Studying abroad is very expensive. That is why most parents want to take a loan for their children's studies abroad. Banks charge 8.60 to 13.70 percent interest on education loans. This loan also includes other expenses related to studying abroad. However, the cost of travelling abroad for studies is not included in it. Expenses like coaching and private tuition fees from abroad are also not included in this loan.
The amount of education loan depends on many things
How much education loan the bank will give depends on which country you are going to study in. Kuho Finance COO Sridhar Hebar said that before giving a loan, the bank or NBFC sees which institution and which course the student is going to study in and what is the probability of him getting a job after completing his studies. The reason for this is that this determines the student's ability to repay the loan.
NBFC's interest in giving education loan has increased
Many banks demand collateral for education loans. Property, bank deposits, life insurance policies can be kept with the bank as collateral. These things can be in the name of the parents. In the last few years, the interest of NBFCs in education loans has also increased. Therefore, before taking an education loan, it is important to know properly about the interest rates of banks and NBFCs. The reason for this is that a slight difference in the interest rate has a huge impact.
The interest rate of public sector banks is low
Whether you should get an education loan from a bank or an NBFC depends on the needs of the student. Hebar said that government banks usually offer education loans at lower interest rates. They also offer higher loan amounts. But, it takes a lot of time to get the loan approved because of the heavy paperwork. Loans get approved quickly in NBFCs. Because of this, many parents want to get an education loan for their child from NBFCs.
Benefits of taking a loan from NBFC
According to Ila Dubey, co-founder of SEBI registered investment advisor EduFund, taking an education loan from NBFC can be beneficial for those who do not want to keep collateral. Apart from this, taking an education loan from NBFC is also good for those who want quick disbursement of education loan. You can also take loan from international financial institutions. Some foreign financial institutions offer education loan.
You can also take loan from foreign institutions
If you want to take an education loan from foreign financial institutions, then you have to take care of some additional things. This includes the risk of the exchange rate of rupee against the dollar. Hebbar said that if you take a loan in dollars from a foreign institution and your child returns to India after studies and his salary comes in rupees, then the burden of currency conversion cost has to be borne on repayment of the loan.
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Changes in currency exchange rates make a big difference
We can understand this with the help of an example. Suppose when you took a loan of 50,000 dollars, the value of rupee against dollar was 75. But now the exchange rate of rupee against dollar has become 87, so the loan amount increases to about 6 lakh rupees. This cost is very heavy on the person. If the student wants to make a career abroad after studies, then he can avoid this extra cost.
