Education is the movement from darkness to light, and it will cost you big money. A part of that journey may be made easier with an education loan. financing your future while keeping any hurdles at bay during a time when making decisions about what path to take can seem extremely daunting. Whether planning for India or abroad, don’t let finances keep you from taking advantage of opportunities.
A student loan is one of the best ways to pay for school without worrying about your finances. The money you borrow typically comes with low-interest rates which mean that, even if it takes a while before you can start paying back what’s owed, any amount in principle will be small enough not to worry about too much.
Top Benefits of Education Loans Are:
Personal savings remain intact
Higher education is a great way to get ahead in life, but it can also be very expensive. If you use your savings for the cost of higher education abroad, then this will restrict how much money you have available and may come with some unforeseen consequences.
The education loan products are designed to give students complete financial support. Not only will it cover 100% of your expenses, but it also keeps your savings intact.
Double tax savings on education loans
Tax exemptions on education loans are a great way to save money and keep your finances in order.
The two parts of this tax exemption include TCS (Tax collected at source) and Tax Exemption while filing your Income Taxes each year. When you have an Education Loan, the interest from a student loan is not taxable for that semester or if it’s due if paid by instalments.
However, Interest income earned offshore will be taxed at 20%. If you’re able to file taxes online through e-filing as opposed to using hard copies then there may also be benefits such as getting upfront deductions instead of having them deferred until later years so they become more valuable over time because of their value increases with inflation every day.
A few months after the Indian government announced their plan to slash capital gains tax, they have now imposed a 5% Tax Collection at Source (TCS) on all remittances of over INR 7 lakhs. This is in addition to any other taxes that may apply for overseas expenditures.
The TCS has been debated by analysts and finance professionals alike because it will discourage people from sending money out of India which could lead to an economic slowdown as more nationals stay put instead of expatriating themselves abroad with funds gathered locally in India.
In short – If you are paying to a foreign university more than 7 lakhs in tuition fees for one year, then 5% tax will be collected at the time of application. If your PAN and Aadhar cards are not furnished with these documents when applying, 10% is charged as income tax on top of that amount.
Choose from customized loan products
The demand for education loans has grown and with it the availability of products that cater to specific needs. Now you can get a loan specifically designed just for your MBA or Vocation school in India.
Repay after your education
The student loan repayment begins when the study period is over. Lenders also give an additional six months to find a job so that students can take responsibility for paying back their loans.
This ensures that during the time they are studying, parents or other family members don’t have to worry about taking care of it themselves and putting pressure on them in regards to various social obligations such as work hours, money owed etc.
Instils financially prudent habits
Education loans give students the opportunity to learn how to handle their finances and build credit. The repayment of these start-ups after you’re done with school, giving new grads ample time to find a plan that works for them while also building on all those lessons they learned in class.
Students and parents should think twice before applying for a personal loan instead of an education loan. Personal loans are less secure, more expensive than student loans, in the long run, offer fewer repayment options with higher interest rates.
Students can get up to 1.5 Crore in education loans with collateral, or without it for an amount of 40 Lakhs! Personal Loans have a 25 lakh limit instead though.
Rate of interest
The interest on education loans is significantly lower than the rates of personal loans. For those who have secured their loan with collateral, women pay 7.85% and men 8.35%. Unsecured borrowers start at 11.25%.
This compares to lending for unsecured debt which starts 10-24%, depending on your credit rating, type of transaction you are looking into signing up for (credit card or other) etc.
If you’re looking for an easy way to start and finish paying off your loan, the moratorium period could be a good option. With this time span of up to six months after graduation, graduates can get their feet on the ground without having any loans hanging over them.
The only downside is that interest will still accumulate during these periods so it’s important not to miss payments or else you’ll end up with more money owed than when they first started out.
For a loan to be considered “good”, it needs to have low-interest rates, affordable monthly payments and offer flexible repayment options.
Different types of loans also come with different terms for when the borrower must repay them. some personal loans only last five years while education-based ones can go up as high as 20 or even 25 years.