The cost of education – especially higher education – is rising day by day, and because of the high fee structure many students are unable to take admission in their desired college.
However, taking an education loan from a scheduled bank can make things easier. If you think that you can repay the loan easily after completing your education, then an education loan may be a good option for you. However, you need to keep a couple of things in mind while getting an education loan. Here they go:
First, check whether the institute has existing tie-ups with any bank or NBFC for education loans. Such tie-ups may offer loans at lower rates with faster disbursal. Ensure all costs, including hostel fee, library fee, the cost of laptop, etc are included in your loan amount as these constitute a sizeable portion of the total cost of your program.
You may also watch:
Also, “try to pay off your loan within 8 years as the tax deduction on the repayment of interest under Section 80E is available for up to 8 years only. Also, I would recommend students to try and service the interest during the moratorium period as many lenders provide a concession of up to 1% on the interest rate on doing so,” says Naveen Kukreja – CEO & Co-founder, Paisabazaar.com.
What are the best options available for education loans?
You can avail an education loan from any of the public or private sector banks or any private lenders. There are certain formalities to be done, after which the loan is sanctioned by the bank. “PSU banks like SBI, United Bank of India, Bank of Baroda and Punjab National Bank score over others in terms of rate of interest, maximum repayment period and processing fee of education loans. However, specialised private sector lenders like Advance and Credila are better when it comes to the speed of loan processing, the probability of loan approval, margin money requirement and the quantum of the loan amount,” says Kukreja.
You may also watch:
How to apply and get tax benefit?
To get tax benefits, you need to take the loan agreement statement from your university or college and then submit the same to your HR department at the time of declaring all the taxes. Else, you can also claim it during filing of the income tax return. It is to be noted that the principal repayment of the loan is not considered under the section 80E
“Section 80E of the IT Act allows tax deductions on interest paid on education loans taken for self, children, spouse or children under guardianship. However, this deduction is only available for 8 years from the start of repayment. Importantly, there is no upper limit on the amount of tax deduction available under this section. Thus, try to optimise your tax savings by fully repaying the loan within those 8 years,” says Kukreja.