Understanding Student Loans Offered In India
Quality education is of paramount importance in today's competitive career space. Learning from premiere institutes that provide secure placement is the dream for aspiring graduates. However, this is a challenge considering the inflated costs. This causes meritorious students to lose out on opportunities.
Banks offer student loan to aid them in achieving their dreams. It is a credit option that caters to all-around educational needs like tuition fees, stationery expenses, accommodation, library charges, etc. The loan term differs for each student based on several distinctive factors. As there is no income source, lenders have distinct parameters to finalise loan terms. Read on to learn about it in detail.
Eligibility: The loans are offered to students having an excellent academic record. It shows the lenders your employment potential, thereby repayment capacity. Besides, you must be a resident Indian to avail of the loan. Other factors include course selection, admission approval, age, etc. You would require a guarantor if the loan amount ranges between Rs. 4 lakhs to Rs. 7.5 lakh. If it exceeds this limit, collateral papers are needed.
Documentation: You must submit the documents to support the information provided in the application. These include your identity proof, residence proof, academic mark sheets, admission letter, detailed fee structure, co-applicant's credit report, etc. You can get the information on the yearly fees on the university website and provide the same. If you work, you can furnish the income statement to optimise your loan profile.
Types: A student loan in India gets categorised based on three factors. The loan terms differ based on the type you opt for:
Location: Domestic and overseas
Course: Undergraduate, postgraduate and career development
Collateral: Loan against property, securities, or deposits and third-party guarantee
Features: You can expect a loan amount of up to Rs. 15 to 20 lakh for studying in India. This amount could go up overseas based on your needs and loan profile. You must co-borrow with your parent. The loan amount gets directly disbursed to the university upon approval. The expenses covered range from institution fees to travel and accommodation expenses. Banks offer loans on specific courses only. So, ensure to check the same before planning the application.
Tax benefits: You get a tax rebate on the interest paid in a financial year under section 80E on a student loan. There is no upper limit on the interest amount needed to claim the exception. This provision is only valid for up to eight years, beginning after the moratorium period. It is best to pay off the borrowed amount within this duration to enjoy tax benefits on the entire interest.