Logo
Forums
Forums
UniSearch
UniSearch
UniSuggest
UniSuggest
AdmitTrend
AdmitTrend
CourseLiX
CourseLiX
RoommateFinder
RoommateFinder
EduTravel
EduTravel
EdulixExpress
EdulixExpress
Chat
Chat
Blog
Grad Studies
About Us
About Edulix

Post Reply  Post Thread 
 
Thread Rating:
  • 0 Votes - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Student Loan: an article (made readable !)
Author Message
gal4MS Offline
Edulix Super Senior
*******

gal4MS Offline
Edulix Super Senior
*******


Posts: 414
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: Dec 2005
Unisearch: Link
Reputation: 0
Post: #1
Student Loan: an article (made readable !)
0
0
GOT IT FROM FALL 2006 YAHOO GROUP
------------------------------------------------------------------------------------
Need a study loan?

Vidyalaxmi, OutlookMoney.com | May 30, 2006

College fees -- two words that can strike terror in the heart of any
parent. And if their offspring decides to take a professional course,
or decides to get a master's degree, woe betide the fond parents.

The minimum fee at an engineering college is Rs 35,000 (the better
ones charge more), while an MBA can cost around Rs 200,000; at a
foreign university the same comes with a tag of Rs 15 lakh (Rs 1.5
million) or so.


Yes, this is bad news, but here's worse. Banks are no longer offering
study loans with the open-handed generosity of a few years ago,
especially to students who plan to study abroad. The reason for this
is that the default rate is rising in banks' education loan
portfolios.

According to a public sector bank official, the problem
of default is worse in the case of overseas education, as students
change their address without informing the bank.
Even students from prestigious engineering and management
institutions default on their payments. And banks find it difficult
to track them given the trend of job-hopping and city-hopping.
Kiran Rao, for instance, took a study loan of Rs 12 lakhs (Rs 1.2
million) from a public sector bank in 2004 to complete her
engineering degree from a college in Bangalore. She then landed a job
with an MNC in the US, where she's possibly raking in dollars now.
But the bank hasn't heard from her in over two years, and Rao has not
even bothered to pay back her education loan.


But given their social responsibilities and policy pressures, banks
cannot simply stop giving study loans. Instead, they have decided to
tighten the lending process, so that their NPAs in this segment do
not become unmanageable.


What's new

The Indian Banks Association has set up a working group to figure out
how study loans can be made a viable business. Based on its
recommendations, banks have revised their norms.
Most banks have now made it mandatory for the student's parents or
guardians to be co-borrowers and therefore liable for repayment.
Rajan Ghogalkar, corporate head, retail banking, IDBI Bank,
says, "Our study loan revolves around the borrower's parents. It is
sanctioned only after checking the parents' residence. They are also
made co-borrowers to ease the recovery process." This also makes it
easier for banks to trace the student's whereabouts.
The working group has also suggested that banks should disburse loans
from branches close to the permanent residence of the student-
borrower. This would help banks to recover loans in a cost-efficient
manner.


Cover the risk

The IBA group has also mooted a Rs 250 crore (Rs 2.5 billion) Credit
Guarantee Fund on the lines of the Credit Guarantee Trust Scheme for
small-scale industries.
This would cushion loan defaults, and will also serve as a group
insurance product. It has been suggested that half of the corpus be
funded by the central government, while the rest could be shared by
the banks and the borrower.


The student-borrower will be charged a premium of say Rs 10 to Rs 15
per Rs 100,000 borrowed, and the bank can claim the insurance, if the
student defaults. The proposal is under consideration of the Reserve
Bank of India and the Union ministry of finance.
Some banks already insist on an insurance policy to cover such a
loan. UTI Bank, for instance, asks borrowers to take an LIC policy
that covers 10 per cent of the loan, while Andhra Bank offers an
insurance cover to protect the students and their parents.


Most overseas universities insist on mandatory medical insurance and
have a waiver clause if the student has a comparable insurance policy
in the parent country. On the whole, it is a good idea to take
insurance here, as foreign policies generally cover only medical
expenses. They are also far more expensive -- the difference in costs can work out to around Rs 35,000. It takes about a day to get the right
insurance; the insurance company will demand to see the student visa
and the admission letter before it sells you the appropriate cover.


Loans on offer

Like we said, banks are still giving study loans, despite the higher
default rate. All the loan products in this portfolio follow the RBI-
approved model education loan scheme.
The quantum and term of loans may vary from bank to bank, and also
depends on the educational institute. The loans typically cover the
tuition fee, exam, library and hostel charges, travel expenses,
books, equipment and uniform, and sometimes even the cost of a two-
wheeler.

Before giving the loan, banks study the viability of the borrower
based on personal discussions with the student, family's assets and
annual income, the nature of the course and reputation of the
institute.

