Education Loan Guide: From Income Tax exemption to interest rate rebate, know these top points before borrowing the amount
Every parent wants their child to study in renowned institutions for higher studies and to be successful in life. The fee of management courses like MBA, engineering and medical education has gone beyond the reach of common man and parents have to take a loan from banks to pay the fee of their kids. Though there is no harm in it, before borrowing, one must know all the terms and conditions that lenders impose. Nowadays, many government & private banks and even financial institutions are eager to lend education loans. Below is a guide to make you aware of the process of education loans:
Education Loan Process
Financial institutions provide education loan for graduation, post graduation or professional courses like engineering, MBBS or MBA. The very first eligibility is that the educational institutions should be recognized by the government. You can easily take an education loan from the bank in which you already have an account. An education loan includes the expenses of hostels, libraries, computers for education and travel expenses as well (bus fee). (Reuters)
Education Loan: Documents and eligibility
The applicant should be of 16 to 35 years in age. The loan amount is calculated on the basis of co-applicant's income. Different banks seek different documents for loan, but generally the documents required by them are mark-sheets, entry or scholarship of the previous examination, the expenditure on the various stages of the course, the last six months' bank statement, last two years' income tax return (parent or co-applicant), and assets and liabilities of the co-applicant. If you don't have an account with the lender bank, then you will also be required to submit ID and address proof. (Pixabay)
Education Loan Amount
Generally, banks provide education loans of up to Rs 10 to 15 lakh for studying in the country. In case of a loan for study in foreign institutions, this amount can be more than Rs 20 lakhs. (Reuters)
Education Loan up to Rs 4 Lakh: No guarantor required
SEBI Certified Investment Advisor Jeetendra Solanki said that for the education loan of up to Rs 4 lakh, the banks do not demand a third party guarantor. If the loan amount is more than Rs 4 lakh, then the person who has to pay the loan will have to deposit the property (home, farmland) documents as security. A co-applicant is a third party guarantor and may be the guardian of the student, parent, husband or wife, brother or sister, mother-in-law or any close relative. (Pixabay)
Education Loan: Rebate in the interest rate for girl students
In order to encourage higher education for girls, some banks offer discounts of up to 0.5-1% on interest rates on loans given to them. Allahabad Bank, Bank of India, Bank of Baroda, Canara Bank, Central Bank of India, State Bank of India, Syndicate Bank, Vijaya Bank, etc. offer a discounted interest rate on education loan availed by girl students. (PTI)
Education Loan: Income Tax exemption
You can avail exemptions at the repayment of interest of education loan under Section 80E of the Income Tax Act. (Pixabay)
Education Loan: What if the child fails to repay the loan?
Solanki said if the loan amount is over Rs 4 lakh, then the bank recovers the amount from the co-applicant or guarantor. For this, the bank can sell the assets of the co-applicant or the guarantor. (Pixabay)