Things You Need to Consider Before Getting Education Loan For Your Higher Study

Things You Need to Consider Before Getting Education Loan For Your Higher Study

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Education loan for Higher study

Aspirations of those who want to go to prestigious universities for education often die prematurely due to the perception that it is an expensive affair. Adding to the common myth is that studying in reputed colleges is only for the rich. While studying in India has its share of expenses to bear, it is not out of reach with the right planning, as reaffirmed by a report by India Today published in May 2021, stating that the demand for education loans is likely to rise in the coming years, with many banks and financial institutions offering customized education loan schemes to students.

According to a research report by RedSeer, the number of Indian students opting for education loans by 2024 is expected to reach 2.7 million, a significant increase from the current 1.5 million. The number of students enrolled in Indian institutes was 40 million in 2020 and is expected to reach 92 million by 2035, leading to a surge in demand for education loans.

This increase is mainly due to the inflation in tuition fees and the cost of living in various countries, as well as the growing demand for quality higher education. Students seek top colleges for a variety of reasons, such as gaining valuable life skills, including soft skills, and expanding their social network through cultural immersion. Since higher education enables students to establish a network of diversified connections by making them culturally intelligent, it provides them a competitive edge for securing high-paying jobs upon graduation.

After the challenging two years, students are now marching to achieve their academic aspirations to start afresh. Parents too are preferring to avail of education loans to effectively fund their child’s higher education and effectively meet all related expenses.

Financing higher education is now easy

Education loans take off the immediate burden of financing higher education. In India, various banks and Non-Banking Financial Companies (NBFCs) offer education loans for higher education purposes. These organizations provide both secured and unsecured loans to students. While public sector banks offer unsecured (non-collateral loans) of upto Rs 7.5 Lakh, with a co-applicant, NBFCs allow larger unsecured loans for the course duration of less than 2 years. There are some other NBFCs that offer students a higher unsecured loan without collateral.

Furthermore, the Reserve Bank of India (RBI) has ordered all scheduled commercial banks in India to adopt the Education Loan Program, which aims to provide financial support to deserving students to pursue higher education in India and abroad with convenient terms and conditions.

10 things you should consider before applying for education loan in India

Education loan is a convenient and flexible financing solution that can help you manage the cost of tuition, books, and other related expenses. However, before applying for an education loan, it’s essential to understand the terms and conditions associated with it, as well as the various factors that could affect your loan application and repayment. In this article, we’ll discuss six important things you should know before applying for an education loan in India.

1. Examine the cost of education:

To properly evaluate the expenses associated with education, you must estimate the total cost before obtaining an education loan. Conducting thorough research is necessary to gain insight into these costs, and some lenders provide useful online tools, such as a college course calculator, to aid in this process.

2. Understanding the process is crucial:

Having a clear understanding of the process is essential, and you should conduct online research and consult with friends and family who have previous experience with similar loans. Additionally, some NBFCs have experts in this area who can provide guidance on education loans and the application process. It’s crucial to understand the eligibility requirements, the application process, and the necessary documentation before applying for a loan.

3. Know how much it covers:

When choosing an education loan, you should ensure that it covers all aspects of the educational experience. It is essential to consider that education loans should cover the holistic cost of education, including not just tuition fees, but also ancillary expenses such as travel, learning devices, accommodation, study materials, and other education-related costs. Many student-centric lenders offer loans that cover the complete cost of education.

Also Read: What are the different types of student education loans available in India

4. Choose the right lender:

Selecting the right lender is critical, and you should consider the lender’s expertise in managing education loans and their unique selling propositions. It’s a common mistake for students to only focus on one parameter, such as interest rates when choosing a financier. Instead, you should take into account other factors, such as customer testimonials, student loan features, costs covered, and overall benefits. Taking a holistic approach can help you ensure that the lender chosen is the best fit for your needs.

5. Enquire about financial Institution tie-ups with universities and colleges:

Researching whether the college or university of your choice has partnerships with financial institutions is important for you. Such tie-ups can facilitate a hassle-free education loan process.

6. Select the right repayment strategy:

Choosing the appropriate repayment strategy is critical to ensure a smooth education loan repayment experience. You should consult with the lender to discuss all aspects of the loan, including the loan amount, tenure, repayment options, and EMI, to develop the most effective repayment plan that aligns with your future plans.

You are advised to make simple or partial interest contributions during the moratorium period, as interest begins accruing shortly after obtaining an education loan, and this period is not interest-free.

7. Plan for fluctuations in interest rates:

Make provisions for interest rate fluctuations: Various macroeconomic factors and regulatory reforms have the potential to impact the rate of interest. Hence, you are encouraged to create a corpus to cover your student debt. Spending judiciously to set aside some funds to ensure continuity in the repayment of the education loan instills financially prudent habits and prevents default of EMIs.

8. International work experience to prepare for the future:

Gaining international work experience is crucial for being future-ready. Choosing the right course, university, and destination can lead to lucrative career prospects, especially with highly acclaimed study programs and top-ranked universities. It is also beneficial to consider countries that offer attractive post-study work opportunities.

9. Work while learning:

To reduce overall expenses, you can work part-time within permissible limits during your study period.

10. Go for upskilling, reskilling and vocational courses:

After the pandemic, the significance of Technical and Vocational Education and Training (TVET), upskilling, reskilling, and executive programs have become apparent. These courses can propel your career to new heights and some financial education loan providers offer student loans to support students in pursuing their academic goals.

Many lenders (NBFCs) are now open to fund certification and vocational courses as it holds great potential for economic mobility and development in India, which has one of the largest working age, unemployed populations in the world. Read more about NSDC’s partnership with Varthana to provide financial assistance to students for skill development courses here.

Planning based on thorough research is crucial for achieving academic goals, and following the process outlined above while obtaining an education loan can help you find the best financing solution for your study journey in India. Varthana education loan helps you to do better in life and gives you a nudge to reach your true potential. It also helps young professionals become independent by taking charge of their own finances without having to depend on family/friends.

Therefore, never let lack of funds restrict your growth. Opt for a Varthana education loan to reach your higher education dreams.

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