Getting a solid educational degree can be life-changing but it can be expensive as well. If you are thinking to avail a personal loan for education, it is better you do your part of the diligence and look at all possible sources. We share with you the Top 5 questions to ask yourself before zeroing in an education loan:
1. Have I checked and compared all the offers?
This is by far the most important question. Have you compared all the different education offers? Or, did you say yes the moment one loan provider said your education loan eligibility is a fit for them? Think about the situation. If you have been offered a loan by one, you will be a welcome borrower for others as well. So, you must look at all the available offers within the limited time before you take the final decision.
2. Do I know the education loan interest rate?
Like every other loans, education loan’s principal needs to be repaid, along with interest. The interest rate is the biggest factor determining the EMI and total repayment amount. You may have got an education loan offer quickly, but look at the interest rate. Even if there is a difference of 01.2-0.25%, it will make a difference during your repayment. You should know that longer the tenure, the more is the impact of a small difference in interest rate.
Additional Read: Things to Look Out for While Signing Education Loan Documents
3. How much time given for repayment?
Just like the interest rate, the tenure of education loan is extremely important. A short-tenure of even the best education loan will mean that the student will have to quickly pay off the loan. It may not be very easy for the student to pay big EMIs in order to repay the loan in a comparatively less time. For example, a Rs 10 lakh personal loan for education at 11% interest rate for 4 years means an EMI of Rs 25,800. This may not be easy for somebody to pay just after finishing education. A six-year loan tenure will reduce the same loan repayment EMI to about Rs 19000. So, kindly choose the education loan tenure very carefully. Many NBFCs provide an education loan EMI calculator from where you can choose your EMI based on the tenure and interest rate.
4. Have I got all the documents to get a loan?
Loans are sanctioned when you have all the documents in place. While photo identity proofs of both the student & parent like Voter ID, Passport, Driving license or Aadhaar Card are asked for, the student is often asked for attested marks sheets and certificates (from 10th standard onwards). There is also a requirement of submitting a copy of the admission letter as issued by the admitting school, college or institute. Other key documents that are asked for include income proof – bank statements for the past six months, salary slips for the last three months & ITR of parent or guarantor. If student going to stay abroad, one needs to give entry permit, admission letter and I-20 form from a foreign institution. Ensure you have all the documents required for Education Loan. If you don’t, first try to get all of them. Without proper documents, your chances of education loan eligibility go down drastically.
Additional Read: Why is 2021 the Right Time to Go for an Education Abroad?
5. Did you look at all the EMI options?
You may have received a call from loan provider about education loan eligibility. However, don’t decide before studying the EMI options. There is the standard EMI plan where you pay the principal amount along with the interest consistently for your defined period. But there are other interesting options like Step Up Flexi EMI Plan. This option, not just provides higher education loan ability, but also allows you to pay lower EMIs in the beginning. Once the salary increases, you can pay higher EMIs. NBFCs like Tata Capital also offer Step Down Flexi EMI Plan. It offers flexibility to pay higher EMIs at the beginning and lower ones at the end. This achieves two benefits of reducing interest substantially and providing higher education loan eligibility. Learn about all the flexi EMI plans for Education Loan here at Tata Capital.
That’s all it takes. 5 questions. If all the answers are yes, you may have found the right education loan for you.