Education loans are a blessing for students who want to pursue their dream career without worrying about finances. Education loans are available in various forms like personal loans for education and student loans. Student loans are secured loans that require assets as collateral. Whereas personal loans for education are unsecured loans and do not require any collateral. Personal loans for education are more popular as they do not require any collateral and have a quick and hassle-free application process. Here are a few things you don’t know about Education Loan.
1: Without Collaterals Does Not Mean Without Security
When any financial or banking institution is offering you a loan without any collaterals, it does not mean that you or your parents cannot be held liable for the loan taken.
The guarantee papers have certain clauses wherein your lender makes sure that they can take over the personal assets (belonging to your parents) in case there is a non-repayment of the loan. So overall, any education loan that you take is backed by your parents’ assets.
2: Fixed Interest
It would be contradicting to state that student loans have a fixed interest rate. As a matter of fact, different lenders offer different rate – Base Rate + Interest Spread.
On the other hand, all banking institutes are governed by Marginal cost of lending rate (MCLR) – which is the cost of funds to the banking institutes. Hence, if the MCLR increases so will the interest rate.
All the NBFCs work on Commercial lending rate (CLR). The interest rate that the NBFCs offer on their services is linked to this rate, which is CLR (+ or -) Premium/Discount. So, when the CLR increases the interest rate will also increase.
3: Education Loan Is the Cheapest Loan Available
Since there are boundless interest adjustments against income tax under the provision of section 80E, RBI ensures that education loan happens to be the cheapest net costing loan that is available in the market.
However, parents must make sure that there is no hindrance in their child’s education due to unavailability of loan. Perhaps after 80E tax deductions, the net rate of interest comes to around 8% to 9%.
4: Flexibility of Interest Payments
You should know for a fact that student loans are one of the most flexible products when it comes to interest payments. The loan terms are structured in such a way that the repayments would start only after the student starts earning. This is typically after 6 months to one year of the completion of the course.
5: Student Loans Are Not As Scary As They Sound
When coming across big financial terms and scary paperwork, parents and students are usually startled. Now, even if the student loans come with a lot of paperwork and big financial terminologies, it is still essential that you carefully go through it all and ask questions when you have them (especially the students).
Your parents, your lender and sometimes even some online financial bloggers readily help you resolve your queries. In fact, you will feel much more confident and less stressed out after you take some time to learn about and understand your loan terms and conditions.
In A Nutshell
Taking an education loan can be scary, but you still have to understand the loan terms. Don’t worry, it will be ok!
Personal Loans available on Finserv Markets come with a quick online process, competitive interest rates and are bespoke to best suit your needs. What’s more? Your online personal loan can be processed under just 3 minutes and the amount can be credited to your bank account within 24 hours! So why wait? For your child’s bright future, apply for a Bajaj Finserv Education Loan with Finserv Markets today!
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