Knowing what an education loan actually covers
An education loan is not restricted to just tuition fees. It also covers hostel charges, travel expenses, library fees, books, and even daily living costs when studying abroad. Most banks and financial institutions offer loans for higher studies within India and overseas, thereby allowing you the freedom to choose your course and university without giving too much thought to finances.
Who can apply for an Education Loan?
Eligibility: The applicant should be an Indian citizen between 18 and 35 years of age, having confirmed admission to a recognized institution in India or abroad. A good academic record enhances your chance of approval. A co-applicant, usually a parent or guardian, is also necessary to share the repayment responsibility. Collateral or security may be insisted upon by some banks for larger loans.
Documents required for smooth processing
Since banks have an elaborate verification process, it will be good if all the documents are ready beforehand. The required documents in this respect are proof of admission, past academic certificates, proofs of address and identity, and income certificates of the co-borrower. Collateral-related documents regarding property papers or fixed deposit receipts may be required if higher loan amounts are needed. Keeping everything arranged may lead to faster approval.
Loan amount, interest rates, and repayment options
Most banks give loans up to Rs. 10 lakh for studies in India and up to Rs. 20 lakh or more for studies abroad. Interest rates usually range between 8 percent and 13 percent, depending on the bank and type of course. Repayment usually starts six to twelve months after completing the course, giving you time to find a job. The tenure can go up to fifteen years, thus making repayments more manageable.
Government support, which facilitates borrowing
Various government initiatives are aimed at making education loans more student-friendly. The CGFSEL or the Credit Guarantee Fund Scheme for Education Loans offers options for availing up to Rs. 7.5 lakh without collateral. The Vidya Lakshmi Portal offers you single-window facility to compare and apply to a range of different banks. The subsidy schemes ease the interest burden of these loans, particularly for economically weaker students.
Tax advantages that make a real difference
An education loan not only facilitates ease in your study expenses but also brings in certain significant tax benefits. This is thanks to Section 80E of the Income Tax Act, where you can claim deductions on the interest portion of your loan for up to eight years or until the entire interest is paid off, whichever is earlier, with no upper limit on the amount. This really helps in reducing the financial load during the early years of your career.
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