What is a Student Loan? Under what circumstances you can avail a Student Loan?

When you get an opportunity to pave your path to build a strong future just by taking a small amount of risk, will you miss it?

Out of all the loans, Student loan or Education loan stands out! And it’s because availing this loan might turn out to be the best liability of your life, in a very propitious way.

What is a Student Loan?

Student loan, to put it in an intelligible way, is the money you borrow from government or private lenders to afford your college fees and all the costs associated with it. Before the bank/NBFCs agrees to sanction the loan, they will go through your past academic performance (marks and subject credits), your achievements, and your extra-curricular talents.

So, what are the common eligibility criteria for a bank to provide you with a student loan in India?

You must be an Indian citizen.
You must fall between the ages of 16 and 35 years to procure student loans.
You should have been admitted to any graduate, post-graduate, or doctoral-level program of study so that the bank can review and verify the college’s course and fee structure before lending money.
You must have a co-applicant and collateral security.

To put it in simple words, if by any chance you do not repay the loan, your Co-Applicant becomes liable to the bank. A Co-Applicant can be any of your relatives. Banks will also request you to submit proof of the Co-Applicant’s financial stability and assets.

Most of the banks will demand collateral for a loan amount of more than Rs 7.5 lakhs. Collateral for student loans can be in the form of Fixed Deposits (FD), life insurance, or an immovable asset. The rate of interest in India usually ranges between 6% and 15% and most of the banks also charge a processing fee up to 1% of the principal lent.

Under what circumstances can you avail of a Student Loan?

If you are a person who cannot afford the entire tuition fee, then considering a student loan is the best option for you. Also,many banks not only lend the amount of tuition fee but also consider other expenses like travel, accommodation, cost of study materials, etc. So, you need not plan for all the other expenses separately but can get it all in one package!

How does the repayment of student loan work?

Repayment of any student loan doesn’t start before 6-12 months after completing your course. This period is known as the ‘Moratorium Period’. The moratorium period gives you the time to find a job after completing your course so that you can repay the loan once you

start earning a steady income. But this comes with a cost, the moratorium period is rarely interest-free i.e., interest for this period will get accumulated and you’ll have to pay it back along with the principal. Generally repaying period in India is anywhere between 5 and 7 years

Finally, is borrowing an educational loan a good option?

Well, many banks and organizations now provide various incentives to attract students because taking a student loan is becoming more and more popular. But, like any other loan, even a student loan is risky as it is a type of liability. So, you must evaluate all the possible outcomes before applying for the loan. It is very much suggested to evaluate your repayment ability and have a repayment plan before the moratorium period begins.

Summarizing it, a student loan gives you an exploratory option into your dream and can also make it come true!