This is the time when admissions in professional colleges for courses such as medicine, engineering, etc, are round the corner. Final results of many entrance examinations like NEET are in the offing. Simultaneously, this is the time for many parents for financial planning and most of them would be wondering for options to fund the education expenses of their children. Some would be looking for an education loan and some thinking to explore the option of using their savings to pay the fees, and other expenses of the course.
The cost of courses, especially if the student wants to pursue studies overseas, is so high that for parents, especially salaried class, there is no better option but to opt for an education loan. Very rarely we see parents reluctant to see their children taking route of a bank loan as a first step towards their career building.
Gone are the days where taking a loan from bank was seen as a mark of disgrace. Today, this view stands radically changed. The fast growing consumerism coupled with emerging sea of personal needs has forced almost all segments of population, especially the young generation to embrace life on a bank loan. Precisely, a bank loan has become a faithful companion to individuals as well as families.
So, banking upon a loan to fund education expenses is not a stigma. It’s a trend now. However, there are certain things which parents need to consider before taking route of education loan. First, parents need to check the future demand of the education course for which they are approaching a bank for the loan. It’s important because loan is not a charity. It’s a liability and is to be repaid along with interest. Once satisfied that the course to be pursued by their child has bright financial prospects in future and has no risk of future financial complications, they should explore the option of taking education loan.
It’s very important for them to analyse the pain points which the outbreak of Covid-19 pandemic has unleashed. According to the Centre for Monitoring Indian Economy (CMIE), an estimated 6.6 million white collar professional jobs, including engineers, physicians, teachers, were lost between May and August, bringing their employment to the lowest level since 2016 and wiping out the gains made over the last four years.
Precisely, amid Covid-19 crisis, debt problems have become common. So the parents have to analyze their capacity to ensure regular repayment of the loan even in crisis situation. They have to take all possible steps to maintain an flawless record and protect the credit score of his student kid for future loan requirements.
Notably, a default spoils the credit score of both the student and parents (usually co-borrower). If EMIs are not paid on time, the bank classifies the loan as a non-performing asset (NPA). This will have adverse impact on the credit history of the student and he/she will face difficulty in accessing other loan facilities in future.
The most important for a student borrower is not to default. Notably, repayment of an education loan starts six months after getting a job or one year after the completion of the course, whichever is earlier. They should use the grace period, to plan some part repayment. They should try to build a corpus during the moratorium period which they can later use to service their loan account. And at the same time explore to pay interest portion monthly to lower equated monthly installments (EMIs). Many banks also give a 1 per cent interest concession to those who repay the interest during the moratorium period. So, it’s not bad to explore this option.
Meanwhile, the students can use a government run education loan portal – Vidya Lakshmi Portal. It is a single platform where students can avail information on loans offered by 38 banks. Following the IBA guidelines, the portal is operating under the aegis of Department of Financial Services, Department of Higher Education and Indian Banks Association (IBA).
How convenient Vidya Lakshmi Portal is for students?
Just by filling up a single common education loan application form, students can apply to banks of their choice at one time in a fast and hassle free manner. Earlier the student needed to visit a bank to bank to apply for Education loan. The process involved a lot of paper work. Precisely, with Vidya Lakshmi portal, the process of education loan application has become online and it involves lesser paper work. The student can also send any grievances directly to bank in which he/she has applied for education loan online through the portal.
How much time does it take to approve and sanction the loan?
As per the IBA guidelines, loan should be processed within 15 days of receipt of duly completed application form with supporting documents and sanction/rejection should be communicated to the applicant.
How can a student apply for education loan through this portal?
The applicant must register and login to Vidya Lakshmi portal (www.vidyalakshmi.co.in) and then fill-up the Common Education Loan Application Form (CELAF) by providing all the necessary details. After filling the form, the applicant can search for educational loan and apply as per his/her needs, eligibility and convenience.
Alternatively, the applicant can also search for educational loan after login and apply for the suitable Educational Loan by filling the CELAF. Notably, the said application form is prescribed by Indian Banks Association (IBA) and accepted by all banks.
How will student know once his/her loan is approved?
The bank has to mandatorily update the status of the application on the portal. Students can view the status of the application on the applicant’s dashboard on the portal.
Is J&K Bank on-board on the portal?
The bank is on-board on Vidya Lakshmi Portal for receiving education loan applications from the prospective student borrowers. To apply for the loan under bank’s education loan scheme, applicants will be required to register themselves on the Vidya Lakshmi Portal, fill a common education loan application form and submit it to the bank by selecting a preferred business unit (branch) where from he/she intends to avail the loan facility. Upon successful registration and submission, the loan application will reach to the concerned branches. The branches will contact the applicant borrowers and process their loan applications on merits within the prescribed timeline.
Is it mandatory to apply for education loan through Vidya Lakshmi Portal?
The students have to invariably apply for the education loan through Vidya Lakshmi Portal. In case, any student is unable to apply through the portal owing to various genuine reasons like unavailability of internet etc., the branches shall entertain offline applications in such cases.
What is the quantum of loan granted under the J&K Bank Education Loan scheme?
For studies in India, the bank provides maximum loan upto Rs.10.00 lakhs. For studies abroad, the loan can be provided upto Rs.30.00 lakhs. However, loans can be sanctioned beyond these limits also.
Do students need to pay margin?
Margin is required as per the quantum of finance. For loans upto Rs.4 lakhs, no margin is required. In rest of the cases, for loans above Rs.4 lakhs (studies in India) it’s 5% and 15% for studies abroad.Notably, for loans upto Rs.7.5 lakhs, margin is not to be obtained, if loan falls under the Credit Guarantee Scheme.
Is student borrower supposed to submit third party guarantee or mortgage of property for obtaining education loan?
For loans upto Rs. 4.00 Lakhs, no security is required from the borrower. However, parent(s)/ guardian(s) have to be joint borrower(s).
For loans above Rs. 4.00 Lakhs and upto Rs.7.50 Lakhs, the borrower has to submit third party guarantee of two persons. In case loans granted are covered under Credit Guarantee Fund Scheme no third party guarantee is required. In this case Guarantee Fee is to be borne by the Bank.
Loans above Rs. 7.50 lakhs are to be collaterally secured with tangible collateral security having fair market value of not less than 100% of sanctioned limit.
Besides, assignment of future income of student is necessary across all loan slabs.
For full details of the scheme and other guidelines, the students can visit www.jkbank.com.