Reading an Education Loan Offer Before You Sign

Education loans are one of the largest financial commitments many students take on, and loan terms are often skimmed rather than read carefully. What actually determines the real cost of a loan: - Interest rate type. Check whether the rate is fixed or floating (tied to the bank's repo-linked lending rate). A floating rate can rise over the loan's life. - The moratorium period. Most education loans let you defer repayment until course completion plus a grace period, but interest often still accrues during this time. Ask whether simple interest is charged during the moratorium, this significantly affects your total repayment. - Processing fees and other charges. These are usually a percentage of the loan amount and are sometimes non-refundable even if you don't take the loan, ask for the exact figure in writing. - Collateral requirements. Loans above a certain amount (commonly ₹7.5 lakh at public sector banks, per RBI/IBA guidelines) typically require collateral or a third-party guarantee, understand exactly what's being pledged. - Prepayment and foreclosure charges. Some loans penalize you for repaying early, check this if you expect to clear the loan ahead of schedule. - Compare public sector bank schemes first. Public sector banks generally offer education loans under the IBA's Model Education Loan Scheme with more standardized, published terms than some private lenders or loan-aggregator apps. Never sign a loan agreement you haven't fully read, and be especially cautious of loan offers that arrive unsolicited via WhatsApp or SMS promising "instant approval, no documents."