My personal experience with an education loan gave me a choice between a private lender and a nationalized bank. After seeing many online adverts about Credila, I decided to contact them and learn more about how much better of worse an eduction loan from private lender can be. The full story about the Credila Loan review can be read here.
Since Credila didn’t seem too competent in sending over their salesperson, i decided to take my chances with some banks in the area in which I and my family had accounts already. I figured I might get an easy sanction from a bank that I had dealt with before.I also approached banks that I did not have accounts with like Canara Bank, Bank of India and Bombay Mercantile Bank (I do have a current account here).
Canara Bank- The manager didn’t seem like he wanted to extend any loan towards us simply because we didn’t have a previous relationship with them. He rudely stated that “you don’t bank with us, but when you want a loan, you come to us”.
Bank of India– The loan department staff here were more accommodating and we were told that loans for domestic and international study were given, but it depended on you academic track record and how well your overall education progressed. Loans here were given only to well deserving students.
Bombay Mercantile Bank– Education loan would be easily provided, but anything above 4.5 lacs needed collateral. This figure in other banks was 7 lacs. We did intend to take a loan below 7 lacs,just to avoid the collateral.
Our last stop was Central Bank,in which we had some old FDs.The deal that was offered seemed good. Under the “Cent Vidhyarti “ loan scheme, I agreed to avail of a 6.5 lac loan, the remaining 5 lacs I would put on my on.
Under the scheme, I would have to make a savings account in central bank and deposit that 5 lacs. Every time a payment disbursement went through to the foreign university,an equal amount would be sent from my account too. This means if summer fees at my university was $2500,then $1250 would be withdrawn from my savings account through remittance , and the bank would put up $1250 and then send that.
Interest would be charged from the first day that the first rupee was given from the bank.
As you can see from the statement,a payment of 1.07 lacs was made towards reducing the loan amount,which brought the balance to 3.56 lacs.The monthly interest calculated on reducing balance was Rs. 5640.The next interest amount will be considerably lower since the balance is now 3.56 lacs.
THINGS I’ve LEARNT
1.Try to keep your education loan below the collateral limit,which in most cases is 7 lacs. It becomes extremely easy to repay.
2.Once you start earning in $ or GBP, paying back your loan is as easy as paying your monthly phone bill, you wont feel the pinch at all. You could easily pay off the entire loan in a years time,while still having a good life and spending well.
3.One things that wasn’t made clear to me when i took the loan was the interest part. I was under the impression the interest would start after the grace period (6 months after completion of university course or when you got a job), but the interest started rolling in after the first money transfer.So by the time i finished the course and grace period (1.5 year course+6 months grace period), i realised i had accumalated about 1.5 lacs in interest amount.