An education loan should not be viewed as a loan, but rather as an investment that allows you to study your preferred subject at a top-ranked institution. It can assist you in laying the groundwork for a successful future profession. However, because the Covid-19 pandemic has caused an employment shortage, today’s youth are naturally concerned about finding their dream job and repaying their student loans. However, you should keep in mind that an education loan has some advantages as well. Let’s look at the benefits of taking out an education loan.
Lower interest rates
Compared to other types of unsecured loans, such as a personal loan, education loans are substantially less expensive. Because these loans are provided to students for their further studies, these loans have lower interest rates.
Improve your CIBIL score.
The credit information report, often known as a CIBIL, is a summary of your credit history to that point. The CIBIL score ranges from 300 to 900, with a score of 750 deemed acceptable. An education loan will enhance your CIBIL score because timely EMI repayment will help you develop the required score and make it easier to obtain a loan in the future.
There is no requirement of selling your valuable assets.
Usually, parents liquidate large assets to finance college tuition, causing long-term financial plans such as acquiring a home or a flat, children’s marriage, and so on to be disrupted. When you take out an education loan, banks hold your liquid assets as security, such as FDs, insurance, and government bonds, and issue you a loan based on that security. As a result, there is no need to sell your valuable assets.
Repayment terms are simple.
HDFC Bank has competitive education loan interest rates, including preferred rates for top-ranked universities and institutes. We also offer a variety of collateral and co-borrower options to make loan repayment as simple as possible.
Under Section 80E of the Income Tax Act of 1961, interest paid on student loans is totally deductible. The tax advantage calculator from Axis Bank depicts the benefit. For students studying abroad, there is an additional tax benefit. Under present legislation, any payment made abroad that exceeds Rs. 7 lakh is subject to a 5% TCS (Tax Collected at Source). So, if a student is studying overseas and pays for the course herself, she will have to pay 5% TCS. The TCS is only 0.5 percent if the student takes out an education loan from an Indian financial institution.
The ability to repay the debt
Students who take out an education loan must refund the money to the lenders once they have completed their studies. This ensures that the student is dedicating 100% of his time to his academics and career.
Relieving your parents of their debt load
Because the student is responsible for repaying the loan after completing his studies and the moratorium period has gone, taking out an education loan can relieve parents of all financial obligations.
Pay after your education with a long moratorium period.
This is one of the most significant benefits of a student loan. The moratorium period is the time when the student is not required to make any payments to the lender until the EMIs start.. In most cases, the moratorium period includes the term of the course plus 6 months/1 year so that students can focus on their academics. Education loans have a long moratorium period, which lasts the duration of the course. Some banks give a six-month or one-year extension after the student starts her work or completes the school. As a result, the student will not have to worry about repaying the loan in the near future, and the family will be able to better organise their budget based on this timeframe. Students from economically disadvantaged backgrounds can apply for the loan through the government’s ‘Subsidy on Interest’ programme.
The Bottom Line
Taking an education loan is a convenient option for attempting and completing your higher studies. You need not to worry about the cost for your education. You just need to concentrate on your studies and you will be able to repay the loan after getting a stable job. To avail an education loan, the most important factor that lenders consider is your CIBIL score. Maintain and improve your CIBIL score till atleast 750 to achieve the best education loan.