Benefits of an Education Loan
Before approaching any bank in the vicinity to enquire about availability of education loans, it is better to be acquainted with the attributes thereof. Let’s look at the plus points: Quick process Minimum documentation Quantum of finance enlarged to include hostel fees, computer cost, etc. Competitive rates of interest Longer repayment period No need to pay back loan till completion of course
A Model Loan Product?
The types of financial assistance available to study abroad depend on the country/course one is applying to. Most US universities offer assistantships (meritbased), fellowships and scholarships depending on the course you have chosen. For countries other than the United States, funding from outside sources (read: own funds/banks) will mostly be required.
Almost every bank advertises in the print/ electronic media about their education loan scheme. It can be a perplexing situation for loan-seeking students. Which one to go to, how to get it, what is the rate of interest and what is the margin amount, and what is the repayment period? For students, there are timelines to be thought of, for submission of documents for registration and subsequent admission. They cannot afford any delay, as delay may mean rejection of admission and loss of a year. At the same time, it may not be practical to get in and out of every bank’s branch to make enquiries.
You may be surprised to know that education loan has been more or less customised as a loan product by RBI. In fact, it was adopted as a model loan product (for higher education in India and abroad) by Indian Banks’ Association (IBA) in 2015 so that banks would be able to draft their own education loan schemes based on this model. It is available in the IBA website for public viewing. Some banks offer concession for female students (who opt for a loan) in terms of lower rates of interest. Some banks are extending interest concession to students looking to repay the interest amount during the moratorium period (study period) so as to reduce the loan burden on themselves/their parents when the time comes for repayment of the loan plus interest. The Income Tax Act provides for succor to students when they avail bank loans for higher studies, by way of income tax exemption to be claimed on the amount of interest paid/payable either by the student or by the parent under Section 80E, for a period not exceeding eight assessment years.