Education loan can help fulfill your higher education dream
Parents generally invest systematically for their child’s education goal so that when the time arrives there is sufficient fund to support them. But in current times keeping up the investment with rising inflation it is not easy. The amount your parents saved for you might not be enough for your education. Some of you might want to go abroad for a better career opportunity. You can seek an education loan from banks to fill the gap in your education expense.
To secure an education loan you have to be a citizen of India and secure admission in a foreign or Indian university or institution before applying for loan. Lenders usually prefer to give loans for courses for a college degree, university courses and professional courses such as MBA, engineering and medical sciences.
If you are applying for an institute in India then you can get a loan up to Rs Ten lakh but if you plan to study abroad then it can go up to Rs Thirty lakh. Education Loan is not limited to admission or tuition fees but also considered for other expenses like hostel/mess charges, examination fees, purchase of books, caution deposit, travel expenses in case of study abroad and any other expenses which may be necessary to complete the course.
If your total cost is only Rs 4 lakh then you can get 100% loan but if the cost is above Rs 4 lakh then you will have to arrange for 5% of the total cost from your own sources as margin money. If you are going abroad then at least 15% of the amount you have to pay from your own sources.
If you are applying for a loan up to Rs. 4 lakh then you will have to apply for loan along with your parent or guardian as co-borrower but no collateral security is required. If you take a loan between Rs 4 lakh-7.5 lakh then you would have to bring someone who will be the guarantor for your loan. If the amount exceeds Rs7.5 lakh then the bank may ask you to give a collateral security. Collateral need not to be only a residential property or gold but lenders also accept fixed deposits, Life insurance policies and National Savings Certificate as collateral.
Also, make yourself fully aware and be prepared for the terms and conditions that will come along with the loan.The interest of an education loan will vary from banks to banks. It is generally between 11.45% and 13.20% per annum. The repayment of the loan will begin after a year from completion of your course or six months after getting the job, whichever is earlier. You will also be required to pay interest for the moratorium period. As per the Income-tax Act, the entire payment of interest is tax deductible. You can avail this benefit from the day you start paying for the loan till 8 years. However this is subject to few conditions. As per section 80 E of the IT-Act, deduction in respect of interest paid on loan taken for pursuing higher education is allowed if the loan is taken by the taxpayer for himself or his relative. It is ideal that you stretch the loan payment only 8 years in the line of your eligibility for claiming deduction u/s 80 E of IT-act. If you take the loan in your name then only you can avail this benefit, so remember that the education loan taken by your parents won’t help you to get any benefit on tax. Also, you don’t get any deduction or tax benefit for the principal amount you repay on the education loan.
Some banks will insist on buying a life insurance policy. Objective of this policy is that in cases of a sudden death of a student the burden should not fall on parents but the insurance will take care of the loan taken by the student. It is advised that you take a term plan instead of buying any expensive insurance policy.
If you are a bright student and have been able to secure admission in a reputed college then you should not worry about cost. It makes sense availing education loan facility to fulfill your dreams even if you cannot arrange fund from your own sources. A good job after the course will ensure that you comfortably pay back your loan.
