What is 'Education Loan'

Money borrowed to finance education or school related expenses. Payments

are often deferred while in school and for a six-month grace period after
graduation. There are a variety of federal and private student loans available
(see An Introduction to Student Loans and the FAFSA and College Loans:
Private vs. Federal).

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Definition: Education Loan

In this type of funding, the loan is made to a student to fulfill the borrowers educational
commitments. It is a long term loan and the payments are deferred till the time the
education is completed and for a period of 6-months after that or when the borrower finds
a job, whichever is earlier. The interest rate charged is higher in these type of loans as
compared to others due to high risk of repayment inherent in it and the reduced
borrowers repayment capacity.
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Education IRA

Education Credit

Education loan forms the major part of NPAs of banks in India and government of India
had announced a R2500 crore moratorium on education loans in the last budget.
Education loans have become a major source of funding education expenses due to rising
expenses and higher cost of living. The loan amount is not transferred to the borrower
rather the payment is made directly in the educational institutions account by the bank to
remove the element of fraud in the lending process.

Although, now a days banks have started giving loans to students of elite educational
institutions without any guarantor, majority of banks require either a parent or guardian to
act as a guarantee for the contract.
Loan

An arrangement in which a lender gives money or property to

a borrower, and the borrower agrees to return the property
or repay the money, usually along with interest, at
some future point(s) in time. Usually, there is a predetermined time
for repaying a loan, and generally the lender has
to bear the risk that the borrower may not repay a loan (though
modern capital markets have developed
many ways of managing this risk).

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A loan is a lump sum of money that you borrow with the expectation of paying it
back either all at once or over time, usually with interest. Loans are typically a
fixed amount, like $5,000 or $15,000. The exact amount of the loan and interest
rate varies depending on your income, debt, credit history, and a few other factors.

There are many different types of loans you can borrow. Knowing your loan
options will help you make better decisions about the type of loan you need to
meet your goals.

In finance, a loan is the lending of money from one individual, organization or entity to
another individual, organization or entity. A loan is a debt provided by an entity (organization
or individual) to another entity at an interest rate, and evidenced by a promissory notewhich
specifies, among other things, the principal amount of money borrowed, the interest rate the
lender is charging, and date of repayment. A loan entails the reallocation of the
subject asset(s) for a period of time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called
the principal, from the lender, and is obligated to pay back or repay an equal amount of
money to the lender at a later time.
The loan is generally provided at a cost, referred to as interest on the debt, which provides
an incentive for the lender to engage in the loan. In a legal loan, each of these obligations
 and restrictions is enforced by contract, which can also place the borrower under additional
restrictions known as loan covenants. Although this article focuses on monetary loans, in
practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions such as
banks and credit card companies. For other institutions, issuing of debt contracts such
as bonds is a typical source of funding.

Contents
[hide]

1Types

o 1.1Secured

o 1.2Unsecured

o 1.3Demand

o 1.4Subsidized

o 1.5Concessional

2Target markets

o 2.1Personal

o 2.2Commercial

3Loan payment

4Abuses in lending

5United States taxes

o 5.1Income from discharge of indebtedness

6See also

7References

Types[edit]
Secured[edit]
See also: Loan guarantee
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property)
as collateral.
A mortgage loan is a very common type of loan, used by many individuals to purchase
things. In this arrangement, the money is used to purchase the property. The financial
institution, however, is given security a lien on the title to the house until the mortgage is
paid off in full. If the borrower defaults on the loan, the bank would have the legal right to
repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the
car, in much the same way as a mortgage is secured by housing. The duration of the loan
period is considerably shorter often corresponding to the useful life of the car. There are
two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan
directly to a consumer. An indirect auto loan is where a car dealership acts as an
intermediary between the bank or financial institution and the consumer.
Unsecured[edit]
Unsecured loans are monetary loans that are not secured against the borrower's assets.
These may be available from financial institutions under many different guises or marketing
packages:

credit card debt

personal loans

bank overdrafts

credit facilities or lines of credit

corporate bonds (may be secured or unsecured)