The best deal

The problem with study loans is that few banks offer a concessional
rate. In general, banks charge 10.75 per cent on loans below Rs
400,000 and 11.75 per cent on loans above Rs 400,000. For loans up to
Rs 400,000, banks lend at their prime lending rate, and 1 per cent
above PLR for loans exceeding Rs 400,000.)
Some banks do offer lower rates to women students or those from
specified institutions. Andhra Bank, for instance, extends loans at
10 per cent to students of select institutes, while women enjoy a
discount of 0.5 per cent.

Students, who show signs of good financial discipline, get a further
discount of 0.5 per cent. Bank of Baroda also offers a 1 per cent
discount to women students under its three schemes -- Baroda Vidya,
Baroda Scholar and Baroda Gyan.

The best banks to approach for these loans are public sector banks, as most private and foreign banks virtually ignore this segment. HDFC Bank does not offer study loans, while for ICICI Bank it is not a
priority area, though it does have one study loan on offer.
HSBC is the only foreign bank that lays emphasis on its study loans;
the bank also offers scholarships for students wanting to study in
the UK.

So, why do private banks eschew this segment? A senior official at a
private bank says that this is a highly regulated segment with set
guidelines that prohibit rejection of applications, which goes
against the lending habits of private and foreign banks. The other
problem is that institutes and universities are very often outside
the private banks' geographical territory. Public sector banks are
better placed to serve these places.

Tax benefits

While banks are not too sure about the viability of these loans,
borrowers are not complaining. After all, repayment of a study loan
is deductible under Section 80E of the Income Tax Act. The annual
limit for deduction is Rs 40,000 (principal and interest), but will
apply only on loans taken for higher education -- graduate or post-
graduate, professional, and pure and applied science. The deduction
will be available for a maximum of eight years starting from the day
of repayment.


Ready reckoner

Want a loan for that course abroad or an MBA? Check out these basics
before you go to a bank for funds.


Interest rate

Banks charge 10.75 per cent on loans below Rs 400,000 and 11.75 per
cent on loans above Rs 400,000. Some banks offer 0.5 per cent
discount to women.


Limits

The maximum loan amount is capped at Rs 750,000 for studies in India
and Rs 15 lakh (Rs 1.5 billion) for studies abroad. The minimum loan
amount is Rs 50,000.


Charges


There is no additional charge or processing fee and banks do not ask
for any margin for loans up to Rs 400,000. For loans exceeding Rs
400,000, borrowers should pay 5 per cent of margin money for domestic
loans and 15 per cent margin money for overseas loans.


Processing time

Depending on the bank, loan amount, and the paperwork required it
takes anything from two days to a week for the loan application to be
processed.


Repayment

The repayment would begin one year after the course period or six
months after the student secures a job, whichever is earlier. The
period for repaying the loan is generally five to seven years and
could be linked to the increment in the borrower's salary.


Collateral

Loans up to Rs 400,000 do not require collateral. For loans over Rs
750,000, banks seek collateral in the form of property, government
securities, public sector bonds, units of UTI, NSC, KVP, LIC policy,
gold, shares/ debentures, bank deposit in the name of the
student/parent/ guardian or any other third party with suitable
margin.


Documentation

The bank will demand your admission card, schedule of expenses,
copies of letters confirming scholarship, etc, copies of foreign
exchange permit, if applicable, statement of bank account for the
past six months of the borrower and income-tax assessment order not
more than two years old, along with a brief statement of assets and
liabilities of the borrower.

-- By arrangement with Outlook Money
05-30-2006 09:27 PM
Find all posts by this user Like Post Quote this message in a reply
AAA Offline
Edulix Active Member
***

AAA Offline
Edulix Active Member
***


Posts: 109
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: May 2006
Unisearch: Link
Reputation: 0
Post: #2
 
0
0
greate info .. keep posting things like this ... takes a lot of pressure of newbies like us ..
05-31-2006 07:57 PM
Visit this user's website Find all posts by this user Like Post Quote this message in a reply
mecaspirant Offline
Edulix Active Member
***

mecaspirant Offline
Edulix Active Member
***


Posts: 332
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: Sep 2005
Unisearch: Link
Reputation: 0
Post: #3
 
0
0
Quote:Charges

There is no additional charge or processing fee and banks do not ask
for any margin for loans up to Rs 400,000. For loans exceeding Rs
400,000, borrowers should pay 5 per cent of margin money for domestic
loans and 15 per cent margin money for overseas loans.

Please confirm this....From my experience the margin money for overseas loans is 25%...

- mecaspirant

Destination ---> UMCP
MECASPIRANT
05-31-2006 08:53 PM
Find all posts by this user Like Post Quote this message in a reply
The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP

The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP


Posts: 10,106
Likes Given: 0
Likes Received: 23 in 15 posts
Joined: Nov 2004
Unisearch: Link
Reputation: 178
Post: #4
 
0
0
mecaspirant Wrote:
Quote:Charges

There is no additional charge or processing fee and banks do not ask
for any margin for loans up to Rs 400,000. For loans exceeding Rs
400,000, borrowers should pay 5 per cent of margin money for domestic
loans and 15 per cent margin money for overseas loans.

