Common Points Of Comparison Between Education Loans

Whether you want to buy a car or a house, there is a high chance you will need a loan to do so. The same can be said for pursuing higher education. With the steady rise in college fees, the only option that most people are left with is taking education loans. These loans are used to cover basic tuition fees. While it is not included in the basic package, you can opt to take loans that cover other expenses like examination fees, study material expenses, library fees, laboratory fees, and hostel charges along with travel expenses if needed. Depending on the lender, the loan involves limits on some expenses. If you choose it, the loan can also pay for expenses on project work and study tours. Due to so many specifications, comparison becomes all the more important.

Here are the common points of comparison amongst different education loans:

Interest Rates:

Interest rates are the biggest cost related to education loans. The MCLR is the regulatory body responsible for the average interest rate in India. The interest rate offered by various banks is based on the cost of borrowing set by the MCLR for the bank. On the other hand, NBFC’s usually provide a floating rate or a fixed interest rate depending on their cost of capital. Hence, the first comparison is about who you should borrow from: banks or NBFCs. The second comparison is between the different deals that a particular lender offers with regards to the interest rate.

Processing Fees:

Processing fees are described as the amount paid as fees to the lender for processing the loan. As it is a cost you have to bear before you even get the loan, it is an important point of comparison between education loans. The different types of processing fees lenders request for are amortizable, refundable, and non-refundable. On the other hand, some lenders may not ask for processing fees.

Loan Amount:

Loan amount, as the name suggests, is the amount of money that a particular lender offers you as a loan. The loan amount is the maximum amount that you get for the course of your entire course. Hence, you need to first know exactly how much you need. Secondly, you need to compare different deals across different lenders based on the loan amount you are being offered.

Margin Money:

The thing about education loans is that you may not always get exactly what you want. For example, while you may apply for a larger amount, the lender may only approve less than that. In such a situation, many expenses related to your course will have to be funded out of your savings, if you have any. This amount is commonly known as margin money. The major point of comparison here is whether your loan includes funds for start-to-finish, or do you have to spend some money yourself. This comparison is highly important as not everybody has enough funds to use as margin money.

Taking an education loan is a major step. Given that the cost of education today is extremely high, the loan taken to cover those costs will also be the same. This makes it all the more important to ensure that you borrow right with a lender that favours your child’s education more than anything.