4 factors to consider before applying for education loan

In an era where the cost of education is skyrocketing, education loans have emerged as the primary financial lifeline for aspiring students. These loans have gained immense popularity among those who might not have been able to afford higher education otherwise. Let's explore the key aspects to consider before applying for an education loan.

1) Understanding education loan eligibility criteria

First and foremost, understanding the eligibility criteria is of utmost importance. Different institutions have different offers and loan schemes. While some focus solely on financing education abroad, others extend their coverage to domestic education as well. If you are not earning at the time of applying for the loan, your parents or siblings can become co-applicants. It's essential to be aware that the loan amount offered varies from bank to bank, so it is advisable to thoroughly review the types of courses covered under the loan to avoid any future hassles.

2) Comparing education loan interest rates

Comparing the interest rates provided by various banks is an essential step. The interest rate you receive may also depend on the course and university you have been accepted to, as well as your academic record. It is prudent to enhance your credit score before applying for a loan, as a credit score above 700 is considered good and provides lenders with a sense of confidence in approving your application.

3) Balancing study and loan repayment

Repayment is a critical aspect to consider. Public banks typically offer a moratorium period, during which borrowers are not required to make any loan payments. This period usually extends for the duration of the course plus an additional 12 months or 6 months after securing a job. This provision ensures that students are not burdened with immediate loan payments and can focus on their education. However, it's important to note that in the case of private lenders where interest servicing is required, simple interest is charged from the first disbursement and will compound if not serviced during the study period. Planning and paying the interest during the moratorium period is a wise move to prevent interest from accumulating. Additionally, opting for a shorter loan tenure can result in significant savings on interest payments.

4) Education expenses coverage 

When applying for a loan, it's crucial to determine the full cost of education. Beyond tuition fees, there could be various additional charges and expenses related to living cost, travel, health insurance, administrative fees, and accommodation, especially when you are moving abroad for studies. Calculating the total amount required will ensure that the loan coverage adequately meets your needs.