Benefits of taking an education loan in 2022 and what is covered under this loan.
In 2022 price of every product and service is increasing and so is education. Not every field or every course needs to be affordable. Sometimes the best universities are not affordable and their fees are in lakhs. But the fees should not stop you from attaining the education, because you have an education loan in your support. Yes, there are plenty of education loan deals or packages in India given by tons of banks. But before reading ahead you should properly know what an education loan is.
What is an education loan?
An education loan is an amount of money borrowed to pay for post-secondary education or costs associated with higher education. Education loans are designed to pay the costs of tuition, books, and supplies, as well as living expenses while a student is pursuing a degree. Payments are frequently delayed while students are in college, and depending on the lender, they may be extended for another year after graduation. A “grace period” is a term used to describe this period.
Now that you know what an education loan is, you should also know that there are some benefits of taking an education loan as well –
Interest rates are a major factor in deciding whether or not to take out a loan. Study loan interest rates are typically lower across the world, and they are relatively cheap in India as well, especially from public sector banks. They can be even less expensive for people from unprivileged backgrounds.
Because education loans are available from a variety of sources, they are easily accessible to the majority of the people. A huge number of NBFCs (Non-Banking Financial Corporations) provide education loans with comparably easier processes in addition to banks – both public and private. Many other organizations also assist students by providing endowment loans and other forms of assistance.
Better conditions in education loan
The repayment plan is another key factor to consider before taking out a loan. Most loans require immediate payback, but because a study loan is based on future earnings, many banks provide flexible repayment options, making it simpler for students to repay the loan once they have employment.
Reduction of tax
Another significant advantage of college loans is the accompanying tax advantages. Under Section 80E of the Income Tax Act of 1961, the interest paid on the loan is tax-deductible. This allows a student to save money while paying back the loan.
Feeling of accountability
The most advantageous part of a study loan is that it educates students to be accountable for their studies. Study Loan provides an additional benefit in addition to relieving their parents of a significant financial strain. Taking a student loan guarantees that students are completely immersed in their studies.
Now that you have known the benefits of an education loan it is important to know what an education loan covers –
The tuition charge accounts for over half of the entire cost of a student’s higher education. Tuition fees are the most significant sum to be paid to the university. As a result, it is covered by all lenders, whether they are government banks, NBFCs, private banks, international lenders, or others. The payment of tuition fees is one of the key reasons for taking out an education loan, as the remainder of the expenditures may be covered by part-time work.
It’s a large category that covers food, rent, and everyday costs, among other things. Banks provide coverage for living costs, however, the degree of coverage varies per bank. The way expenditures are covered in the loans is not consistent. Some banks may impose a monthly spending limit based on a percentage of the entire loan amount, while others may use a different technique to determine the cost of living. The importance of paying attention to the terms of the loan coverage supplied on a certain loan.
All the expenses related to study
The pursuit of knowledge should not be limited to a college education. In reality, going overseas has a much larger definition that includes projects, research, field trips, and other activities. The tuition fee and the expense of education should not be confused. The expense of education is viewed through a restricted lens. Many banks recognize this and provide loans for library bills, computers, stationery, and other such expenses, subject to a limit. SBI is one of the lenders that considers these charges while determining the loan amount. As a result, it’s usually a good idea to check whether the study costs are covered or not by the education loan.
For students from low and middle-income families, the cost of travel to another country or even to a far city is a significant expense. Because the payment is frequently in the thousands, many banks provide the option of adding the cost of the travel ticket to the entire loan amount. It should be emphasized, however, that banks rarely give travel expenses as a default portion of a loan. It can be incorporated at the borrower’s desire. It is recommended to include the trip cost in the loan for individuals who may not be able to afford it.
Health insurance isn’t frequently included with student loans. The majority of lenders did not cover the expense of health insurance. Some banks, on the other hand, may agree to include the expense of health insurance if the borrower requests it. However, just a few banks would accept health insurance as collateral for a loan.
These were some of the things which are covered in education loan. Though it should be noted that every bank has different criteria hence it is not important that every bank will cover all of these categories.