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Problems Associated With Getting Student Loans In India

Updated on March 29, 2012

Today I will discuss the queries and problems associated with getting student loans provided by banks for higher studies abroad.

LOAN AMOUNT:

Student loan rule in India says that,

  • For loans up to 4 Lakhs INR, no security and/or collateral is required.
  • For loans up to 7.5 Lakhs INR, security in the form of collateral or third party guarantee is required.
  • For loans above 7.5 Lakhs INR, collateral is a must.

NOTE:

  • Third-party guarantee: Any person (friends, relatives) who has a regular income and capable of paying out the loan interest, if you fail to do.
  • Collateral: Any asset of worth equal to loan amount (house or land or fixed deposit for the loan amount). Document should be provided to the bank. Bank will evaluate the worth of asset before sanctioning the loan.

But the current scenario is: If the education is pursued abroad, banks demand a collateral security for any loan amount even if it is less than 4 lakhs INR.

RATE OF INTEREST

Typical interest rates will be around 11.75% in nationalized banks. For girls, they give 0.5 % discount in the interest rate, so, it comes to 11.25%.

ADDITIONAL INFO

As per rule for getting a student loan from a bank branch, you don't have to have an account in that branch, but you should have an account in one of its branches anywhere in India, if your bank is nationalized.

There is an option in which you don't have to pay the loan interest during the course period. This is called interest free loan moratorium period. You should demand this option while applying for loan. In that case, you will start paying principal plus interest only getting the job after completing the course or one year after completing the course or whichever is earlier.

But banks demand more requirement, documents and proofs for their safety. So above were some problems associated with getting a student loan in India. If you have a question about student loans in India or would like to discuss your issues, please leave a comment below.

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