Each bank offers a different interest rate for these loans but the rates usually vary between 12% to 14%. As education loans have lower interest rates than personal loans, loans provided under this segment generally don't exceed 14%. Banks also provide a concession of 0.50% to 1% in interest rates for loans taken to educate girls.
These are short term loans with the repayment period starting after 12 months from the disbursement of first installment of loan amount. For some banks, loans have to be repaid within a year of the starting of the repayment period, while some banks allow customers to repay the loans in 3 years through 36 installments.
Usually, these are unsecured loans and hence no security is required. Some banks have a collateral clause in case the loan amount is high. Some banks also ask for employer's sponsorship. Almost all banks hypothecate personal computers in case it is bought with the loans amount.
For education loans taken to pay school fees from nursery to class X, parents or guardians get tax benefits too. The interest on these loans is deductable under Section 80C of the Income Tax Act. There is no deduction for the principal loan amount.
Some banks offering education loans for school kids
- Bank of Baroda - Baroda Vidya Scheme
- Allahabad Bank - AllBank Gyan Dipika Scheme
- Central Bank of India - Cent School
- Indian Bank - IB Balavidhya Scheme
Apart from these, some other banks like J & K bank, Tamilnad Mercantile Bank, State Bank of Hyderabad also provide these loans. Till now, only public sector banks seem to be interested in extending loans to parents of school going kids.
Every parent wants to provide the best education to his child. Now with banks providing loans for school fees, high fees will no longer be a hindrance in the education of a child.