Education loans are one of the most common methods that students use to finance their college education. Such a loan is usually taken for undergraduate, postgraduate, or higher studies. However, sometimes, students may have taken one educational loan for college and may need another to fund their postgraduate studies. Despite how common such situations are, taking a second loan before repaying the first one can be a challenging process.
Read on to learn more about how you can take a second education loan if you already have taken one.
What is a Personal Loan for Education?
When a student or his parents have insufficient funds or face challenges while paying for their education, they can take a personal education loan from a lender on easy repayment terms and affordable rate of interest. They can use the loan amount to pay for an education course of their choice. The students can use these study loans to cover all their educational expenses, including tuition, books, uniforms, hostel fees, and other expenses related to their studies.
Like other personal loans, a personal loan for education is also an unsecured loan since there is no collateral involved. An applicant needs to show relevant income proofs to establish their repayment capacity and a higher credit score to prove their creditworthiness to apply and approve for the loan.
Though it is ideal to repay any existing loan to increase the personal loan eligibility, in the case of a personal loan for education, if your income is supportive of your loan repayment capacity, you can easily get approved for a second personal loan.
In case the applicant is a minor, the parent or legal guardian can take out the personal education loan on their behalf. Having a co-applicant with a higher credit score increases loan eligibility and loan approval chances.
Taking a Second Education Loan
When you need a second educational loan, you have two options:
- You can apply for a second loan at the same financial institution where you already have one outstanding loan.
- You can apply to a different bank or non-banking financial institution.
1. Applying for a Second Loan at the Same Institution
When you apply for a second loan from the same bank or NBFC where you already have a loan, they may agree to extend it to you provided you meet the following conditions:
- They will deduct the amount of the first loan from the money you need for your second loan. This is a loan eligibility calculation.
- Lenders evaluate the applicant’s income to determine their repayment capacity for the second loan. if your income is adequate to handle the loan repayments for both loan accounts, you’ll be approved for the second personal education loan.
2. Applying at Another Bank or NBFC
If the bank where the student already has a loan does not agree to sanction him a second loan, he can choose to apply at another bank. This is how he can apply for a second loan at another bank or NBFC following the same process as a new personal loan.
Best Educational Loan Options
Nowadays, several NBFCs offer personal educational loans up to INR 5 Lakhs with flexible repayment options of 3 to 12 EMIs. Thus, students can easily pay back the first loan and then opt for a second loan without a lot of hassle.
Although paying the first educational loan before applying for a second personal educational loan is the ideal thing to do, there are legitimate workarounds that a student can use to work towards a second degree and become more employable in the market. Students can do so by taking a second loan as soon as they graduate and using it to fund their postgraduate education. Alternatively, the parent or legal guardian can become a co-applicant or apply for a personal education loan on their behalf.