In today’s world, it is important to receive a quality education to embark on a successful career. Sometimes, in developing countries like India, it becomes imperative to educate your children in reputed and premier academic institutions to get a good head-start for a well-paying job. However, these prestigious schools and colleges are pricey and often difficult to get into. This has led to several parents seeking education loan in India, more so than ever.
For students contemplating higher education abroad, the expenses are even higher. Moreover, the fees in private colleges are much more as compared to government colleges. In such cases, students and parents alike prefer to take an education loan.
Why is it better to choose education loan over personal loan? Several people are of the opinion that a personal loan is more beneficial than an education loan. But it’s not true; personal loans come at higher rates of interest and one ends up paying more eventually. On the other hand, education loans have whole lot of advantages and conveniences, and are specifically meant for education which enhances the lives of the students and serves to drive their successful careers.
How to get an Education Loan?
The Government of India has come up with a Comprehensive Educational Loan Scheme in collaboration with Indian Banker’s Association (IBA) and the Reserve Bank of India. This scheme encompasses sponsorship for all kinds of courses in schools and colleges, in India as well as abroad.
Education Loan Interest in India
So what is the education loan interest in India? In India, interest rates for an education loan differ from bank to bank. It can be anywhere between 12% and 16%, which usually depends on the bank’s base lending rate. As per RBI, the base lending rate for banks in India is 9 to 10%.
Tax Benefits of taking an Education Loan
An education loan not only finances the expenses for higher studies from the most prestigious institutions across the globe, but also enables one to save a lot of tax. Under Section 80E, if you have an authorized education loan and are repaying the same in installments, the total interest paid on it is allowed to be treated as a deductible from the total income during the financial year. The best part is there are no limitations on the maximum amount that can be allowed for deduction.
Pre-requisites to apply for Education Loan in India
There are some basic conditions that need to be fulfilled prior to taking a loan. The requirements and the education loan details are as follows:
- The major determinants are the fees of the course as well as the applicant’s annual family income.
- There needs to be a co-applicant which could be one of the family members like parents, spouse or sibling.
- Loans less than Rs. 4 lakh do not need a security or guarantor.
- For loans more than Rs. 7.5 lakh, one needs collateral.
- When it comes to studying abroad, a student needs to seek out part-time jobs or sponsorship as the loan amount may not be sufficient.
- If you’re planning to study abroad, taking up insurance is mandatory.
Since not everyone can afford to be enrolled in premier academic institutions, taking an HDFC Credila education loan can truly offer a great launch-pad for a lucrative and rewarding career.