29th November 2013, 09:04 PM
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How to calculate percentage on Education Loan?

When customer takes loan from bank for any reason such as ,education loan then how to calculate percentage of interest on that loan

8th December 2013, 03:25 PM
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Join Date: Jul 2010
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Default Re: How to calculate percentage on Education Loan?

Education loan has become an integral part of modern education. With the rising standards of education and quality facilities being provided by various institutions, the fees structure has witnessed a drastic change in the fees. In this situation education loan has come to the rescue which has not only made it possible for financially weak students to study in such ultra urban institutions but also go for higher studies abroad. The importance of education cannot be neglected at all. Almost all sections of the society utilize it. The financially weak ones use it to pursue their higher degree courses whereas the financially stable ones use it as a measure to get some tax exemption.

Education loans is different from other types of loans to a considerable extent. It differs from other types of loans in both interest as well as in the procedure to get it and maximum sanctionable loan amount. However, time and again the government and Reserve Bank of India have stood besides the students by making the norms of education loans lenient to enhance better education quality standards in the country.

Coming to your query regarding the calculation of percentage of interest, please refer to the below points to get a good insight over the entire thing.

---> Simple Interest is charged on education loans rather than compound interest in case of other loans.
---> Simple interest is charged till the study period is over and for the next six months after that or till the candidate gets job whichever earlier will be applicable.
---> After that period, interest will be calculated as compound interest.
---> The present rate of interest is 13.75 % for private nationalized banks and 12.75% for State Bank of India.
---> However, the rate of interest varies from time to time as per the orders of RBI. But usually it fluctuates around 13-14.
---> Taking the rate of interest as 13.75%, this implies that the bank will charge an interest of Rs. 13.75 per year on Rs. 100. Thus the total interest can be found out easily.
---> Going mathematically you can calculate using the formula given below.
Interest = P * R* T/100 where P- Loan Amount, R-Rate of Interest, T-Time in years
---> However there is provision of getting subsidies on various grounds like if the parents are ex-service persons.
---> If the interest is paid to the bank every month, then at the end of the study of period the bank will give a rebate of 1% in the rate of interest. Thus the rate of interest will get reduced by 1%.
---> The principal loan amount will increase when you will ask the bank to pay your college fees.
---> You can also clear off the debt as loan at any point of time within the study period.
8th June 2014, 10:05 PM
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Default Re: How to calculate percentage on Education Loan?

Sir/madam,i want to know that how do u charge the interest over the loan amount?do u charge the interest over the money that you send to the college in every six month or u charge the interest over the entire loan amount from the sanction date.
11th June 2014, 12:20 PM
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Join Date: Dec 2013
Location: India
Posts: 8,583
Default Re: How to calculate percentage on Education Loan?

The interest is not charged on the loan amount sanctioned. It is charged on the amount the bank sends to the college every six months. After every six months, when the bank sends a certain sum, it gets added to the previous sum which the bank had given to the college and interest is calculated upon the resulting sum. The interest is calculated as simple interest.
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