The college tuition fees have been rising at an alarming pace for the past two decades in Nepal making students difficult to pay their educational fees. So, many students are considering education loans to cover their various expenses incurred while pursuing their college degree.
What is an education loan?
The education loan is a type of loan that is borrowed to cover education-related expenses. The expenses may include tuition fees, fees, library, laboratory and hostel charges, travel expenses for studies abroad, and so on. This type of loan is specially designed to help students financially in affording the cost of education.
Here in this blog, we have written the process that you need to follow to apply for an education loan in Nepal.
Step 1: Know the Basic Requirements:
1. Who can apply for an education loan?
Students who have completed their 10+2 level education are eligible for an education loan. The education loan is generally provided to the students for professional and higher studies. The eligibility for the loan also depends upon the annual income, academics, potential future earnings, cosigner, and collateral.
The eligibility criteria vary according to the Banks. But generally considers the following factors for providing educational loans:
- Nationality (The applicant must be a Nepali citizen).
- Confirmation of admission from the respective education institution.
- A creditworthy cosigner (generally parents/ guardian/ spouse) having a regular source of income for repayment of installments.
- Age (The applicant must be 18 years of age).
- Collateral security or FD equivalent.
2. What does the education loan cover?
Generally, education loan covers most of the expenses incurred while pursuing education. The expenses include tuition fees, fees, library, laboratory and hostel charge, travel expenses for studies abroad and so on.
3. What are the eligible courses and institutes?
For education loan, the student must be studying Undergraduate/Bachelors, Graduate/Masters & above, or any professional courses in any institution recognized by the Government of Nepal.
Step 2: Visit the Banks and Gather the related information:
1. How much money can you borrow?
The total amount of money that you can borrow varies among the banks depending upon the course that you are pursuing and the regular income of the student’s parents/guardian to service interest.
2. What is the cost for the loan?
The cost of educational/student loans depends upon the interest rate, loan margin, loan processing fees, subsidies, grace period, term period, and moratorium period. Students should find out the amount as well as the total cost of the loan at the time of reimbursement before opting for an education loan.
3. What is the repayment module?
In education loans, the repayment should have to be done through Equated Monthly Installments (EMIs) that commences after the completion of the course.
There is a special provision of the moratorium period in education loans. The moratorium is the time in which and after the loan amount has been disbursed to the borrower and the borrower is not required to make any repayment. However, interest accrues during the moratorium period and the borrower must pay it.
4. What are the terms and conditions of the loan?
If you are applying for a loan make sure you understand each term and conditions of the loan. If you are confused about any terms and conditions don't hesitate to ask the loan officer. Make sure you know the details like the total loan cost, monthly payments, fees, whether the interest rate is fixed or may vary as per the market, collateral, and security, loan amount, etc.
5. Compare the related parameters:
Before applying for the education loans students are highly recommended to compare the education loan on different parameters. The parameters are the interest rate, things that the education loan covers (like tuition fee, library fee, etc.), interest rate, loan processing fees, subsidies, grace period, term period, loan processing time, moratorium period and so on.
Step 3: Do the necessary paperwork
1. Find the cosigner:
Students must have a trustworthy co-signer to apply for an education loan in Nepal. Cosigning is a responsible commitment. If the borrower fails to pay the loan then the cosigner is legally obliged to pay the education loan.
2. Verify the Security/Collateral:
Collateral is movable or non-movable property pledged as security for repayment of a loan, to be forfeited in the event of a default. Commercial banks of Nepal provide educational loans against fixed assets collateral and/or fixed deposits. The collateral/security can be land, building, securities & bonds, gold, and fixed deposits.
3. Submit the necessary documents:
As the supportive documents required for the education loan varies among banks as per their own rules and regulations, so it is always advised to check the list of the documents required with the respective bank and/or visit the nearest branch for further information.
Generally, Commercial Banks of Nepal require the following documents for loan processing.
- Duly filled loan application form.
- Original education certificates/mark sheets.
- Proof of admission to the course or offer letter.
- Schedule of expenses for the course.
- Net worth statement of parents as applicable.
- Income statement or cash flow details of the cosigner.
- Copies of citizenship/passport of the students and their parents/guardian/guarantor along with pp sized photographs.
- Bank (deposit & loan) account statement of 6 months time interval.
- Details regarding the assets and liabilities of parents.
Step 4: Disbursal of the loan
Once the process and paper works are complete, then the banks will disburse the loan. As loans are not free money and every penny you borrow from banks will cost you more amount at the time of repay. So, we suggest you spend the money wisely.
Many colleges in Nepal also offer attractive scholarships to the needy and deserving students. Many of these scholarships go unclaimed every year. We would also like to recommend you to reach out to the colleges, ask them if they have provisions of scholarships and apply wherever possible.