peer-to-peer lending
The interest rates applicable to these different forms may vary depending on the lender and
the borrower. These may or may not be regulated by law. In the United Kingdom, when
applied to individuals, these may come under the Consumer Credit Act 1974.
Interest rates on unsecured loans are nearly always higher than for secured loans, because
an unsecured lender's options for recourse against the borrower in the event of default are
severely limited. An unsecured lender must sue the borrower, obtain a money judgment for
breach of contract, and then pursue execution of the judgment against the borrower's
unencumbered assets (that is, the ones not already pledged to secured lenders). In
insolvency proceedings, secured lenders traditionally have priority over unsecured lenders
when a court divides up the borrower's assets. Thus, a higher interest rate reflects the
additional risk that in the event of insolvency, the debt may be uncollectible.
Demand[edit]
Demand loans are short term loans[1] that are typically in that they do not have fixed dates
for repayment and carry a floating interest rate which varies according to the prime lending
rate. They can be "called" for repayment by the lending institution at any time. Demand
loans may be unsecured or secured.
Subsidized[edit]
A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy.
In the context of college loans in the United States, it refers to a loan on which no interest is
accrued while a student remains enrolled in education. [2]
Concessional[edit]
A concessional loan, sometimes called a "soft loan", is granted on terms substantially more
generous than market loans either through below-market interest rates, by grace periods or
a combination of both.[3] Such loans may be made by foreign governments to developing
countries or may be offered to employees of lending institutions as an employee benefit.

Target markets[edit]
Personal[edit]
See also: Credit (finance) Consumer credit

Loans can also be subcategorized according to whether the debtor is an individual person
(consumer) or a business. Common personal loans include mortgage loans, car loans,
home equity lines of credit, credit cards, installment loans and payday loans. The credit
score of the borrower is a major component in and underwriting and interest rates (APR) of
these loans. The monthly payments of personal loans can be decreased by selecting longer
payment terms, but overall interest paid increases as well. For car loans in the U.S., the
average term was about 60 months in 2009.[citation needed]
Commercial[edit]
Main article: Business loan

Loans to businesses are similar to the above, but also include commercial
mortgages and corporate bonds. Underwriting is not based upon credit score but
rather credit rating.

Loan payment[edit]
The most typical loan payment type is the fully amortizing payment in which each monthly
rate has the same value over time.[4]
The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is:
For more information see "Monthly loan or mortgage payments" under compound
interest.

Personal loan
 Definition
Related Terms
An amount of money lent to an individual (usually on a nonsecured basis) for personal,
family, or household purposes. Consumer loans are monitored by government regulatory
agencies for their compliance with consumer protection regulations such as the Truth in
Lending Act. Also called consumer credit or consumer lending.

Read more: http://www.businessdictionary.com/definition/consumer-loan.html

Cent Personal Loan Scheme

Features
Forms
Purpose:
To meet personal / domestic expenses

Eligibility:
Permanent Employees of Railways, Government institutions, Central and State Government,
Schools, Hospitals, Municipal Bodies etc .having completed ONE year of service
OR
Confirmed/ Permanent employees of Indian/multinational Companies having completed
minimum THREE years of service.

Quantum of loan:
Twenty times of gross salary subject to maximum of Rs.10,00,000/- and minimum net take
home pay of 40% of gross salary after taking into consideration payment of statutory dues,
repayment of various loans including the instalment of proposed loan.

Rate of Interest:
MCLR(12m) + 3.00%

Repayment:
48 equated monthly Instalments.

Processing Fees:
Rs.500.00 + S.T
 Cent Home Loan Scheme
Features
Forms
Calculator
Purpose :

For construction/ acquiring of new home /flat or for acquiring existing home / flat
which has remaining life of applied loan tenure plus 10 years.
For repairs/renovation/alteration of existing home/flat

Eligibility :
Individuals , Groups of individuals , who have attained 18 years ( completed) as on date
of application and including Cooperative Societies , having a legal, identified and
regular source of income either singly or jointly with Parents, sons, spouse.
NRI are also eligible for Housing loan,

Quantum of Loan :
Depending on repayment capacity of borrower & value of property.

Margin :

Loan Amount Home loan as percentage of Cost of

Home/flat

Upto Rs.20.00 Lakhs 90%

Above Rs. 20.00 lakhs up to Rs. 75. 00 80%

lakhs

Above Rs. 75.00 Lakhs 75%

For repairs / renovation / alteration of 75%

 existing house/ purchase of plot.

Repayment:
Maximum period of 30 years or on borrower reaching the age of 70 years whichever is
earlier.
10 years in case of Repair/Renovation

Rate Of Interest :
MCLR (Floating)

Moratorium period:
Maximum upto 36 months

Processing Charges:
0.50% of the Loan Amount subject to maximum Rs.20,000/-

Cent Vehicle
Features
Forms
Calculator
Purpose:
Purchase of two wheeler.(New only) / four Wheeler ( New/ old car) for Personal use. (i.e. not
for hiring/ferrying passengers)

Eligibility
All individuals of age 18 years and above and maximum upto the age of 65
1. Permanent salaried employees/ Self-Employed Persons / Independent
Entrepreneurs who have regular source of income.
2. Farmers irrespective of land holding engaged in production oriented
agricultural activities and in other allied activities.
3. Non-resident Indians
4. Companies / Proprietorships, Partnership Firm /Societies/etc.
and Minimum Income Criteria (Gross Annual Income)
 4 Wheeler (New/ Old) 2 Wheeler

Salaried/ Non-Salaried Rs. 2, 40, 000 Rs. 1, 20, 000

Quantum of Finance
Two Wheeler - Rs. 10.00 lakh.
New Four Wheeler- Rs.75.00 lakhs
Old/Second Four Wheeler Vehicle - Rs.10.00 lakh
Loan shall be sanctioned on Road Price (Cost Of vehicle + Registration Charges+
Insurance + Road Tax). Any additional cost for fancy numbers shall not be financed by
Bank.

