Benefits Of Education Loan
Education is the foundation for the success of any individual. Education loans is the financial assist for the students during there course of study such as any kind of fees payable to the educational institution like tuition fees, examination fee, lab fee etc, Hostel Security, caution money or any kind of institutional fund, purchase of Laptops or any other electronic equipment essential to the course, Purchase of books and uniform, travel expenses (in case of studies overseas), Miscellaneous expenses like project work etc.
Benefits of availing Education Loan
Main purpose of availing an educational loan is to provide financial assist for the students in gaining degrees or education but there are so many benefits associated with the education loan. The following are the benefits of Education Loans
- Under section 80 E one can claim deductions from taxable income (Deduction is only for the interest paid and not for the principal amount)
- One would get tax benefit only if the loan is in his/her name and is taken for the purpose of pursuing higher education for self, spouse or children.
- Only full-time course holders are eligible for tax benefits, neither part-time holders and nor correspondence holders are not eligible for tax exemption.
- One can claim deductions for as many loans he has taken for educational purpose. For example, if you have taken a loan for self as well as spouse, you can claim both deductions from your income, provided it is you who is paying both the EMIs.
- These deductions are only available for a period of eight years starting from the financial year when you start paying the installments.
The bank directly gives the total fee of the entire course to the concerned educational college/institute. The procedure goes like this,
- Once the loan application form is submitted, the bank compares the applied loan amount with the estimate expense for the entire course, at times it’s possible that bank might reduce the loan amount on the basis of various grounds. Bank also might charge a remittance fee for payment to education institutions aboard which are in dollars.
Incase the applicant is unemployed and can’t start paying the EMI immediately after disbursement of loan then the repayment starts approximately six months – one year after your course has been completed or when he/she gets a job, whichever is earlier and the interest will be compounded and added to the principal. While this option carries a high interest rate, it’s beneficial for the students who are going abroad or those who are financing their studies by themselves and education loans do not attract the pre-payment penalty.
Incase the applicant as opted for the floating rate of interest for loan, he is not allowed to switch over to the fixed rate. However he can change his borrower i.e. the bank from where he has taken the loan, in case he get the better deal, with some part of the loan amount paid by him to the bank which would be deducted from the amount he has to pay.
Many times peoples opt for personal loans for educational use, because they want more than the loan amount that has been approved by the bank due to numerous reasons. It is to be noted that rate of interest and repayment option of educational loan is lesser, easier and convenient than the personal loan. Therefore one should go for education loan for all the expenses related to studies.