As there is a popular saying that ‘sun never sets on the British Empire’ speaks volumes about the glories of Great Britain in creating colonies in a different part of the World. Similarly, the Indian education system was also well known and students from every corner of the world visited India to gain a quality education. However, the sun has set on both the British Empire & Indian Education System.
In recent years, the quality of education in India has become poor resulting in low employment opportunities. As the high dropout rates, asymmetries in the labour market, are the main cause of unemployment but low level of education has also added to the lack of skills required in the job market.
This shows that the Indian education system needs a revamp with better infrastructure, quality teachers, sports facilities, etc. to impart skills that will enhance the overall personality required for the job market
To cater to the need for quality education, the schools have started getting business loans for enhancement that enables better learning.
What is the benefit of having a school loan?
- The loan is quickly processed – Few documents are required for availing the loan and on submitting the documents
- Unsecured funding – the opportunity of getting a collateral-free funding
- Availability of loan to cater to various school expenses like hiring faculties, improving furniture & fixtures, upgrading infrastructure
- Line of credit facility – this facility enables one to withdraw and repay funds as per his/her convenience. The interest is charged only on the amount used by him/her
Who is eligible for the school loan?
- The school should have completed a minimum vintage period as required by the lender
- The school should be up to date with the filing of the tax return
- Schools run by the trust, societies, private/public limited companies, can apply for the loan
- The promoters/Trustees/Key person should be a person of good standing in the society
- The property on which the school is built or should be built should be owned.
- In certain cases, the existing school building is mortgaged
What are the documents required for the school loan?
- KYC documents
- Application form
- Bank statement of the school of the previous year
- Fee structure of all the current students in the school
- PAN card of the applicants (Trust/society members)
- Copy of the School Affiliation Certificates
- Copy of the Society/Trust Registration Certificate
- Copy of the other documents of the society/trust as required as per the law
How to apply for a school loan?
There are two ways to apply for a school loan:
- Primary Way
- Alternate Way
What are the charges for the school loan?
The table shows the comparison of the charges by various lenders
| Lender | Interest Rate | Processing Fee | Part Payment charges | Pre-closure |
| Reliance Money | As per lender’s discretion | 1% | 5% | As per lender’s discretion |
| ISFC | As per lender’s discretion | As per lender’s discretion | As per lender’s discretion | Nil |
| Bajaj Finserv | 18% p.a. | Up to 3% of the loan amount | 2% of the part payment amount | 4% |
| Bank of Baroda | Competitive Pricing Linked to tenor based MCLR | |||
| Abhyudaya cooperative bank ltd | 12% p.a. | Service charge applicable | The information available by emailing them on loans@abhyudayabank.net | The information available by emailing them on loans@abhyudayabank.net |
*Note: Charges mentioned above may vary based on applicable taxes
The rate of interest offered depends upon various factors such as future cash inflow of the school, loan repayment history, loan amount requested, loan tenure chose.
When the loan is processed, the processing fees & the documentation fees are charged. During the tenure of the loan, other charges and penalties are cheque swap, change in EMI cycle, cheque bounce, EMI overdue charge, etc.
It is important to note that the loan can be repaid through National Automatic Clearing House (NACH), Electronic Clearing System? (ECS) or Post Dated Cheques.
When can the loan amount received after the loan gets approved?
Each lender has certain eligibility criteria and guidelines for the applicant to go through, so the days taken by each financial institutions vary as per their rules and set process. The days after which the loan gets processed ranges from 8 days to 72 days.
The school loans are directly disbursed in the school account by these financial institutions and NBFCs so that the end-user is established.
Now, many of the banks are also trying to explore the untapped market of education loan for schools. They believe that some of the schools take a one-time annual fee, which leads to the huge financial burden for the parents, hence providing them school loans will ease out some of the financial pressure that the parents have for their children education.
As the education loan is available for the students, the demand for quality education is increasing among the parents for their kids, hence the schools need to timely upgrade themselves to provide good quality education to the children so that they are ready to deal the competitive pressure later in their life.