How to finance your education abroad part 2 : Education loan

Education loan for MS in USA - How to finance your education abroad?
Education loan for MS in USA - How to finance your education abroad?

Education loan for MS in USA – How to finance your education abroad? – Part 2

So you have got your i20 before getting your Education loan for MS. 

If you have not visit how to get the i20 before getting education loan for ms here.

Nationalized banks offer only 30 Lakhs loan and want 15% of your money as safe deposit. (What the hell?)
In addition, the education loan rate is 11.5 % (in 2014-15). After so many hurdles, once I got the i20 from the university I approached SBI and Andhra bank. I walked in like a king and said hey, here is my i20, I have a house along with a land, which is valued at 100 lakhs my parents earn so and so, give me loan of 50 lakhs.

Surprise Surprise!

This is what the bank manager replied and i paraphrase

“ RBI’s rule is education loan abroad is capped at 30 lakhs, we can push it to 40 and you have to show 15% of 40 lakhs as security deposit along with your collateral “(Which is my house) .

Any bank manager I asked repeated the same statement.

HOLY MOLLY! Again, I felt the same helplessness of not having enough money to fund MS. I remember frantically searching the internet and asking all my friends for any other options available. My dad and I even considered taking 30 lakhs loan the first year and selling the house for the second year.

That is when I heard about private lenders like Credila and Avanse. For me Credila worked out fine. They were willing to give 55 Lakhs with collateral (remember the land with the house I was talking about).

Credila made my life simple. Because many bank managers act like they own the place the moment you ask for a loan. And the sheer waiting time involved to visit the manager made it so exhausting. Especially in banks like SBI and IOB I had to wait for an hour to see the manager and once I saw them they told me that some document was missing “go and get it and come back next week”.

The main advantage Credila has over banks is that they process your loan application as soon as you get an admission letter. They consider admission letter as an official document, even before you get an I20. (Wow! I actually din’t know that and no one guided me. I spent 2 whole months borrowing from friends and relatives. Credila was not that famous sometime back).

They provide you with a provisional loan letter. Once you get the i20 you can get the loan amount disbursed from Credila. And if you wish not to, that is fine. You can go to a nationalized bank and get it processed (now that you have the i20 this process is far easier).

Meaning, you can simply get Credila’s provisional loan letter to get the i20 paying 15% of the loan amount you applied for as a fee. And between the time you get your i20, if you find another loan option which is more attractive you can cancel Credila’s processing with a small fine.

Credila has a student friendly education loan application process: Which I am listing below. Banks have the same process but Credila’s representative comes home till your application is approved. And with banks you need to wait, visit the manager, butter him and do the same. And guess what even after doing all this you still have to show 15% of your loan amount as holding deposit. ( I am not advertising for credila. I am merely bashing our nationalized banks)

• You complete Credila’s online Education Loan Application Forms.
• Credila follows‐up with the student & parents to answer questions via phone
• Credila’s Representative visits your house & collects signed application form with the supporting documents
• You provide a completed Education Loan Application form with all the required supporting documents (Note: Students can apply to Credila for Education Loan even before confirmed admission) I did not know about this process so I wasted precious time to visit bank managers and wait for an answer
• Credila’s Credit team to reviews & underwrites the Education Loan application
• Credila approves the education loan or ask for any additional information required
• You complete the education loan disbursement formalities by signing the education loan agreement
• Credila: The education loan amount is deposited in the required bank account electronically. This may change. Credila might only agree to transfer the funds directly to the college via peer transfer.
• In the above process, my parents and I had to visit Credila only 3 times. Once to submit additional legal documents. Once to collect my approval form and once to sign the disbursement. I felt Credila in Chennai at least was well managed
• Remember that Credila is a private lending firm! This is both an advantage and disadvantage. You must know how to speak and bargain to get the best interest rate and how to disburse the fee amount. I played hard bargain and got an interest rate that was just 1 % more than the bank. I also hard bargained to deposit the amount in my bank, which was extremely important for my living expense.
• Clearly tell them how much loan you want. And what is the ratio of living expense and fees. Else you are to blame.

I personally feel the extra INR 50000 I paid to process application via Credila saved me lots of headache related to banks. Which included wait time and money ie. 15% of the loan as holding deposit.

