If you want your child to enrol for a professional course like MBA, IIT, CA, CS or attempt acompetitive examtest like GATE, more often than not, she would want to attend coaching classes. And, the fee for such coaching classes can drill a big hole in your pocket.
Firstpost checked out with a few coaching classes. For JEE, theentrance exam for IIT, the fee was as high as Rs 2 lakh. Even for GRE, GMA and CAT, the fees were easily in the range of Rs 40,000 to Rs 60,000. With EMIs for variousloans (home, car and personal) to be remitted every month, credit card repayments and income tax related investments to be made, it does get a bit difficult for common people to keep aside enough money to pay for such coaching classes, especially if it is not planned. If you are in such a spot, you really need not worry. Now two banks give you a special kind of education loan to pay for coaching classes.
Banks:No prize for guessing that public sector banks are the ones offering these loans. Not all of them have this product, though. The banks that give such loans now areCorporation Bank (Corp-Tutor Fee loan) and Central Bank of India (Cent Comp-Exam loan). Of course, all other banks will gladly pitch their personal loan and tell you to pay the coaching class fee using that. Unlike an education loan, which can be taken by students too, a coaching fee loan is given to parents, guardians or a close relative of the student.
Courses: As mentioned above they offer loans to pay fee for coaching class for JEE, CAT, GMAT, GATE, GRE, CA, CS, AIEEE, PMT and UPSC, among others. Of course, banks do have condition that the class should be reputable and also stipulates that it should have been in business for a minimum number of years.
Finer details:The loan amount is up to to Rs 2 lakh. The rate of interest you will need to pay is linked to the bank’s base rate and in the range of 12.35 percent to 14.50 percent. But, it’s still cheaper than taking a personal loan, since the rate of interest on a personal loan is on an average 16.5 percent, and could go as up to 19.25 percent. Like most loans, here too you will have to pay a margin money, which is 10 percent of the total loan amount availed. You will also have to bear a processing fee of a few hundred rupees. The most important thing to keep in mind is that this is a short-term loan and you will need to pay back within two to three years through the EMI route. Also, if you pledge any kind of asset like an NSC or LIC policy, or an immovable property you could possibly negotiate for a concession on the interest rate. But do keep in mind that, if you avail an unsecured loan, you might have to offer a third-party guarantee.
What should you do:“If you have funds in your PPF, it’s all right to withdraw the same towards paying the child’s coaching class fees, provided you make regular payments in the PPF account, like you would have done via EMIs if you would have taken this loan.” Nowadays, coaching classes accept credit card payments. But we recommend you to stay away from any such modes of payment. Of course, unless you don’t mind paying 40 percent per annum as interest. Also, instead of going for a personal loan, taking this special education loan makes much sense. “If you have no options (like PPF money) going for the lowest interest rate loan makes much sense,” Dani says.
Ideally, you should have planned for such an expense in advance, but if you haven’t, may be you could avail this loan now, tide over, and take your financial planning more seriously in the future.