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There are a large number of options available when you are looking at an education loan, but read the finer details first to get a better idea of the offering.

Rising cost of education, especially professional courses in India, has been a cause for concern in recent years. Hence more students are opting for educational loans. Though most banks provide educational loans, public sector banks are at the forefront in this business.

Here are a few pointers that you should check before taking the loan.

REPAYMENT OPTIONS
Unlike other loans, education loan provides the option of a moratorium period or a 'repayment holiday'. This means, the borrower can suspend repayment of the loan till the course is completed.

Usually, there are three repayment options for an educational loan:

Education loan with repayment moratorium. Many banks stipulate repayment within one year, after completing the course or six months, after getting a job, which ever is earlier.

Only the interest payout has to be done during the period of course. After the course completion, you start paying the actual equated monthly instalment (EMI) that includes the principal and interest

You start repaying the loan through EMI immediately after loan disbursement. In this option you could get the loan at a lower interest rate.

The repayment conditions vary from bank to bank. So, talk with as many banks as possible to get the repayment option that suits your requirements.

INTEREST RATES
Interest rate on education loan is usually lower than a personal loan but slightly higher than a home loan. Some banks offer a "fixed" rate of interest while others offer "floating" rate of interest on education loan.

If the difference between fixed and floating rate is only about one per cent, it is advisable to opt for fixed rate, as education loans have shorter repayment tenures of 5-7 years.

Also, it is important to remember that many banks may say it is a "fixed" loan, but may not give you that option for the entire tenure of the loan. This is a loan with a reset clause.

In other words, the bank will have the right to revise interest rates after every two to three years or whenever the bank feels it is necessary to change rates. So make sure that you take a genuine fixed rate loan. In case of fixed rate loan with reset clause, opting for floating rate may be a better option.

Many banks, especially public sector ones, have special schemes for girl students. Some banks offer one per cent lower interest rate for girl students. So check with your bank about all special schemes.

PROCESSING FEE
Many banks do not charge a processing fee for education loan. So if your bank asks for a processing fee, negotiate for a waiver.

PREPAYMENT FEE
Again, in almost all cases, banks allow foreclosure or pre-payment of the education loan without charging a penalty, if the borrower makes the payment from his own sources. Pre-payment penalty (usually up to two per cent of the loan amount) is charged when the loan is transferred to another bank.

EXPENSES COVERED BY EDUCATION LOAN
The definition of expenses, which education loan covers can differ from bank to bank. The amount of loan sanctioned is correlated with the expenses that you incur while pursuing the course. The most common expenses covered include:

Fees payable to college/school/hostel

Examination/Library/Laboratory fees

Purchase of Books/Uniforms

Caution Deposit/Building Fund/Refundable Deposit

Travel Expenses/Passage money for studies abroad

Besides the above mentioned, there may be other costs incurred for the completion of the course. Like the cost of instruments, such as, a laptop and other aids. Some banks like State Bank of India also offer loans up to Rs 50,000 for two-wheelers as part of education loan.

Banks provide about 80-90 per cent of the cost of education as education loan. But the important factor to check here is the education expenses that are recognised by your lender.

If part of your education (course fee, for example) is funded through a scholarship, you could still get a loan to cover the balance expenditure. In such cases, most banks include the scholarship amount as part of the total cost of education. This way you could end up financing the entire cost of your education through loans and scholarships.

Lastly, it is always advisable to check with as many banks as possible before finalising your lender to get the best deal.

Source:www.apnaloan.com