Can you get interest-free education loan? Find out

In an online chat with readers, Harshala Chandorkar of CIBIL answered their queries on education loans.

Here are the unedited excerpts:

Jeswal: Mam, my salary is 40k per month. How much loan will i get for my son?

Harshala C: Each bank will have their own credit policy to sanction a loan. They will generally look at your income, other fixed obligations, monthly expenses, etc and then grant you the loan. Most importantly banks will check your CIBIL report and Score to assess your credit worthiness.

danger-don: how to get education loan

Harshala C: Make a loan application to the bank. You will have to submit the necessary documents which they require. Do make sure you have a good credit history as banks check the CIBIL report and score to assess credit worthiness of a borrower.

Gadgets-Gaming: What happens if I don't repay my education loan in time? Or delay it say by a year?

Harshala C: Delay or non-repayment of your education loan will get reflected in your credit report and impact your credit score negatively. A low credit score and a negative credit history may hamper your chances of availing any other loan or credit card in the future.

amitabh-shankar: My sister's annual income is 60k. How much educational loan she can avail for her daughter studying B.Tech in AICTE recongnized college at Bhuvaneshwar? Will there ne ant specaial rate of ineterest applicable in this case. And what documents needed for taking educational loan?

Harshala C: Banks do offer special rates for educational loans. Your sister will have to check with the bank for the loan eligibility. They will evaluate the loan application basis her income, current loan obligations and monthly fixed obligations. They may also check her CIBIL report and score to check her credit worthiness.

shashidhara shashidhara shashidhara: i am planning apply educational loan for my Son who is preparing to go US,basically i do not have continuous permanent job, what is eligibility criteria to get the loanthanksshash

Harshala C: While each bank has its own credit policies, banks generally check the education course that the borrower is intending to pursue. Is it from a reputed university, what are the job prospects for the students after they pass out? The repayment generally starts one year after the end of the course or 6 months after the student gets a job whichever is earlier

Gadgets-Gaming: What do lenders report to CIBIL in case of an education loan?

Harshala C: Like any other loans and credit cards, education loans are also reported to CIBIL and get reflected in the borrower’s credit report.

Howdy Texan: For Study in USA1) What are factors on which edu loan is sanctioned. 2) how do i compare one loan with other. 3) what are some of the common pitfalls in edu loans

Harshala C: Banks will check what the type of course the student has opted for, if the Unversity a reputed one, what are the job prospects after the course is completed. Most of the banks will have details of education loans on the website -- like the eligibility, what expenses can be considered for the loan, maximum limit of loan, rate of interest, processing fees, payment terms, etc.

Tonu: Is a guarantor compulsory for getting an education loan? If I do not repay will the guarantor suffer?

Harshala C: A co-borrower or a guarantor like parent or guardian is usually essential for availing an education loan. Generally for loans over Rs 4 lakhs a suitable third party guarantee is required. You may need to arrange for suitable collateral if your loan amount exceeds certain amount. This could be an immovable property, fixed deposit, NSC or an LIC policy, among other things.

Yes. The guarantor on your education loan is liable for its repayment if you fail to pay the EMIs. Guarantor's credit report will show the details of this education loan and defaults will also show if you do not repay. Your guarantor's credit history and score will be negatively impacted for any delayed payments.

Tonu: also what documents are required for education loan

Harshala C: Banks typically ask for a duly filled in Education Loan Application Form, Mark Sheets of last qualifying examination, Proof of admission at the institute, Schedule of Expenses for the specified course, PAN Card of the student and the Parent/ Guardian, Co-Borrower's Bank account statement for the last six months, IT returns for two years, Proof of Income of the co-borrower.

Shayana N: i am planning to pursue a masters course in engineering in US.. how much education loan can i get.. will the exchange rate affect my loan amount?

Harshala C: Each bank has a different limit that they offer to students going abroad for studies. It typically ranges from Rs 20 - 30 lakhs. However do meet you banker to find out the exact loan eligibility and the terms and conditions of the loan.

At the time of disbursement, the bank will dispatch an equivalent amount in foreign currency (based on the existing exchange rate). If the rupee is weaker then, the student will receive a lower amount. So, you have to be prepared to bear this foreign exchange risk.

ganesh-nadar: Chidambaram keeps announcing that educational loans do not need a guarantor or property documents but banks ask?

Harshala C: Education loans below a certain limit do not require a guarantor or security.

ganesh-nadar: Banks also give only tution fees, they refuse to pay hostel fees, books, food so it really doesn’t help

Harshala C: Expenses typically considered for loan are: Fees payable to college/school/hostel; Examination/Library/Laboratory fees; Purchase of Books/Equipment/Instruments/Uniforms; Purchase of computers -- essential for completion of the course (with some limits); Travel Expenses/Passage money for studies abroad. 

SUBRAMONIAM R: my cibil grading is negative. can i get educational loan for my son who is likely nto do iit next year

Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above. Do access your own CIBIL report and score to find out what's your Credit score.

Since you have a year till you apply for a loan, start building your credit history by making timely payments on all your loan instalments & credit card dues

Shayana N: can i get an interest free education loan?

Harshala C: For education loans, banks allow a holiday period during which you do not have to start repaying the loan. This period is called as the ‘moratorium’ period in banking parlance. This is usually taken as the course period plus one year or six months after getting a job, whichever is earlier. It is after this period that the education loan EMIs begin. You may not get an interest free loan.

Shayana N: also will my mother’s credit score get checked if she is a co-borrower on my education loan?

Harshala C: Yes. Banks will access a CIBIL report and score of your mother if she is a co-borrower on your education loan.