Government Bank Education Loan Benefits
A government bank education loan is the first choice of many students who wish to study abroad. Government bank education loans from banks like the State Bank of India, the Bank of Baroda, etc. are much more preferred by students and parents alike because of their flexible education loan policies. Although there are many more lenders who cater to the funding requirements of various courses abroad, a major percentage of students tend to go for government banks, have you ever wondered why? What sets a government bank education loan scheme apart from the rest of them all? This article will tell you the different reasons why you should go for a government bank education loan.
Government Bank Education Loans – An Overview
By now, you all must be familiar with the two different kinds of education loans in India. Although they do grant unsecured education loans up to a certain extent, all government bank education loan schemes mainly specialize in providing secured education loans. Secured education loans are provided on the basis of collateral. To make the entire education loan process easier for loan applicants, all government banks have listed three major categories of assets that can be pledged as collateral against abroad education loans. The 2nd episode of Loanflix lists all the three categories and gives its viewers a detailed explanation about them. So do make it a point to go through the same.
So why is any government bank considered to be the best bank for education loan? What makes their education loan policies seem more appealing to the applicants? Read further to know more.
Government Bank Education Loan: Attractive Factors
The government of India, in its continued efforts to encourage more students to pursue their higher studies, has come up with certain provisions regarding abroad education loans. The following factors have played a key role in making government bank education loans one of the best options for students to fund their higher studies abroad.
Factor 1: Lower Interest Rates
The primary reason why many students who choose government bank student loans to fund their higher education abroad is the low education loan interest rates offered by them. The education loan interest rates offered by some of the government banks which are considered to be the best bank in India for an education loan, do not go beyond 10%. One of the best parts about a typical government bank student loan scheme is that the education loan interest rates do not change at the time of education loan repayment.
Fixed Education Loan Interest Rates
It is common knowledge that the education loan interest rates of government bank education loans are fixed on the basis of the MCLR which is the benchmark value used by most government banks to decide the interest rate for any kind of loan. These values are never constant and hence, the education loan interest rates also vary from time to time. However, one of the best things about borrowing a government bank education loan is that these changes are not applicable to the interest rates of students who have already availed an education loan from any of the prominent government banks.
Factor 2: Affordable Processing Fees
One of the biggest attractions of a government student loan scheme is the lower processing fees charged by them. While NBFCs and private banks may grant education loan without collateral, the processing fees charged by these organizations constitute at least 2% of the total education loan amount. Due to the nature of their funding, government banks have fixed an amount as processing fees for secured education loans.
All government banks have a fixed processing charge of INR 10,000 for education loans provided by them. All government banks charge a certain fee for the legal and monetary evaluation of the collateral pledged by loan applicants. However, even with the additional charges in the picture, the maximum amount charged as processing fees for government student loans does not go beyond INR 18,000.
Factor 3: Education Loan Subsidy 2020
One of the major factors of availing a government bank education loan has been the education loan subsidy which is applicable to the interest rates of government bank education loans. The government of India had introduced three very important education loan interest subsidy schemes which allow students belonging to certain communities to claim an exemption on their education loan interest payment. The terms and conditions to avail this provision is different for each of these education loan interest subsidy schemes.
The education loan subsidy 2020 is applicable to the following schemes:
- The Central Sector Interest Subsidy Scheme (CSIS)
- The Padho Pardesh Scheme of Interest Subsidy for Abroad Education Loans
- The Dr Ambedkar Central Scheme of Interest subsidy on education loans for Other Backward Classes and Economically Backward classes
Each one of the above education loan subsidy 2020 schemes is aimed to enable students who belong to various sections of the society, a chance to fund their higher education in India as well as abroad with a government bank education loan. The eligibility criteria for each of the above education loan interest subsidy schemes are discussed in detail in the 16th episode of Loanflix.
This benefit can only be availed by students who have borrowed a government bank education loan to support their higher studies.
Read More about Education loan interest subsidy: Government schemes
Factor 4: The Vidyalakshmi Education Loan Portal
The government of India, under the Pradhan Mantri Vidyalakshmi Yojana, started the Vidyalakshmi education loan portal in order to make the entire process of applying for government student loans, easier for students and parents alike. The Vidyalakshmi portal is a one of a kind, online, common portal which lists the education loan schemes offered by all the government banks in India.
With the introduction of the Vidyalakshmi education loan portal, students who had limited access to prominent government banks found it easier to apply for government student loans.
In the education loan process, it is very essential to find all the information regarding government education loans from the right source. With the help of this portal, students can access the education loan schemes offered by some of the best banks for education loans in India.
Factor 5: Student-Friendly Education Loan Repayment Terms
All government bank education loan schemes have some of the most flexible education loan repayment terms in place. One of the biggest plus points of the repayment policies of government bank education loans is the feature of a payment-free moratorium period. A moratorium period essentially refers to a loan holiday before the repayment tenure begins. During this time period, students are not expected to begin their education loan repayment for their entire course duration, plus six months post the course. This provision gives students sufficient time to find employment or to arrange funds for their repayment. This benefit is particular only to government bank education loan. The education loan interest rate for this period is calculated on the basis of the simple interest concept and students are allowed to begin the repayment of this interest amount once their course is over. Another benefit enjoyed by students is the loan tenure of 15 years, granted by all the government banks in India.
Also Read about Education Loan Repayment: Process- Steps to know
Factor 6: Flexible Education Loan Eligibility Criteria
All education loan applicants are required to meet certain criteria in order to be eligible for any education loan. The eligibility criteria for non collateral education loans are much more stringent as compared to those of government bank education loan schemes. Especially when it comes to co-applicants. In order to get a non collateral education loan, individuals who have a stable income profile alone are considered as co-applicants by NBFCs. Government banks, on the other hand, allow students to name individuals who are retired, those in the farming industry, etc. as co-applicants. As an alternative, the education loan eligibility criteria for co-applicants in government banks allows students to name a third-party (someone other than the prescribed list of primary co-applicants) with a decent income status, as financial co-applicants.
Despite of all the above plus points of borrowing a government bank education loan for higher studies, a lot of students face obstacles in the government bank education loan process. This is when the services of organizations like WeMakeScholars comes in handy.
Many candidates who have applied for a study loan for abroad to fund their higher education abroad have had to tackle rejection from a lot of lenders. This is especially true in the case of government banks where the bank officials are least aware of the courses that are eligible for education loans. Since the number of candidates opting for countries like Canada, Germany and New Zealand has started increasing only recently, many government bank officials sometimes reject education loan applications submitted for the purpose of funding such courses. Most government banks focus on other categories of loans such as personal loans and home loans. Hence, when a candidate approaches any such banks with an application for an education loan to fund unconventional courses such as this one, their officials are seldom aware of the provisions of a typical education loan scheme offered by their bank.
At WeMakeScholars, the financial team has a good grasp on the education loan schemes introduced by all types of lenders and have been able to help candidates get their study loan for abroad for executive courses even in the most difficult situations. Hence, if you are looking to fund your executive course abroad with the help of an education loan, do get in touch with our team today.
Borrowing an education loan to fund studies abroad, despite the nature of the said course, is a major financial decision. Hence, it is very important to choose the lender after having conducted a thorough analysis of their lending policies and terms and conditions.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others