Margin
Loan Amount Upto Rs.20 lakh - Minimum 10%
Loan Amount More than Rs.20 lakh - Minimum 20%
Old Vehicle (Any Loan amount)- Minimum 25%

Rate Of Interest:

Type Floating Fixed Rate ( Repayment within 36 months)

2 Wheelers MCLR + 0.40% MCLR + 0.40%

4 Wheelers New MCLR + 0.40% MCLR + 0.40%

4 Wheelers Old MCLR + 1.50% MCLR + 1.50%

Security
Hypothecation of vehicle purchased. Our Hypothecation charge should be registered with
Regional Transport Office Authorities.
 Repayment Period in Month

Type Repayment Period In month

2- Wheeler 60

4-Wheeler (New) 84

4 WH (Old)Upto 3 Y old 60

4WH (Old) More than 3Y old 48

Central Scheme of Interest Subsidy on Education Loans to

students belonging to Economically Weaker Section
Features
Forms
Central Scheme for Interest Subsidy has been announced by Ministry of HRD for
providing interest on Education Loans during moratorium for technical and professional
courses for studies in India under the IBA Model Education Loan Scheme for students
from Economically Weaker Sections (EWS) with annual gross parental/family income
upto Rs. 4.50 lacs per annum from the academic year 2009-10.

1. Applicability of the Scheme

The scheme would be applicable only for studies in recognized Technical/Professional courses
in India. The interest subsidy shall be linked with the existing Education Loan Scheme of IBA
and restricted to students enrolled in recognized Technical/Professional courses (after class
XII) in India in Educational institutions established by Acts of Parliament, other institutions
recognized by the concerned Statutory Bodies, Indian Institutes of Management (IIMs) and
other institutions set up by the Central/State Government. Under IBA Model Education Loan
Scheme for studies in India maximum eligible loan limit is Rs.10 lacs.
2. Moratorium Period

The subsidy is provided for the period of moratorium i.e. 12 months after completion of the
course or six months after getting the job,
whichever is earlier as prescribed under the IBA Model Education Loan Scheme. After the
moratorium period is over, the interest on the outstanding loan amount shall be paid by the
student in accordance with the provisions of the Education Loan Scheme.

3. Criteria for Economically Weaker Section/ Income Limit

The benefit of the scheme would be applicable to those students belonging to economically
weaker sections with an annual gross parental/family income with upper limit of Rs.4.5 lacs
per year (from all sources).

4. Competent Authority to issue Certificate

The Ministry of HRD, Government of India has issued an Advisory to all the State Governments
requesting them to designate appropriate authority or authorities who are competent to issue
income certificates.

5. Eligibility for Interest Subsidy

The interest subsidy under the scheme shall be available to the eligible students only once
either for the first undergraduate degree course or the post graduate degree/diploma in India.
Interest subsidy shall however, be admissible for integrated courses (graduate plus
postgraduate). Interest subsidy under this scheme shall not be available for those students once
they discontinue the course midstream, or who are expelled from the institutions on
disciplinary or academic grounds. However, the interest subsidy will be available only if the
discontinuation was due to medical grounds for which necessary documentation to the
satisfaction of the Head of educational institution will have to be given.
6. Nodal Bank

The scheme shall be implemented through Canara Bank, which is the Nodal Bank for the
Ministry of Human Resources Development.

7. Applicable Academic Year

The scheme shall be applicable from the academic year 2009-10 starting 1st April 2009. The
scheme shall be applicable only in respect of disbursements made by the Banks on or after 1st
April, 2009 for the academic year 2009-10, irrespective of date of sanctioning. In case of loans
sanctioned prior to 1.4.2009, for the courses beginning prior to academic year 2009-10, the
interest subsidy is available to the extent of disbursements made after 1.4.2009.

8. Disbursement of Interest Subsidy Claims

The disbursement of Interest Subsidy Claims to the Banks shall be on half-yearly or yearly basis
which has to be worked out in consultation with the Ministry of HRD.

9. Eligible students have to contact the CBI Branch concerned

for any further details along with Income Certificate from the
certifying authority.

