Query on student/education loan


My query is to understand student loan before approaching an institution.
Student loan is needed for the education of my nephew.

  • Is it always necessary to mortgage a property for student loan? Could you clarify with the help of some concrete examples?

If mortgage is necessary, I will have to mortgage my property because student's parents don't have any property to mortgage.

That's why some more questions as below.

  • Will the loan be given to the student directly with him as first applicant (I am not sure if there is something like first applicant, second applicant etc. or not)?
  • Will my name be added in the loan application or in a separate application? If not, how will I and/or my property be linked with the loan? Will I have to submit original papers of the property to the bank with some signed agreements? What will be the link between this agreement, if any, and the student loan?

Because it will be difficult to know at the time of application what the amount of first salary will be, how soon the student will/can be able to pay back the loan, etc. that's why few questions as below.

  • From when will the loan repayments start, for example after the completion of studies, after the start of first job, etc.?
  • When will the monthly installment amount be decided, for example already at the time of application, after the completion of studies, after the start of first job, etc.?
  • When will the tenure for paying back the loan be decided, for example already at the time of application, after the completion of studies, after the start of first job, etc.?
  • Can the start of installment payments be delayed (by agreement already at the time of application, or later), for example if the student wants to pursure some further studies after the completion of the studies for which loan was taken?

I would also like to understand the risk for me because my property will be mortgaged.

  • Can the student escape easily from paying back the loan by simply saying No (refusing) to the bank for paying back the loan even if he has a job?
  • Will the bank have to try every possibility to recover the money from him or his parents before using my property to recover the loan? What are those possibilities?
  • Is the bank obliged to try all possible options including legal route (court cases) against the student and/or his parents before using my property to recover the loan?
  • Will the bank need court's permission before using my property to recover the loan?
  • What can be my point of defence taking into account that I may not have easy and direct access to records related to student's job or salary to prove that he is in a position to pay back the loan but he is not paying? Or I won't be able to keep my property if student simply doesn't pay back the loan?

Thank you.

 
Reply   
 
Retired employee.

A  simple one to one discussion with concerned Bank Manager can help you in understanding the Rules and regulations.

The bank always try to first proceed on those security which can bring recovery immediately.  Be it a high net worth third party (guarantor) or mortgaged property.  One can not foretell the decision that manager may take in future for recovery of the loan.

A Bank may proceed against guaranor also, without proceeding against borrower as it depends on easy access for recovery.  

It appears that your nephew may be demanding for your guarantee/mortgage and it is purely in between you as risk can never be ruled out in such transactions and it depends on borrower's integrity, which guarantor must be knowing better than a Bank Manager.

 

 

 

 
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Advocate

Admittedly, the loan is yet to be applied for. As such, my suggestions are restricted to the sanction of the loan. 

The scheme envisages the sanction of loan against the future earning capacity of the student; loan upto Rs. 4 Lakh requires no guaranteers or mortgage of property; it is sanctioned to the student concerned.

 
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Retired employee.

Making a simple query with several paragraphs confuse the experts that is having limited time at their disposal.

To my understanding the following is the essence of the query.

a)Member's nephew wanted to avail an educational loan.  The presumption of the query is that Bank manager wanted a guaranee and mortgage of property also as the educational loans are substantially  contributing to NPA category which recovery is being very difficult, as students migrate and whereabouts are also not known, or going abroad for jobs etc.  Member whole heartedly  may not be willing and may be his close relations are compelling him to take a decision unwillingly, and he is exploring ways to avoid such future risk by knowing the rules and regulations.

b)Educational rules and regulations uniformly applicable was uploaded by several banks and RBI has uploaded their directives / guidelines.

c)Sanctioning of a loan is discretion of the bank.  As 4 lakhs is the cut off limit, banks sanction 4,05,000/- as loan and insist mortgage.

I may be right or wrong, but the presumptions can be made while replying to a query and such presumptions are not meant for offending unknown members.

 
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