With higher education getting more and more expensive in India the trend of taking loans is also going up. The trend is much greater for people who are looking to get an education at top notch institutes and those looking to study abroad. Getting an education load in India is getting easier with each passing day but repaying those loans is getting much tougher. The reason most people are looking at micro finance or child support plans from an early age so that the constant terror of an expensive loan is not present.
Dynamics of the Education loan:
Education loans are easily available at all banks in India (whether private or public). Very often these loans can be availed by students by just showing the prospectus to the bank. In case the institute is of national recognition and people know that passing out from these institutes means getting a big job, the loan allotment process is eerily simple.
A trend which has developed of late is that once students are getting admitted into a college they are being contacted by the banks themselves or are being given freebies on taking the loan from a bank set up at the campus. Very often these loans come with a hefty price tag. In most cases the loans come at 13.5% interest but often certain banks allow clash the interest rate for their employees and bring it down to just 13% per annum.
An additional feature of the loan is that while the student is studying at the institute no interest in levied on the rented sum, the interest is levied only after they have got a job. The banks allow the students between 10 to 7 years to repay the loan.
This is one of the very few good features about the education loan system of India; the student can build up other assets in this time frame and can slowly pay off the loan. It is obvious that the student has to place some object as a mortgage for taking the loan from the bank. When taking an education loan in India and being unable to pay it, most public banks will allow the loaner to have more time to repay the loan.
Alternative to taking a loan:
There are a few alternative to taking a very expensive education loan. Two of the most commonly used and known tactics are to invest in a child development program. Very often parents invest in a scheme, with no current benefit, to be able to pay off the huge education fees. Another commonly used method is the use of micro finance companies. This is lesser known route.
The loaner can take a loan from a micro finance company for the education from a number of different micro finance companies (there is no central database for micro finance so tracking is nearly impossible). In case the loaner has some land somewhere they can also apply for a farmer loan and wait for over 4 years to repay the loan (most farmer loans by cooperative banks in Vidaharba are waived by the government).