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Rajendra Kuruhuri IIM Indore

Education Loans in India

need-based loans, college loans, government based loans, and private education loans -- in

fact, chances are excellent that there are educational loans that can meet your

specific needs.

What Education Loans are?

Educational loans work like any other debt. That is, loans are simply specific money that you

borrow from a bank, a private lender, or some other type of lender. Afterwards, you must repay

your debts with interest. However, unlike other types of loans, educational loans are different in

several respects:

Different Qualification Features

Loans created for students recognize the fact that students have not had time to build up credit

rating. For this reason, applications for student loans are simpler and more streamlined. The

qualifications for such loans are also usually more lenient.

Generous Repayment Terms

Most students and parents today realize how

expensive an education is. Whether you hope

to study at a private high school, a college,

university, or an overseas school, tuition costs

plus the costs of books and living can quickly

add up. If you are worrying about the cost of

school, you should not feel that money has to

decide your education. There are a number of

financial aid options that can help you.

Educational loans can be one important part

of your overall financial aid package. There

are special distance education loans,

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Loans designed to help students pursue an education recognize that students should spend their

school time studying, not working to repay a loan. For this reason, many loans created for

students allow students to pay back their debts very gradually and only after graduating. This

means that students can focus on their studies rather than on their loans. In fact, most loans

designed for students give students the opportunity to put off repaying their debt until six months

after graduation. This gives students a chance to settle down and find a job before repaying their

debts.

Many Various Student Loan Types are Available

Since there are so many students, each with separate needs, there are a number of loans designed

to help students pay for their education. Many of these loans are designed specifically to help

students with their unique money issues. There are loans created by private sources, by the

government, and by schools. Many feature very low interest rates. Some are need-based and

some are not. No matter what a student's financial needs, there is likely a loan available that can

help the student meet their educational goals.

Comparative Analysis of PSU Banks - Education Loan Products

Bank Bank of Baroda State Bank of India Corporation

Bank

Products

Type Interest

(P.a.)

Baroda Vidya 10.00%

Baroda Gyan 12.00%

Baroda Scholar 12.00%

Baroda CareerDevelopmentPlan

12.75%

Education in India or

abroad.

Corp Vidya

(Education in India

or abroad.)

Max.

AmountType Max.

Amount

BarodaVidya

Rs4L

In India Rs10L

Abroad Rs20L

In India Rs10L

Abroad Rs20L

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Baroda Gyan Rs10L

Baroda

Scholar

Rs20L

Baroda

Career

DevelopmentPlan

In India,

Rs10L

Abroad,Rs20L

A Maximum amount of Rs50Lis sanctioned based on the Merit

of the Candidate.

Tenure

Tenure

Type Period

Baroda

Vidya

Max. 12

EMIs. 1st

EMI to bedue 12

months after

1st

disbursementof each

year's loan

component.Baroda Gyan 5 to 7Yrs

afterMoratorium

Period

(Course period + 1

year or 6months after

getting job,whichever is

earlier.)

Baroda

CareerDevelopment

Plan

BarodaScholar

5Yrs 7Yrs

(Moratorium Period -

Course period + 1 year or 6months after getting job,

whichever is earlier.)

7Yrs 10Yrs

(Moratorium Period -

Course period + 1year or 6 months

after getting job,


Processing

ChargesType Amount

Baroda

Vidya

Nil

Baroda Gyan Nil

BarodaScholar

1% of theLoan amount

Sanctioned.

(Refundable)

1. No processing fee/

upfront charges.

2. Deposit of Rs.5000/- for

education loan for studiesabroad which will be

adjusted in the margin

money.

Studies in India Nil

Studies Abroad -

Rs.2000.

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BarodaCareer

Development

Plan

Margin Type Max. Amount

BarodaVidya

Nil

Baroda Gyan Up to Rs4L-

NilAbove Rs4L-

5%

Baroda

Scholar

15%

Baroda

Career

Development

Plan

Up to

Rs4L

Nil

AboveRs4L

In India,5%

Abroad,

15%

Up to

Rs4L

Nil

AboveRs4L

In India,5%

Abroad,

15%

Eligibility

Eligibility

1. Should be an Indian national

residing in India.

