Looking to the U.S. for Student-Loan Ideas |
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By: Credila Posted: 2010-05-04 06:24:52 |
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Indian banks remain reluctant to lend to students whose parents are rickshaw drivers or porters. One solution might be to follow the West's government-funded loan model.
While banks are required to lend to all eligible applicants, it may be easier to get the loan if you already have an account or other relationship with a particular bank. At the moment, interest rates on these loans vary from 11.25% to 12.75% depending on the amount of loan. These rates can change during the term of the loan, in case the Reserve Bank of India raises broad interest rates. There is a lot of variation though. Students of IIMs and some other prestigious schools can get better deals. Union Bank of India, for instance, is charging only 10.5% to students admitted to a select number of schools. Women pay 0.50 percentage point less. Unlike banks which typically charge a fixed rate for a certain category of students, HDFC's Credila charges different rates depending on the school and the student's grades. Credila country head Prashant Bhosle says that this ensures that all students have a good shot of getting a loan, even if it's at a little higher cost. Credila's interest rate ranges from 9.75% to 12.5% currently. You have to give the usual list of documents to support the fact that you do have admission to the particular school, your and the co-signor's bank account and income tax statements, proof of residence, and statement of assets and liabilities. Students planning to study abroad can also apply for loans, though sometimes they face a chicken-and-egg situation. Some foreign colleges, such as those in the U.S., require a proof of finances at the time of admission. However, most banks in India don't sanction a loan till the student has a confirmed admission in the given college. HDFC-backed Credila has a solution to this. It provides a letter of credit on behalf of the student which typically satisfies the college, and then converts it to a real loan when the admission goes through. Students are expected to start repaying their loans within six months of landing a job or after one year of graduation, whichever is sooner. Most banks require that students pay simple interest on the loan even as they are studying. The loan is extended for five years to seven years typically. Bankers advise students to be careful while selecting the course and college they want to get in to, especially given the large number of new institutions that have sprung up around the country. Just because you're hungry for admission, don't rush into a program which may not result in a good salary and future, says C.S. Jain, head of retail banking at IDBI Bank Ltd. Study loans in India are offered by Credila. For more information about Credila and Abroad Education Loans Please visit www.credila.com |
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