Importance of savings accounts for students taking education loans in India.


The last two covid hit years have been hurtful for the entire world. From people’s livelihoods to health, everything has suffered to a great extent. And students’ education has been no exception. 

And given that education loans are a crucial source of funds for many students in India to realize their dream of learning in an institute where they couldn’t have paid the lump sum themselves, the covid has impacted both existing as well as those who were planning to take an education loan in India.

And speaking of education loans, knowing the steps to Open SBI Savings Account is a crucial element for students to not just repay the EMIs but also to conduct transactions with their parents for expenses or even for getting paid through an internship or part-time work. A savings account is an absolute necessity for banking activities.

Also, since all banks offer the savings account facility, comparing the Saving Account interest rates becomes crucial to select the suitable bank to go ahead with for taking steps to Open SBI Savings Account.

And amidst the ongoing covid, even the lending scenario is not the same, with banks, fintech and NBFCs being more cautious now and a lot of them not at present offering high Saving Account interest rates due to the low-interest rate regime.

– For ed loans, it’s believed that many financial institutions have been seeking stronger co-borrower profiles, insisting on collateral and stringently evaluating the ed. loan applications, post factoring in the current changes in the overall economic scenario.

-Those looking to avail ed loan for studies abroad after understanding the steps to Open SBI Savings Account, should remember that the pandemic has impacted economies and the employment scenario across the world, hence many countries have altered their visa and work permit norms, and universities have revised their admission norms, which may impact the accessibility of ed loans for such students.

-Even for studies in India, financial institutions are being wary of the uncertain economic circumstances and employment scenarios in various sectors, hence focusing more on the feasibility and employment prospects associated with the chosen course and educational institution’s placement record/history.

-When it comes to approval of education loans for students and/or parents requiring the funds, the approval would, as usual, continue to primarily depend on the applicant’s fulfilment of set eligibility criteria and repayment capacity/employment prospects.

2) Considering that most of the higher educational institutions remain shut, and students continue to study remotely, would an education loan be a viable option for students? 

-While the COVID related restriction and lockdowns have resulted in most colleges continuing with the online mode of studies, the on-campus regular college classes are expected to gradually crawl back to normalcy. 

-Moreover, even in the remote setup in the case of online classes, the course fee structure for higher education courses hasn’t as such been impacted and remains the same as in the case of regular on-campus classes.

-This implies that irrespective of whether the higher education courses are carried on remotely or on campus, the need for an education loan will remain the same for students who require funds to pursue their higher education.

What to keep in mind while submitting an education loan application amidst the COVID pandemic? 

-Before availing of an ed loan, take into consideration your estimated course fees to arrive at the loan amount required and repayment capacity as per expected future placement/job’s income (package) upon completion of the course.

-Compare amongst various prospective lenders and their education loan offers before zeroing in on any. 

-Similar to in case of going through the steps to Open SBI Savings Account, wherein you check the Saving Account interest rates, card fees etc., for education loans, factor in parameters like interest rate, loan amount, tenure, processing fee etc. during comparison, in order to arrive at a suitable lender. 

4) How can one financially prepare themselves before applying for an education loan? What would be your advice for existing customers? 

-While estimating the loan amount required, make sure to take into consideration not just the basic course/tuition fee but also other related expenses such as hostel fees, examination fees and other charges. Also, check whether the lender covers the cost of travel, especially in the case of studies abroad. 

-As most education loan lenders put forth the requirement of margin money of usually 5% in case of studies in India & 15% in case of studies abroad, make sure to have accumulated the estimated margin money as per the selected/shortlisted course before applying for education loan.

-Also, factor in the collateral security and/or third-party guarantee requirements as per the loan amount and prospective lenders’ set criteria and requirements. 

-Most education loan lenders require tangible collateral security only for loans above Rs 7.5 lakh. Whereas for those up to 4 lakh, no guarantee/collateral is required, and for above 4 lakh to 7.5 lakh, usually a third party guarantee may be required by some lenders. Moreover, some lenders even offer collateral-free loans of a higher loan amount of up to 40 lakh for select premier institutes. 

-Existing students enjoying high Saving Account interest rates should also avail another financial benefit to make their finances healthier. They should try serving the interest repayment during the study period and subsequent moratorium period. Doing so can fetch them an additional concession of around 1% lesser education loan’s interest rate. 

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-As the pandemic has been impacting the economies and employment scenario globally, this has impacted the repayment capacity and placement/employment scope for newly or soon to be graduates, thus causing difficulty in repayment of education loans.

-Newly or soon to be graduated students should keep in mind that post completion of their course, lenders usually provide a moratorium period of up to 1-year post completion of the course of six months posts getting a job, whichever is earlier. 

-However,  keep in mind that the loan continues to accrue interest on a simple interest basis during the moratorium period, which you need to repay through EMIs itself, which begin repayment of EMIs for their ongoing education loan that was taken after taking the required Steps to Open SBI Savings Account when taking education loan with SBI.

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