6 Important education loan terms to know

Higher education is a boon and necessary for students these days. Since there are plenty of opportunities to pursue it, you also require funds to fulfil your dreams. As a parent, you can approach several banks and lending institutions for attractive loan schemes and financial aid. They will help you pay for your child’s academic expenses without affecting your savings.

An education loan is necessary for you to fund your studies without depending on your parents for money. You need to know some important terms before you begin the search for a bank or loan lender. It will help you understand the requirements and coordinate with the lender to get a great loan deal.

Collateral

Sometimes, your loan lender will ask you to submit physical or financial assets as a form of surety against the student loan amount. You need to pay close attention to the requirements and repayments to get your assets from the lender. In India, loan providers request collateral, and the value of the collateral may be significantly higher than the loan amount.

Co-borrower

A co-borrower is someone who signs your study loan with you to take responsibility for loan repayments. Since you are the primary loan borrower, you can take your parent, spouse, or sibling as your co-borrower. Your loan lender can obtain the loan amount from your co-borrower if you are unable to pay it.

Pre-payment

Some banks and lenders charge a pre-payment fee for early repayment of the education loan in India. You can calculate the loan instalment amount and interest due towards the end of the tenure using the education loan interest calculator. It is available on several banking and lender websites for free and is always accessible.

Fees

When you apply for student loan, you need to pay the lender some fees, including currency conversion fees, insurance and processing or admin fees. Enquire about the loan charges before finalising the deal with the lender. How and when lenders charge fees can vary widely. Always understand the fee structure attached to your loan.

Sanction letter

It is one of the documents you receive from your lender which shows the loan amount. Along with the education loan documents you need to present to the lender; this will prove to your university and the relevant immigration officials you can pay. This document is necessary to secure your spot or your study visa.

Loan tenure

It is the total time you must repay the student loan in India, beginning at the end of your grace period and ending with your last payment. The longer the loan tenure, the lower is your interest rate. But that also means you will pay more over the tenure. Look for lenders offering flexible terms to calculate a timeframe that works for you.