RBI guidelines for education loans
Did you know that there are certain RBI guidelines for education loans that every borrower should be aware of? Let’s find out!
The RBI is in charge of determining the lending standards for Indian banks. It has agreed to give banks’ financing to the education sector priority.
Similar to any other loan, the bank considers the borrower’s creditworthiness before approving an education loan. It’s possible for a student to lack a credit history.
Therefore, banks consider the CIBIL score of the parents who are the student borrower’s co-signers.
Here are the RBI guidelines for education loans
- The RBI demands that banks give deserving applicants education loans. A comparative phrase, “praiseworthy,” is used to describe a student who has passed the admission test for professional and technical programs.
- It also takes into account pupils who have been accepted to reputable universities on the basis of their employment history, demonstrating the students’ potential for employment through campus recruitment.
- The interest component of the loan may be claimed as a subsidy when filing for income taxes, according to Section 80E of the Income-tax Act. In addition to this law, the CSIS program offers the economically poorer portion full interest subsidies during the moratorium time.
- Based on the sum provided, loans must be separated into protected and unprotected loans. No collateral is needed for loans under 4 lakhs, however, a security deposit in the form of collateral is required for loans over 4 lakhs.
- Banks also provide a suspension period right after the program is over, during which the debtor can start looking for employment to begin paying as soon as the term is over.
Depending on whether you’re seeking a student loan for India or abroad, the RBI will determine the interest rate.
In India, students who are accepted into highly regarded educational institutions must pay a considerably lower interest rate. In general, interest rates primarily consist of fixed and floating rates.
Foreign loans are available with fixed interest rates, but loans from Indian banks for study at Indian colleges have a floating rate of interest.
In accordance with RBI regulations, you must begin making monthly payments as soon as the grace period is ended. Experts recommend that a person’s EMI not go over 50% of their wage.
After the time limit, the payback should be finished in a range of 8 to 15 years. The payback period could be extended based on how soon the subsequent course will be finished in rare instances where a student gets another loan for a program enrolled in soon after the initial course completion.
Parents should take into account several factors prior to actually taking out a loan, such as
- The potential increase in interest rates
- EMI rates
- Repayment options available
The RBI guidelines for education loans strive to ease the pressure by managing interest rates and repayment options to make education loans affordable for all.
What is the rule of RBI for education loans?
Program length plus one year, or six months following the job offer, which comes first. The loan will be repaid in 5-7 years from the start of the repayment period.
If a student is unable to finish the course in the allotted time, an increase in the time limit for completion of the course may be allowed for a maximum of two years.
Are there any criteria for an education loan?
The applicant requesting the loan should be an Indian citizen. He or she should have received written confirmation of admission to reputable universities in India or abroad.
When applying for a loan, the participant’s age must fall between the ages of 18 and 35.
What is the rule for education loan repayment?
For Student and Scholar Loan Schemes, the EMI payback period begins 12 months after the course is finished or 6 months after obtaining employment, whichever comes first.
Repayment of the EMI for Global Ed-Vantage Loans begins six months after the course ends.
What happens if an education loan is not paid?
The lender would start sending reminders to you and your insurer if there is one if you don’t repay your education loan in India.
Failure to accept the cautions will result in loan default, which will negatively impact your credit score. For a very long period, you wouldn’t be eligible for any loans in the future.
Consult an expert advisor to get the right plan