Education loan insurance: Many students take out loans to pay for their higher education. But if they can’t repay the loan, the responsibility falls on their co-applicants.
Education loan insurance helps reduce this financial risk by providing backup if the borrower can’t repay the loan.
Sometimes, if the main person who took out the loan has insurance and they have a serious illness, the insurance company pays the full amount instead of the other people who applied for the loan with them.
What is education loan insurance?
The job market is tough right now because there aren’t many job openings, campus placements aren’t going well, the local economy is slow, and the global economy is uncertain. This makes it hard for people to find work.
Education loan insurance helps out if the main borrower can’t pay back the loan because of serious situations like death, severe illness, or losing their job.
It also makes sure that the co-applicants don’t have to pay back the loan if something bad happens to the main applicant.
When you use the Edufund App, finding the perfect education loan that suits you and is affordable isn’t confusing anymore.
The app’s financial team gives helpful advice to ensure that the co-applicants won’t face difficulties if anything goes wrong with the main applicant.
Is it compulsory to buy education loan insurance?
You don’t have to get education loan insurance because different lenders have different rules about it. If you borrow from government banks, you don’t need insurance.
But with some private banks or organizations, you might have to get insurance to get the loan.
In most government banks, applicants can choose whether they want to get insurance when taking out education loans with collateral.
However, if you’re applying for a loan from private banks or NBFCs for studying abroad without putting up collateral, you have to get education loan insurance. This is because the lender hasn’t asked for collateral, so it’s a must.
What is the amount charged as a loan insurance fee?
The fee for loan insurance changes depending on who you borrow from—private lenders or government banks.
Government banks usually charge between 0.5% to 1% of the total loan amount for education loans. They provide insurance schemes through their own lenders.
Private banks and non-bank financial companies (NBFCs) levy insurance premiums on unsecured student loans equal to 1.5% and 2% of the total loan amount, respectively.
Contact the financial experts at the EduFund App as soon as possible for a consultation if you have any questions or concerns regarding the terms and conditions of the school loan insurance.
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What is the payment process for education loan insurance?
The first thing that springs to mind when school loan insurance is obtained is whether the applicant will have to pay the lender’s required loan insurance fees right away.
The best thing about the insurance is that since the due amount is modified to reflect the entire amount of the education loan, there is no need to make a separate payment for the insurance fees.
For instance, the approved loan amount is INR 30 lakhs + INR 30,000 = INR 30.3 lakhs instead of INR 30 lakhs if the applicant has applied for an education loan of INR 30 lakhs and the insurance amount is INR 30,000. The applicant is not immediately responsible for paying the insurance amount.
Benefits of education loan insurance
The applicant bears a heavy financial burden as a result of having to repay the education debt. If the original applicant has any tragedy, the co-applicant bears equal responsibility for the entire sum.
The advantage of getting college loan insurance is that the insurance company will bear the responsibility of repaying the loan in the event that the co-applicant is unable to do so.
The interest rate on loans is additionally waived by 0.5% for students who purchase school loan insurance. The applicant feels relieved because the interest rates are lower overall.
Conclusion
The co-applicant is protected by the school loan insurance, which spares them from having to pay the full loan amount in the event of non-repayment.
Applicants can consult our team of experts on the Edufund App to gain detailed knowledge about the entire procedure if they lack thorough understanding about the education loan process and the associated education loan insurance.
