There is no difference between Education loans & student loans. The monetary assistance availed the students to fulfill their expenses regarding their studies, college fees, and other study-related expenses are known as student loans or education loans.
How Does An Educational Loan Work?
Education loans are usually offered at affordable and efficient interest rates with monthly and flexible payment options. The process of getting an education or student loan is simple, you just have to submit a FAFSA (Free Application for Federal Student Aid)form.
After the approval of your FAFSA form, the loan amount is automatically disbursed to your mentioned educational institute, and your cover study cost by itself.
However, it’s important to carefully read the terms and policies of the loan providers, including the respective interest rates. The repayment amount is directly promotional to your interest and can also affect your credit score.
If you are an Indian reader then you must know that in India educational loans are offered by banks like SBI with an interest rate of 8.50% to 10.25 % & RBI with an interest rate of 9-14%.
What Is FAFSA?
It is a kind form & an essential process for getting an education loan. Federal Student Aid (FSA) ID is necessary for the student, and at least one parent of the dependent student will also need to complete it. It comprises a unique username and password that grant you access to the system. Both the student and the parent must provide a digital signature for the results to be considered valid for dependent students. Next, you would proceed with filling out the FAFSA application.
Why Anyone Should Take An Education Loan?
There are various pros and cons of taking education loans and we have mentioned three of them here:
Advantages-
- You can pay a lot of money to get a good education, like at IIMs or other places.
- You can take care of yourself. Your parents don’t have to spend all the money they’ve ever made on college.
- If you take out a loan to pay for school, you feel responsible. You’re likely to pay more attention in your studies.
Disadvantages-
- The interest rate is pretty high compared to a home loan or car loan (10–11% per year).
- If you want to borrow money, you need a guarantee. This could be your parents or someone else. That way, they have to pay back your loan too.
- You need to repay this loan, of course. So you need to be very sure about the schooling and its scope before taking out this loan.
We advise you to consider a legal and expert person with in-depth knowledge about the bank’s interest rates and finances before claiming any kind of loan.
Type Of Lenders In The Market
There are four main types of education or Student loan lenders in the market –
Public Banks: Banks like SBI and BOB offer education loan amounts up to INR 1.5 Crore with included collateral. As a general rule, it is compulsory that collateral value should be equal to or more than the loan amount. Bank lenders offer loans without collateral only up to between INR 7-8 Lakhs.
NBFCs: Non-banking finance Companies like HDFC Credila offer education loans of the amount INR 40lakhs. They also give loans with collateral, but still, for some reason, they are known for insecure education loans.
Private Banks: Axis Bank and ICICI Bank offer education loans amounting to INR 40 Lakhs WITHOUT collateral. These lenders are likely to be more expensive than public banks.
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