2. Secured admission to theeligible courses in the reputed

institutions (foreign/indian).

3. Have secured admission tothe course through entrance test

/ merit based selection process.

1. The applicant should be

at least 18Yrs old from the

date of loan sanction.2. The loan applicant should

have a source of regular

income.3. In case of NRIs the

applicant should be holding

a legitimate Indian passport

or a legitimate work permitand should have been

employed overseas for at

least 2Yrs.

1. Should be an

Indian national

residing in India.2. Should have

completed previous

qualifyingexaminations.

3. Secured admission

to Professional/

Technical courses inIndia or abroad

through Entrance test

/ Merit basedselection process/

Management quota.

4. Person already ingainful employment

not eligible for loan

under the scheme

except for pursuing

evening coursecovered under the

scheme of approvedInstitute.

5. If a gainfully

employed personwants to pursue full

time education either

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on study leave or by

resigning frompresent employment,

such proposals may

be considered

provided theapplicant submits the

proof in this regardto the sanctioning

authority before

disbursement of loan.

Interest

RatesUp to

Rs4L

10.00%

Above

Rs4L

12.00% - 12.75%

Up to Rs4L 11.25%

Above

Rs4LRs5L

12.75%

Above

Rs7.5L

11.75%

Up to

Rs4L

11.00%

Above

Rs4L Rs7.5L

12.00%

AboveRs7.5L

11.50%

Security

Security

1. Up to Rs.4L - No security2. Above Rs.4L and up to

Rs.7.5L,

Collateral in the form of asuitable 3rd party guarantee

along with assignment of future

income3. Above Rs.7.5L,

Tangible collateral security

equal to 100% of the loanamount along with assignmentof future income

Baroda Career Development

Plan,1. 100% tangible collateral

security by way of mortgage of

property or assignment ofsecurities NSC, KVP, LIC

policy, FDR etc.

2. Personal guarantee of

Father / mother of the applicantor any other person having

sufficient worth.

1. Up to Rs.4L - Nosecurity

2. Above Rs.4L and up to

Rs.7.5L,Collateral security in the

form of suitable third party

guarantee. The bank may, atits discretion, in exceptional

cases, waive third party

guarantee if satisfied withthe net-worth/means of parent/s who would be

executing the documents as

"joint borrower".3. Above Rs.7.5L,

Tangible collateral

security of suitable value,along with the assignment

of future income of the

student for payment of

installments.

All loans should be secured

by parent(s)/guardian of thestudent borrower. In case of

married person, co-

obligator can be eitherspouse or the parent(s)/

1. Up to Rs.4L,Co-

obligation of

Parent/s, GrandParent/s (if parents

are deceased). No

other security.2. Above Rs.4L and

up to Rs.7.5L,

Co obligation ofParent/s GrandParent/s (if parents

are deceased)

together withcollateral in the form

of suitable third party

guarantee.3. Above Rs.7.5L,

Co-obligation of

Parents/Grand

Parents (if Parentsare deceased)

together with

tangible collateralsecurity along with

the assignment of

future income of thestudent for payment

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parents-in-law of installments. The

loan to be fullysecured after

maintaining

prescribed margin on

respective securities.Prepaymen

t Penalty

Charges 1% of the OutstandingLoan Amount.

Charges 1% of theOutstanding Loan Amount.

Nil

USPs 1. 1% interest concession, if

interest debited during the

repayment holiday is serviced.2. Hassle free processing.

3. One of the Oldest Banks in

India and Customer Trust.4. One of the largest and most

widespread networks of

branches across in India.5. Easy EMI Repayment

Option.

6. 1% Concession in rate of

interest to loans for girl student.7. Interest charged on the daily

reducing balance.

1. Low Processing

Charges.

2. Interest charged on thedaily reducing balance.

3. 0.5% Concession in rate

of interest to loans for girlstudent.

4. One of the Oldest Banks

in India and CustomerTrust.

