Education loan interest rates have been more or less steady in the last few months. It is expected that interest rates on these loans would drop given the fact that interest rates in the economy are headed lower.
|Name of Bank||Interest Rate on Education Loan|
|IOB Education Loan - Vidya Jyoti||12.75%|
|SBI Education Loan||13.50%|
|Syndicate Bank||1.75% above base rate|
|Bank of India||13.20%|
|Punjab and Sind Bank||12.75%|
|Oriental Bank of Commerce||12.75%|
|Bank of India||13.20%|
|Axis Bank||Base Rate +6.20%|
|State Bank of Mysore||13.25%|
|Andhra Bank||Base Rate +2.25%|
It's important to note that in the case of all of the above banks, the interest charged for education loan of the girl child is 0.50 per cent lower.
Expenses Considered For Education Loan
It's always important to remember that different banks have different norms when calculating and considering education loans for students. Broadly one can include the following in the total amount that is considered as the education cost.
1) Fees that are likely to be paid to the college or the hostel.
2) Laboratory fee that is to be incurred along with examination and library fee, if any.
3) Costs incurred towards buying books, instruments, equipment etc.
4) Travel expenses in case the student is planning to study abroad
Insurance Cover for the Student
The student can take an insurance and the premium payable can be added to the costs and the loan computed accordingly. It is important to remember that an insurance policy is a must as it provides some hedge to the bank in case of death to the student.
The Size of Education Loans
Normally, this may vary from banks to banks, particularly they differ from private and public sector banks in the country.
Generally for studies in India it is a maximum of Rs 10 lakhs, while in the case of going abroad it could be Rs 20 lakhs.
Bank of India provides education loans with the above ceiling, but says that it again depends on the repaying capacity and the collateral in question.
Security for Education Loans
Generally, when one is taking an education loan the bank asks for a guarantor or a collateral. If the parent is the co-borrower then there is no security that is required for loans under Rs 4 lakhs. However, if it a sum that is greater then that a third party guarantor maybe required.
In case the loan is above Rs 7.5 lakhs then some form of security for the satisfaction of the bank maybe necessary.
Before taking an education loan it is best to check with all the banks on interest rates. In case the loans are above Rs 10 lakhs or so, even a small difference in the interest rate could mean a lot. Interest rate from government owned banks are much cheaper as compared to loans from private sector banks.