Things to keep in mind before applying for education loan

The results of major all-India school board exams (CBSE, ICSE and state boards) are out. It is now time for successful students to seek admission to higher education institutions, be it to study arts, science, commerce, engineering or medical within the country or flying abroad to undertake further studies.

Higher studies are getting expensive by the day, be it within the country or abroad. Studying overseas, especially in the United States and Europe could be expensive for most families. “On one hand cost of education has been constantly rising. However, on the other hand, salary levels of fresh graduates is not rising that rapidly. Employment scenario globally have been going through lots of turbulence causing relatively slow growth in starting salary levels of fresh graduates,” says Ajay Bohora, Co-Founder, MD & CEO of Credila Financial Services Pvt. Ltd, an education loan provider promoted by HDFC Ltd.

If money is a constraint in pursuing your dream career, the best option out is to avail an education loan from a gazetted lender, which may be a bank or a non-banking finance company (NBFC).

However, you might be unsure about how to go about seeking that student loan. The questions that may be bothering you and your parents is how much loan should one take? Whom to approach for an education loan? What are the factors to consider while availing a student loan if one is going abroad? As a general advice, Naveen Kukreja – CEO& Co-founder, says, “Students must avail education loan depending on the nature of course and fee structure.”

Here we bring to you 5 factors that you need to keep in mind while availing an education loan:

Choose longer repayment period: It is advisable for students and parents to choose an education loan with longer repayment tenure resulting in relatively smaller EMIs. “Longer tenure also would entitle you to avail tax benefits on interest paid for a longer period and hence save more,” says Credila’s Bohora.

Factor in all costs: It’s important to calculate complete costs like tuition fee, living costs etc and have the education loan cover the entire cost of attendance and not just tuition fees. For Indian students going abroad, currency depreciation further leads to increase in fees.

Avail maximum loan: Lenders can finance up to 100 per cent of the cost of education, depending on the course, institute and its location. These loans typically covers tuition expenses, living expenses and overhead expenses such as cost of traveling, purchasing laptop, equipment and books says’s Kukreja.

Compare margin money requirements: Most lenders ask for margin money, but some private education loan lenders don’t require any margin money, which helps you get up to 100 per cent of the total cost of education. Lower margin money ensure less financial stress.

Avail loan from a gazetted lender: Education loan comes with tax benefits under Sec 80-E of Income Tax Act. However, this is available only if taken from banks or few private sector lenders. Only then would interest paid on education loan can qualify for income-tax deduction.
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