Central Bank of India Cent Vidyarthi Education Loan Scheme is a term loan
scheme for students for pursuing higher studies in India and Abroad.
Eligibility :

The student should be an Indian National

Should have secured admission to a higher education course in

recognized institutions in India or Abroad through Entrance Test/
Merit Based Selection process after completion of HSC(10 plus 2 or
equivalent)

Where there is no entrance test/merit based selection process and

admission is purely based on the marks scored in qualifying
examinations, the student should have scored minimum 50% marks in
qualifying examination. (10% relaxation for SC/ST categories)

Secured admission to Foreign University/Institutions.

Loan Details

Coverage of expenses

Fee payable to College/School/Hostel.

Examination/Library/Laboratory fee.

Travel expenses/passage money for studies abroad.

Insurance premium for student borrower, if applicable

Caution deposit, Building fund/refundable deposit supported by

Institution bills/receipts
 Purchase of books/ equipment's/ instruments/ uniforms

Purchase of computer at reasonable cost, if required for completion of

the course

Any other expense required to complete the course - like study tours,
project work, thesis, etc.

While computing loan required, scholarships, fee waiver etc., if any

available to the student borrower may be taken into account

Quantum
Need based finance subject to repaying capacity of the parents/students
with margin and the following ceilings:

Rs. 10 lakh for studies in India

Rs. 20 lakh for studies abroad

The ceilings fixed for studies in India and abroad correspond to the limits
fixed by the RBI for treatment as priority sector lending.
No maximum celling if loan amount secured by 100% collateral security.

Margin :

Upto to Rs.4.00 lacs - No margin

Above Rs.4.00 lacs

For studies in India : 5%
For studies abroad : 15%
Scholarship assistance to be included in margin.

Security :

Upto Rs.4 Lakhs : No security .Parent(s)/guardian to be joint

borrower(s). Assignment of future income of the student for payment
of loan installments.

Above Rs.4 Lakhs and upto Rs 7.5 Lakhs: Besides the

Parent(s)/guardian executing the documents as joint borrower(s),
collateral security in the form of suitable third party guarantee will be
taken along with the assignment of future income of the student for
payment of installments.

Above Rs.7.5 Lakhs: Parent(s)/guardian to be joint borrower(s).

Tangible collateral security of minimum value equivalent to the loan
amount and acceptable to bank, along with the assignment of future
income of the student for payment of installments.

Rate of Interest

As per bank rules

Male Students - MCLR+2.00%

Female SC,ST,IIT students - MCLR+1.50%

Concessions
 1% interest concession may be provided by the bank during the study
period, if interest is serviced during the study period and subsequent
moratorium period prior to commencement of repayment.

Interest is calculated at simple basis during Repayment Holiday /

Moratorium Period. Interest will be compounded on monthly rests
from due date of first installment.

Disbursement

Payment directly to college / hostel / mess / airlines etc. In appropriate cases

disbursement to be made to borrowers subject to satisfactory evidence.
Original receipts to be submitted.

Repayment

Repayment to commence 12 months after completion of studies or 6 months

after securing job whichever is earlier.
Maximum repayment period upto 10 years for loans upto Rs.7.50 lakh
Maximum repayment period upto 15 years for loans above Rs.7.50 lakh.
Repayment on EMI basis.
Education Loans

An education loan is a form of financial support from any bank or financial

institution that enable a student for taking higher education. Availability of
the education loan, at the appropriate time will help millions of deserving
bright young Indians to achieve their dreams come true. All graduation,
post-graduation and professional courses from institutes approved by the
state and central government and also from foreign universities are eligible
for a loan. Several institutes/ colleges have tied up with various banks, for
the benefit of prospective students. For studies in India one can get loans up
to Rs.7.5 lakh and up to Rs. 15 lakh for studies abroad.

Before giving the loan, banks study the viability of the borrower based on
personal discussions with the student, family's assets and annual income, the
nature of the course and reputation of the institute. In most banks for loans
up to Rs. 4 lakh no collateral or margin is required and the interest rate will
not exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the
interest rate will be PLR plus 1 percent. PLR is a term used to refer the
interest rate of the bank and it may vary with each bank.Some banks offer
lower rates to women students or those from specified institutions.Security
to the loan depends on the amount. Security is some form of investment (i.e
bank deposits, house property etc) that are surrendered to the bank while
taking the loan. Security is not needed for loan amounts up to Rs. 4 lakhs.
Instead of security, some bank may ask for a third party guarantee
( guarantor) for higher loan amounts. There is no need to repay the loan
while studying. The repayment starts after you have finished the course or
started working. The repayment cannot be delayed for years after the
completion of course. The loans are to be repaid over a period of 5 to 7
years with provision of grace period of one year after completion of studies.