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- Believing the Sales Guy – In most cases the person selling the education loan would be completely biased about his loan product. He would never give you unbiased comparison of the loan product. He would also give false sense of urgency thereby asking you to commit to the loan without completely understanding its features.
- Pre Visa Disbursal – Many financial institutions convince the student to take the entire disbursal before the visa. They play on the psyche of the parent who feels relieved that he has secured the loan for the child’s future.
- Rate commitment on Phone – During the negotiation with the financial service provider it is imperative that the rate commitment to be done in written document. There have been occasions earlier where in final sanction carries a different rate of interest than the one communicated on the phone.
- Non negotiation of Forex Charges – The margin for Forex ( Currency Conversion) is often overlooked by the parents during negotiation. All financial institutions would insist that they have fixed Currency dealers to remit the money. The same would be more expensive than the market. It is advisable to discuss the charges at the first stage of negotiation
- Understanding Margin Concept – Most financial institutions require you to fund an amount of the loan from your personal funds. The same needs to be arranged every disbursal and many times student assume that the same needs to be paid at the end.
- Unsecured Does not mean without security – The financial institutions take personal guarantee of the guarantors which have the legal provision to attach all personal properties of the guarantor.
- Assuming rate of interest is fixed – The rate of interest for all lenders is variable depending of the cost of borrowing for each bank ( MCLR rate) and lending rate by the financial institutions (PLR). The same is published by the banks on there website as per RBI regulations. The rate is revised every month in most cases
- Legal Guardian – The guardians need to be legally connected to the student. In case the parents are separated the same needs to be legally verifiable for the bank to assess your loan application.
- Understanding Title clearance of Property – The property needs to be clear of any encumbrance or any lien. All the chain of title deeds should be registered. Occupational certificate should be available which signifies the property confers to all clearances provided by the local municipal corporation.
- Clear CIBIL Score – Students and guardian should be careful that they have a good CIBIL score which is not affected by late payment due to credit card or any previous loan
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