Nowadays, most of the students are opting for Education loans to fund their education. But sometimes due to the lack of research, they end up getting a loan at a higher rate of interest or the loans with bad repayment policies. In that case, we have a choice to transfer our education loan from one bank to the other and this surely helps in easing out our education loan baggage.
An Education Loan Transfer is basically a process of transferring high-interest debt from one lender to another lender with a considerably lower interest rate and better repayment policy. The lender here can be banks and NBFCs.
Banks like SBI, Union Bank, Bank of Baroda offer Takeover loan schemes for transferring the education loans. Under the takeover loan scheme of SBI, you can easily shift your high-cost education loan to SBI in order to reduce the monthly EMIs. There’s no processing fee for this and the maximum loan limit goes up to INR 1.5 crores.
1. Once you finally decide that you want to transfer your loan, your old lender will give you a statement about the pending loan amount that is to be repaid.
2. After this, the given statement has to be submitted to the bank that will provide the student loan refinance.
3. After receiving this statement, the loan process will begin as usual. Once the loan has been sanctioned, the new bank will issue a cheque for clearing all the pending dues of the former lender.
The interest rate of takeover loans is always less than that of the fresh loans and it is because the risk factor associated with the new bank is comparatively low.
A loan applicant can apply for an education loan transfer only if he/she satisfies the following conditions:
1. The loan applicant should not take any more disbursements from the current lender’s loan. It means that the disbursements have already been made and now no more amount can be borrowed from that lender.
2. The repayment towards the old loan must have started in the form of EMIs and the CIBIL score of the borrower should also be good. To know more about CIBIL score click here.
3. The loan must be a first-time takeover.
1. In case you are transferring a collateral education loan then the new bank will take over that existing collateral.
2. Whereas in case you are transferring a non-collateral loan and you are looking forward to transferring it to a public bank that mostly lends collateral-based loans, then you will have to place valuable collateral with the particular public bank. There will be no loan margin and the loan amount on that collateral will be 100%.
In most of the cases, the transfer of education loans from one bank to the other bank is beneficial because of the reduced interest rates and better repayment policies. But before going for an education loan transfer, consider studying the recent trends of the loan transfer to avoid any losses.