Interest rate plays a very significant role when it comes to studying abroad. As education loans are tailored to augment financial assistance to students who are aspiring to study abroad and pursue higher education in reputed colleges, the rate of interest on your loan is a game-changer. The rate of interest can flip the scenario as taking an education loan is a life-altering decision and opting for an incorrect bank can posit you in a bog where repayment would be double the loan taken. So, before proceeding ahead with any banks, it is necessary to understand the market and how the bank policy works as most of them end up getting higher interest rates on their loans or loans with unsatisfactory repayment policies.
Students often encounter problems where they witness a change in their rate of interest after a few months of taking a loan especially in private banks, and high interest rate can have an immediate impact on your personal finance. If you find yourself in such a situation where you are planning for an education loan transfer read this article till the end. This article will give you a deep insight into education loan transfer for a better rate of interest.
What is an education loan takeover?
Education loan transfer includes an extended process of transferring debt from one bank to another with a better repayment policy. Most people refer to transferring from one bank to another because of the higher interest rates, unfriendly repayment policy of the bank, etc.
What is the process of education loan takeover?
- In the old bank where your loan is currently under process, you will get a pending repayable amount that has to be paid by your lender.
- This pending repayable amount is further submitted to the new bank, and they will provide a student loan refinance and the loan process will be accustomed.
- Once the loan is sanctioned from the new bank, the new lender will consign a check to clear off the dues from the old lender.
- After this process, the education loan takeover is done.
Few terms and conditions for takeover loans
- No further disbursements can be taken from the old bank, i.e loan applicant cannot demand any more disbursements on the remaining loan amount or borrow any money from the old bank.
- Repayment of your old loan must be started in the form of EMI’s and should be regular to avoid low CIBIL score in the future.
- As per the bank laid norms, if your current loan is a collateral based loan, the new bank will takeover your collateral under possession until the loan is repaid completely with interest.
- As per the bank laid norms, if your loan is an unsecured loan and if you are moving it to a Government Bank, you would need to arrange valuable collateral. There will be no loan margin as the new bank will pay all the pending dues to your old bank and the loan amount on that collateral will be 100%.
If you are still having trouble understanding education loan transfer, watch the 5th episode of Loanflix- Education Loan Transfer for a better rate of interest. Make sure to follow Loanflix to update yourself on education loans as it was an eye opener to many parents and students as it covers all current education loan policies.
Education Loan Transfer Calculator
Instead of spending a considerable amount of time on calculating, WeMakeScholars have come up with an online tool Education Loan Transfer savings Calculator which can help you calculate Equated Monthly Installments (EMI’s).
- Before moving ahead, make sure to specify whether your loan is from an Indian Bank or a foreign bank.
- Enumerate your outstanding loan amount i.e your outstanding principal and the accrued interest amount. This will help you obtain the exact due amount in your loan account statement.
- Put the exact input of the remaining outstanding, only then you will know the exact savings
- Next, input the figures in current interest rate and how much EMI you are currently paying or intending to pay in the given space.
- The final step, Click on CHECK to know how much amount you will be able to save.
All these savings which you see on the Education Loan Transfer savings calculator has been made more simple and easy. Wemakescholars consider the lowest special interest rates which are only applicable for our applicants. Wemakescholars is a Government funded organization that deals with International Education finance and connects you with the best loan lenders. As this initiative is under the Digital India Campaign, it is free of cost.
Benefits of doing the loan transfer via WeMakeScholars
- Zero-Processing Fee
For the loan takeover cases, WeMakeScholars have secured approval from all the banks and NBFC’s for the Zero Processing Fee which means if you transfer your loan via WemakeScholars either there is no processing fee or it is 100% refundable.
- Complete assistance for students abroad
In most situations, students studying abroad seek an education loan transfer in India. Applying via WemakeScholars can help you talk to them through WhatsApp call or other digital modes and get the work done from the comfort of your home. Your parents will be allowed to carry out further documentation if in India and will receive assistance from your financial officer at each and every step. In case your parents are abroad, the process can be done just by involving a local guardian.
- No Pre-Payment Penalty
There will be no Pre-payment penalty in any of the banks i.e even if you procure bulk payment and ought to close the loan on immediate basis or within 6 months, there will be no charges for pre-closing the loan.
Process and documentation of Education loan takeover
Moving ahead with the education loan takeover process, after giving them a consent letter which states the outstanding loan amount from the other bank, you need to surrender your collateral originals to the new lender. To continue weaving with the Education loan takeover process after submitting the letter, you need to take the following documents from your existing lender are:
- Loan account statement of your education loan account since you started the process
- Your final foreclosure letter which specifies the total you need to pay to the bank to close the loan (i.e your outstanding due plue pre-payment penalty)
- Collect a certificate from the bank stating the security you obtained this loan for including all the original documents list that you submitted to the bank.
- The existing bank needs to consign a letter of the confirmation of the original documents with them to the applicant.
Apart from these 4 documents, you need to arrange another 4 documents from your side are:
- Copy of your loan agreement
- Copy of your loan sanction letter
- Copy of your collateral documents if your existing loan is collateralized
- One letter of consent which denotes- Please pay my existing bank the outstanding amount by debiting my new loan account.
After this, they will start your education loan takeover process with the new bank. Once the loan is sanctioned, they will clear the existing deus with the old bank and the applicant will become the loan customer of this new lender.
Types of Education Loan Transfer
There are basically 4 types of Education Loan transfers.
- Secured to secured:
In case of secured to secured loan transfer, wherein your existing loan is with collateral, the new loan will also have collateral security. In such case, you will not have collateral originals and hence the process will be done on xerox papers.
- Unsecured to secured:
Either due to time constraints or unavailability of mandatory collateral papers, most people consider an unsecured education loan from a private bank or NBFCs. During the time of repayment, students realize their loan is very costly. With collateral security, students get a lower rate of interest in Government Banks.
- Unsecured to unsecured:
Incase of unsecured to unsecured transfer, it is more likely to take a loan from NBFCs and they prefer moving to a private bank because of the certain benefits like 80E, which will help them save tax on the interest.
- Secured to Unsecured:
These kinds of cases are very rare as this includes giving away on lower interest rates over higher interest rates. This happens mostly when the collateral owner wants to sell-off the property and to get released from the loan.
So if you find yourself in such a situation where you are being charged a hefty interest or having unfriendly repayment policies, then you may approach WeMakeScholaras and request a callback. Our financial team will get back to you soon.
Note: WeMakeScholars is a Government funded organization that deals with International Education finance and connects you with the best loan lenders. As this initiative is under the Digital India Campaign, it is free of cost. We are associated with 10+ public/private banks/NBFCs in India and help you get the best abroad education loan matching your profile.