Please confirm this....From my experience the margin money for overseas loans is 25%...

- mecaspirant

Its 15%

As if I give a damn
05-31-2006 09:09 PM
Find all posts by this user Like Post Quote this message in a reply
mecaspirant Offline
Edulix Active Member
***

mecaspirant Offline
Edulix Active Member
***


Posts: 332
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: Sep 2005
Unisearch: Link
Reputation: 0
Post: #5
 
0
0
Madmax Wrote:
mecaspirant Wrote:
Quote:Charges

There is no additional charge or processing fee and banks do not ask
for any margin for loans up to Rs 400,000. For loans exceeding Rs
400,000, borrowers should pay 5 per cent of margin money for domestic
loans and 15 per cent margin money for overseas loans.

Please confirm this....From my experience the margin money for overseas loans is 25%...

- mecaspirant

Its 15%

Hmmm..maybe it varies from bank to bank.... Rolling Eyes Rolling Eyes ..In my case, the margin amount was quoted as 25%...

- mecaspirant

Destination ---> UMCP
MECASPIRANT
05-31-2006 09:44 PM
Find all posts by this user Like Post Quote this message in a reply
The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP

The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP


Posts: 10,106
Likes Given: 0
Likes Received: 23 in 15 posts
Joined: Nov 2004
Unisearch: Link
Reputation: 178
Post: #6
 
0
0
mecaspirant Wrote:
Madmax Wrote:
mecaspirant Wrote:
Quote:Charges

There is no additional charge or processing fee and banks do not ask
for any margin for loans up to Rs 400,000. For loans exceeding Rs
400,000, borrowers should pay 5 per cent of margin money for domestic
loans and 15 per cent margin money for overseas loans.

Please confirm this....From my experience the margin money for overseas loans is 25%...

- mecaspirant

Its 15%

Hmmm..maybe it varies from bank to bank.... Rolling Eyes Rolling Eyes ..In my case, the margin amount was quoted as 25%...

- mecaspirant

Nope its 15% but if options are few in front of students( lets say you are from small city) then Bank Managers try to cheat Students to earn good will points in Head office.

As if I give a damn
05-31-2006 09:51 PM
Find all posts by this user Like Post Quote this message in a reply
AAA Offline
Edulix Active Member
***

AAA Offline
Edulix Active Member
***


Posts: 109
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: May 2006
Unisearch: Link
Reputation: 0
Post: #7
 
0
0
SORRY FOR HIJACKING THE THREAD... Embarassed Embarassed

But whats the ceiling to an education loan ::i have read somewhere @gaurav82 ##loan of 20lacs with 15% margin money..and he is going to usc BTW..

do we have to provide property as gaurantee if we take a loan higher than 15lacs,,,

AFAIK 15% is the margin money in all the banks it does not vary from bank to bank in my knowledge( corrrect me if i m wrong)..

what are the chances of getting a loan from america if GC holder is ready to garuntee.. i hear CITIASSIST is good 5-6% interst..and we also get a good credit history as icing onthe cakeWink !!
has some seniors followed this route or everbody in edulix has aid or takes loan from india..

if somebody has please post the link to th thread explaing the procedure...
i am having a tough time searching for it Confused Confused Sad Sad

seniors help..
06-01-2006 09:50 AM
Visit this user's website Find all posts by this user Like Post Quote this message in a reply
The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP

The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP


Posts: 10,106
Likes Given: 0
Likes Received: 23 in 15 posts
Joined: Nov 2004
Unisearch: Link
Reputation: 178
Post: #8
 
0
0
1) We have to pledge property for loan

2)Margin money is 15%-25%

3)Chances are good if you know some GC holder

4)Search for Edulix senior member 'Bharat'.He took loan in US.

As if I give a damn
06-01-2006 10:09 AM
Find all posts by this user Like Post Quote this message in a reply
AAA Offline
Edulix Active Member
***

AAA Offline
Edulix Active Member
***


Posts: 109
Likes Given: 0
Likes Received: 0 in 0 posts
Joined: May 2006
Unisearch: Link
Reputation: 0
Post: #9
 
0
0
THANKC DUDE... 8) 8)
06-01-2006 06:20 PM
Visit this user's website Find all posts by this user Like Post Quote this message in a reply
The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP

The Madmax Offline
Edulix MVP - 10K Posts
*********
Edulix MVP


Posts: 10,106
Likes Given: 0
Likes Received: 23 in 15 posts
Joined: Nov 2004
Unisearch: Link
Reputation: 178
Post: #10
 
0
0
AAA Wrote:THANKC DUDE... 8) 8)

NC!!!!!!!!!!!!!!!!!!!

Twisted Evil Twisted Evil Twisted Evil Twisted Evil



Wink Wink Wink Wink Wink Wink Wink

As if I give a damn
06-01-2006 06:27 PM
Find all posts by this user Like Post Quote this message in a reply
« Next Oldest | Next Newest »
Post Reply  Post Thread 


View a Printable Version
Send this Thread to a Friend
Subscribe to this thread