I am listing a table of banks , the loan amount limit and interest rate slab.

Name of Bank Loan Amount Rate of Interest per Annum
State Bank of India 20 lakhs  beyond which collateral is needed capped at 30 lakhs
15% is holding deposit
Upto 7.5 lakhs- 11.10%
    Above 7.5 lakhs- 10.75%
Allahabad Bank 20 lakhs beyond which collateral is needed capped at 40 lakhs
15% is holding deposit
Upto 4 lakhs- 11.45%
    Upto 7.5 lakhs- 11.45%
    Above 7.5 lakhs- 10.95%
Axis Bank 20 lakhs and  beyond which collateral is needed capped at 30 lakhs Upto 4 lakhs- 16.50%
    Upto 7.5 lakhs- 17.50%
    Above 7.5 lakhs- 15.50%
HDFC Upto 10 lakhs, beyond which collateral is needed Max-15.25%
    Min- 9.50%
Credila No limit. Depends on collateral you can show 12.50%+ floating rate(depends on the risks points of the applicant)
Moves close to 13% 
Punjab National Bank (PNB) 20 lakhs beyond which collateral is needed capped at 40 lakhs Upto 7.5 lakhs- 11.25%
    Above 7.5 lakhs- 11.85%
    for education at premier foreign universities- 9.85%
IDBI Bank  Depends on requirement. Capped at 30 lakhs needs collateral Upto 10 lakhs-10.45%
    Above 10 lakhs-11.45%
Indian Overseas Bank (IOB) Upto 40 lakhs, Collateral is needed and 15% is holding deposit Upto 4 lakhs- 11.50%
    Upto 7.5 lakhs- 12.00%
    Above 7.5 lakhs- 12.25%
State Bank of Mysore Upto 40 lakhs, Collateral is needed and 15% is holding deposit Upto 4 lakhs- 12.20%
    Upto 7.5 lakhs- 12.20%
    Above 7.5 lakhs- 11.20%
    Above 10 lakhs- 11.70%
Avanse Financial Services No limit.  Depends on collateral you can show 11.5%+ floating rate(depends on the risks points of the applicant)
Syndicate Bank 20 lakhs Upto 4 lakhs- 11.00%
    Upto 7.5 lakhs- 11.25%
    Above 7.5 lakhs- 12.25%
Canara Bank 20 lakhs. Capped at 30 lakhs needs collateral Upto 4 lakhs- 11.15%
    Upto 7.5 lakhs- 11.65%
    Above 7.5 lakhs- 11.15%
Information provided here was from early 2015. Rates may be closer +/- 0.5 % but no drastic changes from banks to slash rates

So here are some questions students want answers.

1) Do the universities verify bank statements?
Yes, My University did call the officials to verify if I had an account and maintained enough balance. I am not sure if all universities do.

2) What all documents should I send to the university to obtain i20

a) Bank passbook copy clearly having the amount or exceeding the amount on i20 in your local currently. Or a bank statement with the bank seal and managers’ sign. Note that online statements are not accepted mostly. If your bank provides only online statements. Take a printout and get it signed from your bank manager. If the bank manager asks you why. Tell the you need it for I20.
b) A letter from the bank signed by the manager stating that you have USD xxxxx.xx at a conversion rate of (INR XX.XX) and you are a customer with good standing with the bank. This is also known as a bank affidavit.
c) Affidavit of support from all your sponsors

3) How many bank statements do I need?
The number of universities you applied for + 5 additional for 1 for visa entry and others for port of entry and backup

4) How much loan should I take?

Amount mentioned on your i20 as tuition fee. (Multiplied by number of years) . In addition, living expenses. Which is close to 1/3th of your 2-year tuition fee example if your 1-year tuition fee is $50000 you will definitely spend close to 17000 if you do not get an on campus job or TA ship especially if you are in west coast. However, college towns are cheaper and cost lesser. If you are willing to share a room, rent cost goes down. The cost mentioned here is upper end.

5) How much do you think will MS cost me?

Your tuition fee plus 1/4rd if you want to live comfortably and eat outside. 1/6th if you are willing to adjust, share and cook.

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