I am planning to take an education loan of Rs10 lakh to pursue studies abroad. Do I need to provide any kind of security?
You can avail education loans in the range of Rs15-25 lakh. For loans exceeding Rs4 lakh, irrespective of study in India or abroad, you will need to provide a collateral, such as government securities, gold, shares or a guarantor. The security varies from bank to bank. Before the bank sanctions a loan, it will understand the kind of assets your family owns, its income, the nature of your course, future employment prospects and the institute’s reputation. Some foreign institutes also request for a capability certificate to confirm that your bank or sponsor will fulfil expense requirements for the course till completion.
I was unable to keep up my loan commitment for two months. Is this a default? How much extra will I have to pay?
In banking terms, a default occurs when your equated monthly instalment (EMI) remains unpaid for 30 days after the due date. Also, such defaults incur a penalty of 1-2% of your EMI, which will be compounded on a monthly basis. Add to this, the bounced cheque charges if you have opted for payments through post-dated cheques. Talk to your bank as soon as possible and explain the situation with a promise to pay the dues along with the charges incurred. It is best not to neglect this as banks have the right to raise interest rates, citing defaults.
I am planning to buy a car. Will a sports utility vehicle (SUV) make sense? I commute nearly 50km daily for work. Also, I have to take a loan for purchasing this car. What should I do?
An SUV is suitable for travelling between cities, on highways, uphill climbs and rough terrains. They are quite expensive. For travel and especially commuting to and from work, a small car is more ideal. It has a smaller turning radius and helps you negotiate narrow lanes and difficult turns. Moreover, small cars are more affordable. A small car is more economically viable, especially if you are taking a loan. The lesser the loan amount, the lower the EMI, leaving more money in your hands to meet fuel costs.
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