In today's interconnected world, pursuing higher education abroad has become increasingly common among students seeking to broaden their horizons and advance their careers. However, financing such aspirations can be a significant challenge, often requiring students to explore various funding options, including education loans. While education loans provide the means to achieve academic goals, it's essential for students to delve into the finer intricacies of the loan process, including education loan insurance. We'll delve deeper into what education loan insurance entails, its pivotal role in the loan process, and why it holds significance for students embarking on overseas education journeys.

Understanding Education Loan Insurance:

Education loan insurance serves as a protective mechanism for both the borrower and the co-applicant, typically the parents, in the event of unforeseen circumstances. Essentially, it acts as a safety net, ensuring that the burden of loan repayment doesn't solely rest on the co-applicant if the borrower faces challenges in meeting their obligations. This aspect holds particular importance for government bank loans, where even retired parents can be co-applicants, exposing them to potential financial liabilities.

Significance of Education Loan Insurance for Overseas Education:

When students pursue higher education abroad, they often encounter substantial financial commitments. Education loan insurance plays a crucial role in providing financial security amidst uncertainties such as terminal illness or untimely demise of the student. In such unfortunate circumstances, the insurance coverage ensures that the outstanding loan amount is taken care of by the insurance company, thus relieving the co-applicants from the stress of repayment obligations.

Is Education Loan Insurance Mandatory?

The requirement for education loan insurance varies across lenders, however, for unsecured education loans from Non-Banking Financial Companies (NBFCs) and other private banks, insurance is often mandatory. Given the absence of collateral in these loans, insurance serves as a risk mitigation measure for the lenders.

Understanding the Cost Dynamics of Education Loan Insurance:

The cost of education loan insurance varies depending on the lender and the type of loan. Government banks generally charge a nominal fee, typically ranging from 0.5% to 1% of the loan amount. In contrast, private banks and NBFCs may levy higher premiums, usually in the range of 1.5% to 2%. These insurance fees are usually integrated into the total loan amount, simplifying the payment process for students.

Payment Process and Added Benefits:

Education loan insurance fees are typically factored into the total loan amount, eliminating the need for separate payments. Moreover, opting for insurance can yield additional benefits for students. For instance, schemes like the SBI Life Rinn Raksha offer a 0.5% waiver on the interest rate for borrowers who choose to purchase insurance. This not only provides financial protection but also translates into tangible cost savings over the loan tenure.

KlassFin- an amazing platform to plan your abroad education loan

KlassFin is a perfect platform to compare the different education loan benefits at a place. We can help you choose the loan as per your needs. Connect with us to learn about the interest rates, loan tenures and many more stress-free processes for your education loan abroad.