You have plenty of choices when it comes to taking out an education loan to study in India and abroad. There are wide range of choices to fund your education ranging from public sector banks, private banks, Non-Banking Finance Companies (NBFCs) to international lenders.
Considering each bank has a different loan product, you should always compare them on various parameters such as interest rate, processing fees, loan eligibility, among others. Consider this: State Bank of India (SBI) is offering education loan at 7.95-11.15 per cent, Bank of Baroda at 8.45 per cent to 10.75 per cent and another public sector Punjab National Bank is offering education loan at 8.65-11.40 per cent.
The average rate of interest from public banks starts from 7.95 per cent. The same starts from 9.5 per cent for private banks. The rate is generally higher for NBFCs, and fintech players. However, it is important that one compares them on various parameters such as moratorium period while deciding on the best lender.
“Public banks offer a moratorium period, wherein the borrower is not required to pay any part of the loan. In most cases, it is the course duration plus 12 months or 6 months after securing a job. The period ensures that the student is not burdened with loan payments and can focus on their education. However, they should bear in mind that in the cases of private lenders where interest servicing is required, simple interest is charged from the first disbursement and will compound if not serviced during the study period. It is wise to plan and pay your interest during the moratorium period to avoid accumulating interest,” says Ankit Mehra,CEO and Co-founder of GyanDhan, a platform that match students with lenders for their loan requirements.
Moreover, before applying for the loan remember that secured education loans are the cheapest source of funding. This is because in a secured education loan the risk is lower due to a collateral provided to the bank. Another benefit of an education loan is the unlimited tax benefits on interest income under Section 80E of the Income Tax Act of India.
Also read: SBI hits record high; stock can rise up to Rs 760 level, say analysts
Also read: SBI vs Bank of Baroda: Stocks hit 52-week highs on Q2 push; should you hold, sell or buy?