4 Things To Know About Education Loan Benefits

Posted In education loan On October 8, 2018
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Apart from the obvious benefit that education loan helps students to pay for their college fee, there are various other reasons which makes education loan the best option for funding your education.

A. TAX BENEFIT:Under section 80E of Income tax act, the interest paid on the education loan is deductible.It should be noted that all education loans do not qualify for the deduction. Conditions:

  1. The loan should be taken from Financial institutes or banking companies or any approved charitable institution. Loan availed from relatives or friends does not qualify for the deduction.

  2. Deduction can be availed after repaying the entire amount or within 8 years of disbursement of the loan, whichever is earlier.

  3. Loan should be taken for self, spouse, children or the student for whom the person is legal guardian. The deduction does not apply if the loan is taken for a sibling or a relative.

  4. Interest should be repaid from the taxable income.

B. REPAYMENT COMMENCEMENT: You do not have to start repaying the loan right after completing your course. As the student himself is expected to repay, banks give a relaxation period of 6 months to 1 year for the students to find a job. This relaxation time is known as moratorium period. Since students do not have an income during the course, education loan provides this feature to let students repay the loan after they start earning and build their finances.

C. REPAYMENT OPTIONS: For repaying the loan, students have different repayment options. The repayment mode is decided by the bank depending on the profile of the student and the income of the co-borrower.There are usually 3 modes of repayment: -

  1. Simple interest: Here, the borrower continues paying the Simple Interest during his study period. Hence, Simple Interest doesn’t keep on adding to the Principal amount and thus, the EMI is only the Principal amount+ Compound Interest.

  2. Partial simple interest: In this mode, the borrower pays only a portion of the simple interest and the remaining interest keeps on adding to the principal amount. Hence, the compound interest is ultimately charged on the principal amount as well as the remaining simple interest. This option is provided to students with weak financial background who are unable to pay the simple interest during their course period.

  3. EMI: In this case, the payment starts one month after the disbursement of the loan amount. In this repayment method, the co-signer is expected to repay the loan since the repayment is made during the course period, making it impossible for students to repay the loan themselves.

    D. EXPENSES COVERED: Apart from the college fee, there are various other expenses to take care of during the admission process. These expenses increase substantially if you’re planning to go overseas. The education loan not only covers the cost of the course but almost the entire expense of education. These expenses include: -

1. Tuition and hostel expenses
2. Library. exam, lab fees
3. Cost of uniform, books etc.
4. Travel expenses

Now that you have made up your mind about taking an education loan, you can approach Credencfor a hassle-free loan. We provide fast and easy online application process so you get an education loan without going to the bank. And it gets better- we do not charge any service fees!

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