Answering the FAQs of educational loans

Educational loans have become almost mandatory for many people due to the ever increasing cost of education. This is why many people apply for the same every year. In this article, we answer some of your most frequently asked questions about educational loans:

What are the options available to get education loans?

There are many options available for students opting for educational loans. The students can avail loans to study in a variety of courses like Engineering, medicine, business management, law etc. in India or in overseas countries.

What are the advantages of opting for educational loans?

Education Loans have many advantages to offer. Firstly, the student will get 100% financing for his tuition fees. The student applying for the loan does not have to worry about meeting the deadlines of payment of tuition fees and can focus on his studies. The student will also get very flexible and convenient options for repayment of the loans. The student can opt to pay the loan during the course. He/she also gets the option to pay only the interest part of the loan during the course. Most of the lenders also allow the students a moratorium period or grace period of three or six months after they finish their studies or after they get their jobs. This gives them the time to settle their finances before they start repaying their loans.

Is pledge of an asset as a collateral mandatory to get educational loans?

No. There is no mandatory requirement of an asset as collateral in order to apply for education loans for smaller amounts. For loans higher than 7.5 lakhs, the lender will ask for a security as collateral. For smaller amounts, the applicant can pledge an asset as collateral in order to get attractive interest rates.

What securities are accepted as collateral to apply for education loans?

The securities accepted as collateral to apply for education loans include property, non-agricultural land, insurance policy with a surrender value equivalent to the amount required and an FD assigned in favor of the lender.

Are there any tax benefits of applying for educational loans?

Yes. According to the Section 80E of the Income Tax Act, any amount paid as the interest of an education loan can be claimed to be deducted from the income tax of the applicant.

Which expenses are covered in educational loans?

Generally, the expenses incurred in education loans are the tuition fees of the institute or university in which the applicant is studying. However, there are lenders who also cover part of the living expenses incurred by the student. This can include any security deposit paid by the student to the university, expenses to buy study material, gadgets like computer/laptop which are necessary pre-requisites for some courses and also the travel expenses incurred which can be a factor for students going abroad or to distant corners of the country to study.

We hope this article was helpful to you and solved some of your queries about educational loans and their various specifications. Wishing you all the best!