5. One of the largest and

most widespread network of

branches across in India

1.1% interest

concession, if

interest debitedduring the repayment

holiday is serviced.

2. 0.5% Concessionin rate of interest to

loans for girl student.

3. 0.5% Concessionin rate of interest to

loans for SC/ST.

4. Maximum

Repayment Period of10Yrs.

Analysis

Among PSU Banks, Bank of Baroda has better product profile. Whereas, SBI competing

strongly.

Bank of Baroda offers a max. amount of Rs50L.

Bank of Baroda offers 1% concession to girl students. Whereas, SBI and Corporation

Bank offers 0.5% concession to girl students.

Competitive Study BOB Over SBI Educational Loan

Bank Bank of Baroda State Bank of India

Categorizations Wide Variety of Product

Categorizations.

Less Number of

Categorizations.

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Concession 1. 1% Concession in rate of

interest to loans for girlstudent.

2. 1% interest concession, if

interest debited during the

repayment holiday isserviced.

0.5% Concession in rate of

interest to loans for girlstudent.

Amount A Maximum amount of

Rs50L is allowed.

A Maximum amount of

Rs20L is allowed.

Prepayment Penalty Charges 1% of theoutstanding loan amount.

Interest Rates Charges 10.00% InterestRate up to Rs4L.

Charges 11.25% InterestRate up to Rs4L.

EMIs Low EMI for the loans up to

Rs7.5L.

High EMI for the loans up to

Rs7.5L when compared to

Bank of Baroda.

EMI- Educational Loan

Product Bank of Baroda State Bank of India

EMI Total Interest EMI Total Interest

Rs 4L @ 5Yrs 8,598.82 1,09,929.20 8,746.92 1,24,815.20

Rs 5L @ 5Yrs 11,122.22 1,67,333.20 11,312.65 1,78,759

Rs 15L @ 5Yrs 33,366.67 5,02,000.20 33,177.48 4,90,648.8

Baroda Career Development Plan

Rs 10L @ 5Yrs 22,625.30 3,57,518 - -

Rs 15L @ 5Yrs 33,937.95 5,36,277 - -

Analysis

Among PSU Banks, Bank of Baroda is the market leader. Whereas, SBI is competing

strongly as it is oldest and highly networked bank in India.

Comparative Analysis of Private Banks - Education Loan Products

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Bank Axis Bank HDFC Bank HSBC Bank

Products Education in India or abroad Education in India or

abroad for Students andalso Working Executives.

Education in India or

abroad

Max.Amount

In India Rs10LAbroad Rs20L

(Min. Rs50K)

In India Rs15LAbroad Rs20L

Working Executives Rs6L

Upto Rs1Cr

(Min. Rs5L)

Tenure 5Yrs 7Yrs 5Yrs 7Yrs

(Moratorium Period -Course period + 1 year or 6

months after getting job,


Ranges Up to 15Yrs

Processing

Charges

1% of the loan amount applied

for, subject to a minimum of

Rs10000 plus service tax.

Max. 2% of the loan amt. 1% of the loan

amount applied for,

subject to aminimum of

Rs10000 plus servicetax.

Margin Up to

Rs4L

Nil

AboveRs4L

In India,5%

Abroad,

15%

5% to 15% of the LoanAmount

15% of the LoanAmount

Eligibility

Eligibility

1. Applicant need to be aResident IndianSecured admission to

professional/technical courses

in India or Abroad throughEntrance Test/Merit based

selection process.

1. Applicant need to be aResident Indian2. Applicant should be aged

between 16 - 35 yrs.

3. All Loans require a co-applicant.

1.Age Should be in between 18Yrs to65Yrs

2. Income,

Rs5L p.a. (salaried)Rs7. 5L p.a. (self-

employed)

Interest

Rates

15.75% 12.00% to 14.00% 13.00%

Security 1. Third party guarantee and/or

collateral security may be asked

for in appropriate cases.

Up to Rs7.5 L ,

No Collateral Or Third

Party Guarantee.

