Getting into a top university and graduating with a college degree is a one-way ticket to success in life for many people. Higher education is an excellent investment because it guarantees a well-paying and successful career.
Affordability is a common barrier that students face in achieving this goal. Scholarships, grants, and work-study programs do exist, but the cost of education has skyrocketed in recent years. It is even more expensive to study abroad due to all the additional costs.
Fortunately, there are student loans available to help students fund their education, realize their potential, and achieve their goals. The Reserve Bank of India (RBI) has directed all the commercial banks in the country to implement the education loan scheme, which aims to provide financial assistance to deserving students pursuing higher education in India and abroad on reasonable terms and conditions.
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What is a student loan?
A student loan is a sum of money borrowed from a bank or a private lender to fund graduation, post-graduation, or other higher education.
Public bank loans have lower interest rates and can be paid back after a set period or when the student earns a certain amount. This period of waiting is called the moratorium period. These loans are intended to cover tuition, room and board, books and supplies, exam fees, travel expenses, and other miscellaneous charges.
Most Indian banks provide student loans for both domestic and international studies. Some of the best banks to get an education loan are the State Bank of India (SBI), Canara Bank, Bank of Baroda, HDFC Bank, ICICI Bank, and Axis Bank. Online independent money lenders like Money View also offer education loans if their parents or guardians meet loan eligibility requirements.
Eligibility criteria for a student loan
Given below is the eligibility criteria that the banks or lenders usually check before approving a student loan:
- The applicant must be an Indian national.
- The applicant should be between the ages of 18 and 35.
- The applicant must have a strong academic record.
- The applicant must have been accepted to a recognized university/institution.
- The course of the applicant must get covered under the education loan regulations.
Features and advantages
Student loans are regarded as good debt because it represents an investment in education that will pay dividends in the future. With the assistance of a good student loan, students can concentrate on their studies without having to worry about money.
Let us look at some other features of an education loan:
- Education loans are available for both domestic and international studies.
- The maximum loan amount available is one crore rupees.
- Repayment terms of up to 15 years.
- Low-interest rates compared to other loans.
- Moratorium period of up to one year following course completion or six months following employment.
- Female students receive preferential interest rates.
- Major banks offer collateral-free loans with no third-party guarantees of up to Rs 7.5 lakh ($9400).
- Residential or commercial property, insurance, and fixed deposits are all acceptable forms of collateral.
- Budget-friendly EMI options.
- Tax benefits on interest paid (under the Income Tax Act Section 80E).
In addition to funding for education, taking out student loans can help you build a good credit score if you make your payments on time. A good credit score makes it easier to obtain other loans in the future, such as home loans, car loans, and so on.
How to apply for a student loan in India?
Most banks have information about student loans on their websites. However, it is always preferable to contact the banks and speak with their representatives about the specifics. It is best to apply for a loan as soon as possible because the entire process of application, approval, and loan disbursement can be time-consuming.
Compare the student loans offered by various banks before deciding on a lender. The courses covered by the loans are not the same for each bank, and the loan amount varies. There are loans available for both full-time and part-time courses. Researching and comparing options will aid in selecting the best one.
The application form for the loan can be filled both online and offline. You can fill the form, upload all required documents and submit it online. Some banks may offer virtual assistants to assist with the application process. To fill the form offline, go to the nearest branch office of the bank of your choice. Submit the completed application form with all of the necessary documents at the bank.
When the loan is approved, the bank issues a loan document that contains information about the loan. Following the signing of the loan agreement, the bank will disburse the funds in installments or as requested by the institution/university.
How Money View’s instant student personal loan can help you?
There are several reasons to apply for a Money View personal loan for students. The instant student personal loan comes with a slew of features and benefits such as:
- If your parents, guardians, or siblings have a regular income or salary, they can apply for a personal loan in your name.
- In contrast to a student loan, which must be used solely for educational purposes, Money View’s student personal loan can be used for any purpose.
- The personal loan eligibility check takes only two minutes.
- Money View offers personal loans to students between Rs 10,000 and Rs 5,00,000.
- Loan repayments are spread over longer loan terms of up to 5 years.
- The loans are disbursed within two hours of approval.
- Highly competitive interest rates beginning at 1.33% per month.
- Minimum loan processing fee (2.5-6% of the amount approved).
- The entire process is done online, from documentation to repayment.
- Even people with bad credit scores are eligible for personal loans.
- In case of cancellation of a loan, no additional charges aside from the interest amount will be levied during the period between loan disbursement and loan cancellation.
Tax implications
Section 80E of the Indian Income Tax Act allows the interest paid on an education loan to be deducted from total taxable income with no upper limit. The tax benefit can be claimed for a maximum of eight years, beginning with the year the interest payment began. The tax deduction is no longer available after eight years.
The tax benefit, however, does not apply to the principal amount. Higher education includes all fields of study pursued after passing the senior secondary or equivalent examination, and it includes both regular and vocational courses. As a result, education loans taken for higher education for an individual, his or her children or spouse, or the student’s legal guardian are eligible for tax benefits on the interest paid.
Furthermore, under the new tax rules for sending money from India through an education loan, only 0.5% of TCS (tax collected at source) is applicable on amounts exceeding Rs. 7 lakh.
What should you consider before applying for a student loan?
Loans, in simple terms, are borrowed sums of money that are repaid along with interest. As a result, it inherently carries some risk. Inability to make timely payments and default on a loan can result in an unfavorable credit score, making it more difficult to obtain future loans.
When considering applying for a student loan, it is important to consider the following:
- Attend a career counseling session to gain a better understanding of the career landscape of various industries and sectors.
- Choose a top-ranking university for your higher education.
- Research about the educational requirements and the earning potential for various fields.
- Choose a degree that will lead to a job that will pay enough to repay the loan.
- Consider the loan in terms of future earnings and expenses. If possible, borrow less than what is offered which will keep the monthly payment lower in the future.