Quality higher education is essential for a good job and a better package. However, due to the huge expenditure in higher education, a large population of the country cannot afford it. Because of which banks and NBFCs give education loans. But sometimes even after higher education, good job is not available due to which education loan is not repaid for many years. Therefore, whenever you apply for an education loan, keep these things in mind.
Set up education loan Fees, hostel fees, laptop and book-copy expenses must be included while taking an education loan. On the other hand, if you take a loan for higher education in the country, then 10 lakh rupees and if you take education abroad then you can apply for a loan of up to 20 lakh rupees. On the other hand, reputed institutions like IIMs, IITs, ISBs etc. can get loans of more than the prescribed limit for studies.
How much time do you get to repay the loan? If you take an education loan, then you have to start repaying the loan after 1 year of completion of studies. You can extend it for a maximum period of 2 years. Whereas, the interest on education loan starts with the time the loan is taken. Along with this, 15 years are given after the completion of studies to repay the education loan.
Education loan interest rate – The education loan interest rate usually starts from around 6.75% per annum, depending on the type of course, institution, past academic performance, credit score of the student/co-applicant and the security offered.
Margin Money – While taking an education loan, a part of the education cost needs to be paid out of pocket. However, no margin money is required for education loans up to Rs 4 lakh. For loans above Rs 4 lakh, margin money of 5% and 15% is required for Indian and foreign courses respectively. However, some lenders like SBI waive margin money for courses pursued in top educational institutions.
Partnership between College and Banks Many educational institutions partner with banks to arrange education loans for their students. Therefore, while taking an education loan, you should check with your university or institution, who they have partnered with who provide education loan quickly and at low interest.
Make sure to calculate EMI in education loan – While taking an education loan, one must see the placement history of the former students by their educational institution and must assess their package. Through this, you can easily calculate your average income and EMI after studies.
Tax benefit in education loan – Individuals availing education loan for self, children, spouse or children are eligible to claim tax deduction under section 80E of the Income Tax Act. This deduction is given on the interest of the loan and there is no limit. However, the deduction is available for only eight years from the day the EMI starts. Hence, borrowers should try to repay their loan within 8 years to maximize tax benefits.
Guarantor for education loan – While taking an education loan, a guarantor is not required for loans up to Rs 4 lakh. Whereas, HDFC Bank does not require a guarantor for up to Rs 7.5 lakh. On the other hand, considering your repayment capacity, many banks do not ask for guarantors on education loans above Rs 7.5 lakh.