NEW DELHI: If you plan on pursuing studies in a foreign university, public sector banks (PSBs) offer the best rates for education loans. However, they can have restrictions on the maximum loan offered.
Bank of India, for example, offers education loan at interest rates of 7.55-9.35%, but the loan is capped at ₹20 lakh loan. State Bank of India, on the other hand, offers education loan between 8.8% and 9.3%, and a borrower can get up to ₹1.5 crore loan for specific courses.
Most lenders would also ask the borrower to offer security, like a house, if the loan amount is over ₹4 lakh.
But the biggest challenge with public sector banks is the processing time, so if you start the loan process early, it will help.
Even if you have all the documents in place, it can take over three weeks for loan approval. There are many processes involved in loan sanctioning, especially for loans with collaterals.
PSBs are also more focused on the course, college and university. Their crucial criterion for evaluation is the value of collateral for loans above ₹4 lakh. Also, getting a loan for a US-based course is much easier from PSBs than, say, a course in Germany.
Students are now going to different countries for further studies and also opting for specialised courses. Private lenders are more willing to lend to such students than PSBs.
Private lenders look at the application more holistically. For example, they have credit evaluation models under which they evaluate the academic record of students and their earning potential. Some may also look at the economy of the country where the student is going for studies.
Before selecting a loan, it’s essential to look at the way the loan has been structured. With some lenders, especially government banks, a student doesn’t need to pay any money until six months of completing the course.
Before finalising a lender, look at the total interest that you would end up paying and then take a call.