Documents Required for a Full Amount Education Loan: A Comprehensive Guide
When considering an education loan for studies in India or abroad, it's important to understand the requirements and process thoroughly. A full amount loan means no financial contribution from the student, which is only allowed for a certain quantum. Here, we will guide you through the documents needed and other essential details.
Eligibility for Full Amount Education Loan
A full amount education loan is offered to students who wish to study in India or pursue higher education overseas. This loan can be utilized for various types of courses, including full-time, part-time, or vocational ones, and for fields such as engineering, management, medicine, hotel management, architecture, and post-graduation.
To be eligible, you must be an Indian citizen and have secured admission into a college or university recognized by a competent authority in India or abroad. Additionally, you should have completed your higher secondary schooling and have no upper age limit restrictions unless specified by some banks.
Essential Documents for Application
When applying for an education loan, you will need to furnish the following documents:
Admission Letter of the Institution: This document verifies your admission into a recognized college or university. Fee Structure: Details of the fees you will be paying during your studies. Mark Sheets: Class X, XII, and graduation mark sheets, if applicable. Income Proof of Co-obligeant: If you are required to service the interest. The bank may ask for proof of income to ensure the co-obligeant can service the interest if needed.Loan Amount and Margin Requirement
The amount of the loan and the margin requirement can vary depending on several factors, including:
Studying in India: The maximum amount offered can be up to 100% of the loan, with no margin money required for loan amounts up to Rs. 4 lakh. For studies over this amount, the required margin money increases to 5%. Studying Overseas: For studies abroad, the required margin money increases to 15%. Some banks may also ask for collateral for loans above Rs. 7.5 lakh.Direct Disbursement and Repayment
The bank will directly disburse the loan amount to the college or university based on the given fee structure. The student, the primary borrower, or the co-obligeant will be responsible for repaying the loan. Repayment usually starts 6 months after course completion or after securing a job, whichever comes earlier. The repayment period is generally fixed between 5 and 7 years, depending on the expected income after the completion of the course.
Interest Payment and EMI
It's crucial to consider the impact of interest payment during the course period on future EMIs. While paying interest during the course period may reduce the burden of the EMI, if added to the entire repayment period, it can exceed the maximum limit of the gross salary.
Cost of Education Loan
Before submitting a loan application, it's essential to calculate the total cost of the loan, including interest, and determine if the loan is financially viable. For instance, assuming a loan amount of Rs. 20 lakh for a two-year course, the total liability including interest would be approximately Rs. 22 lakh. If the student secures a job at Rs. 50,000 per month, the EMI would be Rs. 36,523 for 7 years, with a total interest payable of around Rs. 867,889.
Only if the job fetches a salary of at least Rs. 1 lakh or more, it makes sense to avail the loan. Therefore, thorough analysis of job prospects after completing the course is essential.
Conclusion
Availing a full amount education loan is a significant decision and should be made after a thorough assessment of your financial viability. If not fully secured, the lender's approach will likely focus on the strength of collateral security rather than the financial viability of the loan. Make sure to check all fees and any pre-payment charges before submitting your loan application.