Avail of an education loan to enhance your pay packet. Even as you enjoy tax benefits on the loan, higher education will ensure better job opportunities
Statistics show that India can clearly lay claim to one of the largest aggregations of software engineers, doctors and college graduates in the world. Clearly, as Indians, we place tremendous faith in the ability of a good education to get ahead in life. But higher education for students often involves enormous amounts of money. For the vast majority of middle-class households, it's an extremely expensive proposition. Still, for those determined to take up higher education programmes, they have little choice but to hunt for an study loan.
Today, with some very welcome tax breaks available, the decision to take that enormous education loan becomes just a little bit easier. With retail lending turning into the fastest growing segment for banks, personal loans, loans for education, automobile purchases and consumer durables have been pushed on to the centrestage of bank retailing activity. Loan application forms have become more simpler and money is disbursed far more quickly. Today, loan packages can range from Rs 50,000 to Rs 15 lakh.
More From This Section
Bringing more cheer for education loan-takers is the fact that interest rates -- a key factor in swinging that loan decision either way -- have fallen in recent years. They now range between 11 and 13 per cent.
Providing a further cushion of comfort is the fact that student borrowers also don't need to start paying off their loans until they find a job. With education loans, borrowers can now claim deduction under Section 80E of the Income Tax Act -- upto Rs 40,000 per year during the years of repayment of the loan. If the loan instalment being paid in a year is less than Rs 40,000, the actual instalment figure is taken as the deduction. The deductions are available for eight years or till the entire amount of the loan(including interest) is paid up, whichever comes first. The deduction is made on the income that is actually chargeable to tax.
BOX IN THE STORY
Terms of Loan
Q: What do you need to know before beginning your search for an education loan?
To start off, you need to be an Indian citizen. Then, you have to provide proof of the cost of the course you've set your heart on taking.If you're scouting for loans upto four lakh, you won't need to furnish any collateral security. For loans worth more than four lakh, though, banks will demand security equivalent to the amount above four lakh. Approved securities can include shares, an insurance policy, National Savings Certificates and the like. Once the repayment starts, loans have to be fully repaid in five to seven years. Usually, the interest that accrues during the study period is added to the principal every quarter. Loans are usually repaid in fixed equated months instalments.
And there are penalties if you don't pay your instalments on time. For loans above two lakh, a usual charge is two per cent on the overdue amount for the period between when you had to pay the instalment and when you actually pay it.
Q: What does higher education include?
Higher education includes full-time courses