Education is the most important aspect of an individual’s life, and everyone has the right to get a proper education. The Indian government leaves no stone unturned when it comes to educating the citizens, which increases the importance of an education loan.
Although, there are people who aim to cover every bit of the sky and acquire the best education. But considering the expenses of education these days, many aspiring gems lose their charm and stay confined to their nutshell. Loans, then, play the role of a protagonist here and help students achieve and acquire the education they want.
All about Education Loan
Irrespective of where you decide to pursue your education from, be it India or abroad, a loan will go a long way when to comes to financing your education. The stress of being aloof from the education you want because of a shortage of finances gets alleviated here. Moreover, you can complete your education independently and only pay once it is completed. This article will give you every detail to help you decide if taking a loan for your education is a wise decision in India or not. Let us now begin by discussing the benefits first.
Benefits of Taking a Loan for Education
Taking a loan for the purpose of education is far better than taking a personal loan. There are distinct advantages of this particular loan that a student can avail of for studying in India and abroad. Let’s give it a closer look.
Extremely Lower Interest Rates
There is a massive relaxation with these loans as compared to personal loans, especially when it comes to interest rates. Therefore, while taking personal loans for financing education abroad, the interest rates are much higher than education loans. Similarly, the interest rates on study loans are significantly lower. Moreover, Government banks provide an additional concession of 0.5% to all female students. So, the opportunity for availing this loan is enormous compared to other loans.
Moratorium Holiday- Pay after your Course Completion
This is one of the most significant advantages of taking a loan for education. A borrower is usually expected to start paying the incurred EMIs in the following months as personal loans. The scenario of a student loan is entirely different. Hence, the scheme on this loan come with an opportunity called the moratorium period.
Furthermore, the moratorium period is known to be the time until which the EMIs don’t start, and the students are not required to make any payments to the lender. This is to help the students as much as possible. Primarily, the moratorium period includes course duration plus six months, which can extend to a year (12 months). This opportunity is given so that the students can concentrate on their studies. They can repay the loan when they have completed their studies.
Expenses Covered with Education Loan
There are various loans available in India, each with its particular perks. For instance, a loan for education to pursue abroad studies covers almost every necessary expense. Moreover, every aspect that a student might need to complete their education is managed here. A study loan for going abroad includes tuition fees, travel tickets, university fees, house rent, food and living expenses, a laptop, or any other apparatus required for the education.
As mentioned above, the government does everything that would help students to complete their education with no hurdles. Therefore, the Government of India has introduced distinct interest subsidy schemes on these loans to benefit the applicants who belong to the financially weaker sections of society. We have listed a few government schemes to give you a glimpse of the different types of subsidy schemes.
- The Central Sector Interest Subsidy Scheme
- The Dr. Ambedkar Central Sector Scheme of Interest Subsidy
- And finally, the Padho Pardesh Education Loan Interest Subsidy Scheme
Furthermore, the advantages of these subsidy schemes include the waiver of the student loan interest charged during the moratorium period. Although after the moratorium period, these students need to start the repayment of EMIs on their own.
The Tax Benefit – Section 80E
The benefits of study loans in India are in abundance. Similarly, Section 80E of the Income Tax of 1961 states that the loan applicant or the co-applicant can get the income tax exemption on this loan. To be more precise, the loan applicant or the co-applicant can benefit from a certain percentage of the interest paid towards the loan as deductible from the total income.
The Tax Collection Source (TCS) on Foreign Remittance
According to the TCS on foreign remittance, a person sending money more than seven lakhs abroad in a financial year must pay an extra tax if it exceeds 7 lakh. Hence, for providing relief to students who have taken loans through a financial institution in India. For instance, the banks or NBFCs, the rate of TCS would only be 0.5% on amounts exceeding Rs 7 lakh rupees. On top of that, the best part is that you can claim back the entire quantity of TCS.
An Education Loan can Build your CIBIL Score
You might know that CIBIL is the credit information report or the summary of your credit history to date. The CIBIL score generally ranges between 300-900. Likewise, a score above 750 is a good CIBIL score. Similarly, this loan benefits your CIBIL, and the timely repayment of EMIs will build the required score. The benefit of creating a good CIBIL score is that it will help you get a loan quickly in the future, such as home loans, car loans, etc.
You don’t Need to Liquidate your Precious Asset
Usually, the parents liquidate their valuable assets to cope with education expenses. And these loans ultimately disturb long-term financial goals. Be it buying property like land or a flat, basic expenses like children’s marriage, and more. Consecutively while taking a loan for education, banks retain your liquid assets like FDs, insurance, and Government bonds as security and then grant you a loan against your security. Therefore, the loan for your education would not dwindle in between your long-term financial goals.
You can Liberate your Parents from the Burden
Taking an education loan can very well liberate parents from all financial burdens as the student is responsible for repaying their loan after the completion of his studies and the moratorium period.
Get Customisable Loan Products
The loan market for students has developed over the few decades. With this tremendous growth, lenders have recognised the demand for loan products that help students pursue education from a particular course, college, or even a country. Financial institutions like the public sector, private banks, and Non-Banking Finance Companies (NBFCs) have specific and customised loan products to study in India and overseas. Regardless of your chosen choice, you will get the benefits of a loan. Whether you are going for a financial MBA program or a vocational (skill-based) course, you will get a product that suits your needs.
Examining each loan product will be time-consuming and cumbersome. So, it’s important to go through channels like GyanDhan, which will study your profile and suggest the lender and loan product that will suit your requirements.
Self-Dependence with Education Loan
The most intriguing aspect of a study loan is it teaches a student to take responsibility for their studies. Besides saving their parents from a tremendous financial burden, a study loan also has added benefits. It also ensures that you have the utmost commitment as well as investment in your studies.
There couldn’t be a better preparation to be an adult in today’s world than for students to fund their higher education.
By now, you must have understood the synopsis of the benefits of an education loan in India. The main crux of bringing in all the details was to let you know what opportunities you have. Most people are unaware of the moratorium holiday and related aspects where you can pay the EMIs after completing your studies. Besides this, the government schemes will benefit you many folds. So, if you are aspiring to pursue any course or degree in India or abroad that you think is out of your budget. Then, enjoy the perks of being an Indian, avail of a student loan, and get going to avail all the benefits.