How to choose the right financial institution for an overseas education loan
Posted by Rita Biswas on May 20th, 2021
Education loan plays an important role in the lives of students planning to upgrade their career with an international degree. With the help of an education loan for higher studies abroad, it becomes quite easier for parents to send their kids to study overseas. Choosing the right financial institution for an education loan is as crucial as choosing the right university and degree according to one’s interests and career aspirants.
There are various financial institutions both in India and overseas like nationalized banks, private banks, NBFCs, and international lenders that offer overseas education loans. Factors like rate of interest, quantum of finance, processing fees, pre-payment terms, moratorium period, repayment tenure, tax benefits are some of the factors that differ. Hence, it is advisable to compare these options and see what suits your needs.
7 factors to be considered while choosing a financial institution
• Rate of Interest: Rate of Interest (ROI) is the factor that plays a pivotal role in an education loan. It is considered to be the most important factor while choosing a suitable financial institution. Compare the interest rate of various financial institutions and see the overall package it offers. Also, do analyze and comprehend the difference between fixed and floating ROI. An interest rate falls between 8% to 14% depending on the bank.
• Quantum of finance: Not all financial institutions provide 100% loan amount hence students should first visit the bank or take the online consultation to know how much quantum of finance is being offered by the bank.
• Processing fee: In an overseas education loan, the processing fee is an upfront fee that is charged by the financial institution to the applicant. Students are required to check and compare the processing fee of various banks before settling on one option.
• Loan margin: Loan Margin is the term that describes how much loan amount the financial institution will offer. Not all banks offer 100% of expense coverage hence it is of utmost importance to check the loan margin of various financial institutions before finalizing one. Chalk out the loan amount that you will need for your overseas education and check which banks offer that much amount.
• Moratorium period: Once students apply study loan for abroad studies, they are given a time period after the completion of which they must start will the loan repayment. This period is called the moratorium period. It is a span of 6 months to 1 year in which a student is supposed to look for a job.
• Repayment Tenure: The repayment period is a time span when the student has to repay the overseas education loan to the financial institution. This payment is done in the form of Equated Monthly Instalments for the time span of 5 to 15 years. The repayment period of government and private banks is of 15 years whereas of NBFCs, the repayment period is of 10 years.
• Income Tax Benefits: An overseas education loan that is taken from the Indian Banks registered under the Reserve Bank of India is eligible for tax deductions under Section 80 E of the Income Tax Act of India, 1961. This benefit can be availed for a total number of 8 consecutive years.
These are the six factors that should be considered before finalizing a bank for your overseas education loan. Compare and analyze to understand which is the right bank for you and know how to get an education loan for study abroad. If you have any queries, get in touch with us at ELAN Loans.