to Rs 7.5 lakh, and 15 years for higher amounts.

5) The entire interest paid on the education loan is tax-deductible under Section 80E. The deduction for interest payment is available for eight consecutive years, the first year being the year in which the repayment starts.

Content Courtesy: Centre for Investment Education and Learning

Source : http://economictimes.indiatimes.com

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Educational loans with PAN Card only

Several banks have made it mandatory this year to give educational loans only to those who have permanent account number (PAN) in view of increasing non-performing assets (NPAs) in educational loans. In the event of a guardian or a co-borrower existing, he/she must produce a PAN card, a reliable source said.

Though some banks are demanding PAN only at a later stage, after disbursing the loan, some leading banks like State Bank of India (SBI) might be insisting on PAN for even processing the educational loan application forms.

The new eligibility criterion is being enforced due to difficulties faced in contacting the borrower after he/she completes his/her studies.

There were many such cases in each bank, which had led to a rise in NPAs in educational loans, a bank source said.

“The students, after graduation, might shift either to another country or some other place in the country. So, it becomes difficult for us to trace them based on the address given while obtaining the loan,” said a bank staff in charge of the loan section, seeking anonymity.

He added that PAN would help track them, if they defaulted. That is, if they apply for any other loans from banks, the default would be exposed and could even prevent them from obtaining any loan in future, a bank official said.

Mr N. Chandrasekar, AGM of Corporation Bank, told Deccan Chronicle, “PAN cards are necessary for anyone in their life.

Hence, the students should acquire a PAN before joining college. If some banks insist on PAN, they can readily produce the PAN details and process their applications quickly, rather than waste another 15 days to get a PAN.”

A bank source said circulars were issued to ensure PAN details were collected from those who had already obtained loans, and also from those applying for educational loans this year.

“We hope that when we insist on PAN cards, the NPA will come down after a couple of years as the students will have reason to repay the amount,” said the bank source.


source:tkbsen.com

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SBI to slash interest rate on education loans

The country's largest lender State Bank of India (SBI) today reduced interest rates on education loans by up to 1 percentage point across various segments, a move likely to be followed by other lenders.

Education loans up to 4 lakh have become cheaper by 0.25 percentage point to 13.50 per cent against 13.75 per cent. However, loans between Rs 4 lakh and 7.5 lakh will be available at 13.25 per cent against 14.25 per cent, a sharp reduction of 1 percentage point. Loans beyond Rs 7.5 lakh will cost 0.25 percentage point less at 12 per cent. Under this education loan scheme, loans up to Rs 10 lakh for studies in India and up to Rs 20 lakh for studies abroad are given

At present, interest rates on education loans range from 12.25 per cent to 14.50 per cent, depending on their quantum and the duration. SBI is also offering a concession of 0.5 per cent on interest rates for loans given to female students.

Interest rate on loans given to students undergoing courses at premium institutes such as IITs, IIMs have also been cut by 25 basis points to 2 basis points over the Base Rate

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