Money matters

Money in hand brings smile to face - Photo: V. Ganesan

Money in hand brings smile to face - Photo: V. Ganesan  

"An education loan scheme has been in operation since April 2001 under which loans up to Rs. 7.5 lakhs and Rs. 15 lakhs are available for professional courses within the country and abroad, respectively. The requirement of collateral was dispensed with for loans up to Rs. 4 lakhs. I am happy to say that commercial banks have now agreed to waive the need for collateral for loans up to Rs. 7.5 lakhs, if a satisfactory guarantee is provided on behalf of the student. Thus, no student admitted to any professional course, including courses in IITs, IIMs and medical colleges, will be deprived of the opportunity to study because of lack of funds."

That was the Finance Minister presenting the new loan proposal for education, in the annual budget.

The bad news is that most public sector banks say they have not yet received `official circulars' instructing them to waive collateral. And so banks are sticking to their regular loan schemes, offering the regular rate of interest and requiring collateral.

Educationplus takes you through the rough guide to what you need in your head, pocket and bag if you are going to apply for an educational loan in any bank.

The pact with a bank is usually this: You borrow a whopping sum to see you through college. Your dad pays back the interest while you are studying. And you pay back the principal once you get a job.

First, it is best to steer clear of private banks — most of them do not have educational loan schemes per se.

Second, it is advisable to approach the bank closest to home for a loan or the one that your parents and grandparents have been keeping their accounts in for ages — that way they know who you are. (Also check with the organisation your parents are working in — there might be an attractive loan scheme on offer.)

And lastly, most students who have taken a loan say they feel a sense of "responsibility" and a feeling of "growing up" once they have taken the loan.

All banks will ask you to come back with the following — mark sheets from class XII onwards, a letter with the proof of admission or a scholarship, a chart of the expenses for the specific course and passport size photographs. Your parent, who will accompany you, has to have in order his banks statements for the last year, pay slips, copies of Income Tax returns, a statement of assets and liabilities. And if all these papers are in order, loans are sanctioned in just two days, chorus many banks.

A round up of the deal some leading banks have to offer:

State Bank of India

According to AGM of the Adyar branch, N. Arun, "It's as much a business proposition for us as an opportunity to serve the students. Take the students going abroad. After we offer them loans, they'll probably bank with us and have NRE accounts. That means money coming into the country — and the GDP will grow."

The scheme: The bank lets you borrow a maximum of Rs. 7. 5 lakhs for education in India and Rs. 15 lakhs for education abroad. The interest rates are between 10.5 and 11.5 per cent. The repayment period is about 5 - 7 years, starting a year after the course period or six months after obtaining a job, whichever is earlier. Contact: 24417077

Bharat Overseas Bank

"The service is better here because we are a modest size bank. As long as students study well, banks are here to support them," says one official.

Interest rates are 11 per cent for sums over Rs. 4 lakhs. And if students are willing to give a collateral security, they are eligible for an interest rate of 10 per cent. Domestic loan ceiling: Rs. 7.5 lakhs; Overseas education ceiling: Rs. 15 lakhs. Contact: 28523203

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