1. Residential

Property. Both self-

occupied and owned

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Security

2. Assignment of LIC policy in

favor of the Bank for the sumassured being at least 100% of

the loan amount. The policy is

kept alive during the currency

of the loan. To ensure this, theannual premium may be

included in the computation ofthe loan requirement, along

with the tuition fees and other

recurring charges. Further, the

future income of the studentneeds to be assigned in favor of

the Bank for meeting the

installment obligations.

Above Rs7.5L,

1. Residential Property

2. HDFC Bank Fixed

Deposit3. LIC/NSC/KVP

by either primary or

co-applicant.2. Must have a co-

applicant in India

and can only be

parents or spouse ofstudent.

Prepaymen

t Penalty

Nil Charges 4% on the

principal out sanding

1. Up to 25% of the

outstanding loan Nil (Once Every

Financial Year).

2. Excess of 25% of

the outstanding loan 4% of the amount

prepaid.

USPs 1. Pre-approved loan facility.

2. No Prepayment Penalty.

3. Doorstep delivery of homeloan papers.

1. Insurance Protection

from HDFC ERGO.

2. No Security is requiredup to Rs7.5L of loan

amount.3. No Security is requiredfor studies in Management

Institutes up to Rs12L

(Min.).

4. A tax rebate is offeredunder section 80-E of the

Income Tax Act 1961* for

the entire interest amountpaid towards your education

loan.

1. Prepayment option

up to 25% of loan

after 6 months ofdisbursement.

2. 0.5% Concessionin rate of interest toloans for girl student.

3. A Max. amount of

Rs1Cr is provided.

Analysis

Among Private Sector Banks, HSBC has better product profile offering a max. loan of

Rs1Cr. Whereas, other banks offers a max. loan amount of Rs20L.

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HDFC Bank offers a low interest rate of 12.00% among private sector banks.

HSBC bank offers a max. repayment tenure of 15Yrs. Whereas, Axis bank offers nil

penalty on prepayment of loan amount.

Comparative Study - PSU Banks Over Private Banks - Education Loan

Bank PSU Banks Private Banks

Categorizations Bank of Baroda provides WideVariety of Product

Categorizations.

Less Number of Categorizations.

Concession 1. Bank of Baroda Offers,a.1% Concession in rate of

interest to loans for girl student.

b.1% interest concession, ifinterest debited during the

repayment holiday is serviced.

2. Corporation Bank Offers,a.0.5% Concession in rate

of interest to loans for SC/ST.

HSBC Bank Offers aConcession of 0.5%

Concession in rate of interest to

loans for girl students.

Amount Bank of Baroda offers a Max.

amount of Rs50L.

HSBC offers a Maximum

amount of Rs1Cr.

Prepayment Penalty Corporation Bank charges Nil as penalty on the prepaid loan

amount.

Axis Bank also charges Nil as penalty on the prepaid loan

amount.

Interest Rates Bank of India offers reasonable

Interest Rates.

HDFC Bank offers 12.00%

Interest Rate.

Processing Charges SBI Offers Low ProcessingCharges.

HSBC Bank Offers 1%Processing Charges on the loan

amount.

EMI Bank of Baroda offers Flat

EMIs.

HDFC Bank also offers flat

EMIs.

Tenure Corporation Bank allows

repayment for a Max. of 10Yrs.

HSBC Bank allows repayment

for a Max. of 15Yrs.

EMI- Educational Loan

Product Bank of Baroda HDFC Bank

EMI Total Interest EMI Total Interest

Rs 4L @ 5Yrs 8,598.82 1,09,929.20 8,897.78 1,33,866.80

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Rs 5L @ 5Yrs 11,122.22 1,67,333.20 11,122.22 1,67,333.20

Rs 15L @ 5Yrs 33,366.67 5,02,000.20 33,366.67 5,02,000.8

Baroda Career Development Plan

Rs 10L @ 5Yrs 22,625.30 3,57,518 - -Rs 15L @ 5Yrs 33,937.95 5,36,277 - -

Analysis

In Education loan category, Bank of Baroda holds edge over all other PSU and Private

Sector Banks by providing better products and services.

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Documents