Study Abroad Education Loan

1. Interest Rate - You must check for the lowest interest rates and get quotes from various banks and NBFCs. The NBFCs and private banks have a higher rate of interest in comparison to the Government banks. The small difference of 1% could increase your total interest by Rs 1-2 lakh. For example, the loan amount is Rs 20 lakh, Loan tenure is 5 years, and course duration is 2 years. If the ROI is 10%, the interest will be around Rs. 10.60 lakh, and if it is 11%, the interest would be approximately Rs. 11.85 lakh. This 1% make the difference of Rs 1.25 lakh in interest amount.
2. Lending Margin - Sometimes, they do not provide the full amount for Educational expenses. They require the applicant to make a down payment towards it. If the Bank has 0% lending margin, then all education related expenses will be cover by them. For example, the bank might ask you for a 10% lending margin. If the total expenditure is Rs 25 lakh, you have to pay Rs 2.5 lakh out of your pocket, and Rs 22.5 lakh will be given by them.
3. Moratorium Period - It is the period in which you don't have to repay any EMI. This might be your course duration or some extra time after the course completion. In some cases like an unsecured loan, the banking institution may not allow any moratorium period, and you have to pay EMI right from the day of disbursement. You will be charged simple interest during the moratorium period, which will be added to your loan principal amount.
4. Processing period - You should start looking for an Education loan at least 3 months before your University Fees deadline or visa interview. The Government banks might take more time if we compare them with NBFCs or private banks.
5. Tax Benefits - Most banks provide Tax Exemption under 80E on the interest paid upon an education loan. You or your co-applicant can avail of the exemption for a maximum of 8 years or tenure of loan, whichever is shorter. The tax benefit has to be availed in India only.
6. Concession - The selected Government banks provide female applicants a 0.50% discount in interest rate. Make sure to verify the same before availing yourself of an education loan. For example, if the bank offers the usual interest rate of 9.5%, the female applicant will get it at 9%.
7. Early Repayment - They might not allow you to repay your education loan earlier than the loan tenure or ask for early repayment or pre-closure charges. They might also have a lock-in period for early repayment.
8. Living Costs - They might not cover your living costs during your course duration. In that case, you have the living costs such as rent, food, transportation, etc.
9. Collateral - To get more loan amounts and a cheaper interest rate, you have to provide collateral or a guarantee. The collateral can be a home, shop, plot excluding farming land, or fixed deposits. You can choose an unsecured loan if you don't have anything to provide as collateral.
10. Hidden Charges - They might have some hidden charges along with an education loan
    • Processing Fees - They charge processing fees of 0% to 5% on the loan amount. Before continuing with the application, it is advised to double-check or inquire. Even a 0.5% difference might increase the processing fees by Rs 25,000 in a Rs 50 lakh loan. For example, if the loan amount is Rs 50 lakh, the processing fees might be around Rs 50,000 to Rs 1,00,000 or more.
    • Forex Margin - The tuition fees and living expenses will be in foreign currency, and the bank will charge foreign markup of around 1% - 2% to convert INR to foreign currency.
    • Credit Life Insurance - To minimize the loan default, they have to secure you with Life Insurance to cover the loan amount in case of mishappening.
    • Investments & Policies - Their staff might manipulate you to purchase Term insurance or similar policies before or after sanctioning the loan for their own benefit.
    • Interest Rate in different currencies

The Bank or NBFC might have different rules and regulations based on multiple factors such as an applicant profile, collaterals, university or college, course type, etc.