Education Loan is a priority sector lending. Most of the banks have education loan programs. However, the common issues faced by most students include:

• Which banks should I go to?
• Why do I have to go to the native bank branch?
• Why do I keep getting requests for more and more supporting documents?
• Why does it take such a long time to get the education loan approve?

Most students and parents want the education loan approval in time. If loan approvals don’t come in time, students risk losing out on the admission in the college or if they are going abroad, visa dates get missed.

Education segment is quite complicated. There are tens of thousands of colleges and courses. It’s not easy for officers and managers to keep track of educational institutes. There are so many colleges and courses getting added every year. It’s therefore, quite confusing for officers to find out validity of courses, colleges and Universities.

Also, typically education loans are required for colleges which are in cities other than the branch location. It’s therefore, seen as high risk by some officers.

However, some lenders are education loan specialists. Their understanding of the education loan segment is quite high. They use their own databases and knowledge to offer much quicker processing.

It depends on your requirements. Typically speaking, there are a lot of hidden costs while pursuing higher education e.g. fees for coaching classes, fees for additional entrance exams, fees for some extra courses, additional living expenses like cell phone bills, internet charges, trips to native city or native country, cost of books, laptop computers. In today’s environments, most of colleges typically raise fees every year. In some colleges fees are increasing quite dramatically.

There is a tax advantage to take loans. Interest repayments on education loans are tax deductible. A deduction under section 80 E of the Income-Tax Act for the interest paid on an educational loan can be claimed.

It’s therefore, quite prudent to take the approval of education loan and use it as and when needed.

While processing your education loan form, the lender has to put in a lot of efforts, which include some costs such as:

• Title Search Fees
• Document preparation fees
• Fees for lawyers
• Fees for CIBIL report
• Cost of employment verification
• Cost for general validation and verification
• Underwriting costs

Banks typically have their own lists of courses, which are eligible for loans. These lists may not be comprehensive for study abroad. Since there are thousands of new courses coming up every year, it gets confusing for officers and managers.

It might be helpful to have an education loan option with a non bank education loan option if you have some questions or are not sure about your course, while you work with banks.

Almost every bank requires a cosigner/guarantor for every loan. Parents or relatives typically act as cosigners or guarantors. A guarantor has the responsibility to repay the loan if the student defaults on the loan repayment. Typically, banks look at the employment details and financial details of the in relation to education loan amount.

The usual security that banks accept are Non Agriculture Land, House, Property, Fixed Deposit Receipts, National Savings Certificates (NSCs), bonds, gold, etc.

Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit bureau reports.

Credit scores analyze a borrower's credit history considering numerous factors such as:

• Late payments
• The amount of time credit has been established
• FThe amount of credit used versus the amount of credit available
• Length of time at present residence
• Employment history
• Negative credit information such as bankruptcies, charge-offs, collections, etc.

Education Loan specialized lenders have a specialized credit scoring model that scores students based on the University, College and the Course of admission. They also consider academic background of student. It could be helpful for students to get these specialized credit scores done by the education loan specialized lender such as Credila Financial Services (www.credila.com)

• Pay your bills on time. Late payments and collections can have a serious impact on your score.
• Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively.
• If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score.

Cost of education includes:

• Tuition Fees
• Other fees payable to academic institute
• Hostel fees
• Living expenses
• Books, instruments etc.
• Computer and other education material

Students and parents should review their savings and decide on whether they are looking for full amount of education to be funded by the education loan or only want part loan. Due to the tax benefit, many parents prefer to take maximum loan amounts.

Banks typically ask for margin money (i.e. up front money paid by parents) and can only cover part of he total education costs. However, education loan specialized lenders can cover 100% of these costs.

The money that gets put in by student/parents towards the education is called margin money (e.g. if parents put in Rs. 100,000 out of total education cost of Rs. 500,000, then Rs. 100,000 is called the Margin Money)

Know Your Customer - KYC enables lenders to know their customers and their financial details to be able to serve them better.

KYC is required to establish the identity of the client. This means identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information.

Yes, it’s mandatory for any loan. The regulatory authorities have made it compulsory for all lenders to Know Their Customers through KYC norms for security reasons.

Most of the banks have expert agencies to verify and validate information provided in the education loan application. These specialist agencies verify the address given, they do employment verification, bank verification etc. There are a lot of other investigations are done based on the information provided in the education loan forms.

This process is called as Field Investigation.

For loans of higher amount, banks require the loan to be guaranteed by Collateral such as land, property, Fixed Deposit Certificate etc. This is required by banks to ensure that in case the borrower defaults on the loan, there is some guarantee given against the loan..

It must be understood, that the process can take a long time if appropriate documents are not submitted in time. Also, banks have to check title deeds of the collateral provided. In many cases, there are independent specialist agencies who work on behalf of banks and independently submit the report to the bank about the valuation of the given collateral.

It’s, therefore, suggested that the education loan application process must be started well in advance.

Since banks are taking collateral (such as land, property, share certificates etc.) guarantee against the education loans, banks typically want to find out the valuation of the given collateral. It’s done with the objective to find out how much loan can be given out against the collateral guarantee offered.

Expert agencies, which are empanelled with the banks, perform a detailed analysis of the collateral. They submit a collateral valuation report. Typically banks offer the education loan amount which is lower than the valuation of the collateral.

However, some specialist education loan providers like (www.credila.com) can offer some flexibility in that front.

Some banks perform independent verification of the employment records of the cosigner of the loan, which is typically parents of the student who are applying for education loans.

It’s important to note that if appropriate pay slips and other employment details are given to the bank well in advance, a lot of time can be saved while processing your education loan application.