Education loans are a type of debt financing available to both students and their parents to cover the cost of higher education. A common financial product, it’s important to familiarize yourself with its terms and conditions prior to applying for one. We will explore who qualifies for an education loan, how interest rates work and some key details you should keep in mind before applying. In this article we’ll also look at whether eligibility can change and important details you should keep in mind during application.
Eligibility for education loans depends on a borrower’s creditworthiness and income. Most lenders set minimum requirements in terms of both, although there may be exceptions such as cosigning by family members for cosigned student loans with less stringent requirements than private lenders.
Banks usually don’t require collateral or third-party guarantees for loans under Rs 4 lakh; however, loans above Rs 7.5 lakh necessitate such safeguards; additionally guarantors may be necessary when borrowing from some private-sector lenders.
Federal student loans are the most prevalent educational loan type available and often feature lower interest rates than private ones. They also come with the option to defer repayment while you’re studying, as well as provide six months grace period after graduation and potential loan forgiveness programs for public service or teaching jobs.
Private-sector educational loans follow more of a traditional lending process and typically carry higher interest rates compared to federal student loans, though their interest rates and repayment terms can often vary significantly from one lender to the next. Some private-sector lenders, like Sallie Mae, allow borrowers to prequalify without incurring hard inquiries on their credit report.
To determine your eligibility for an education loan, it’s essential that you know the total cost of higher education including tuition fees and living expenses. An EMI calculator can be an invaluable asset in this regard and show your monthly payment based on principal and interest rate calculations.
Once you know how much you need to borrow, the next step should be comparing lenders. Aim to find those offering loans at lower or no application, origination, disbursement fees; these charges can add up quickly over the life of a loan and make a big impactful difference to monthly payments. In addition, look for lenders offering flexible repayment terms without charging prepayment or late fees – these factors could all add up when searching for financing.