Education Loan
Proper education is one of the foundation stones for the success of any individual, and must never be abandoned for any reason whatsoever. By availing an education loan, you can get financial assistance during the pursuit of your studies in the following areas :
Any kind of fees payable to the educational institution like tuition fees, examination fees, lab fees, etc.
Hostel security, caution money or any kind of institutional fund
Purchase of laptops or any other electronic equipment essential to the course.
Purchase of books and uniforms
Travel expenses (in case of studies overseas)
Miscellaneous expenses like project work, amount for completion of theses, etc.
While funding one's studies is obviously the main purpose of taking an education loan, there are also many benefits associated with the taxes you would have to pay. Following is a slight brief of the same :
The section under which one can claim deductions from taxable income is 80 E. To be specific, the deduction is only for the interest paid, and not on the principal amount.
One would get tax benefit only if the loan is in his/her name and is taken for the purpose of pursuing higher education for self, spouse or children.
Only full-time courses would be considered for tax exemption. Neither part time courses nor correspondence ones can be exempt under the same.
One can claim deductions for as many loans he has taken for educational purposes. For instance, if you have taken a loan for self as well as your spouse, you can claim noth deductions from your income, provided it is you who is paying both the EMIs.
These deductions are only available for a period of eight years starting from the financial year when you start paying the installments.
The total fee for the entire course is usually given by the bank directly to the concerned college, educational institution. The process goes like this, once you have submitted the application for a loan, the bank would verify the estimated expense for the entire course and compare it with the amount you have applied for. It might also be a possibility that the bank may reduce the loan amount on the basis of various grounds. Banks also might charge a remittance fee for payment to education institutions abroad which are in dollars. In case you are unemployed and can't start on your EMIs immediately, your repayment would start approximately six months to one year after your course has been completed, or when you get a job, whichever is earlier, and the interest would be compounded quarterly and added to the principal. Although this option carries a high interest rate, it's beneficial for students who are going abroad or those who are financing their studies by themselves. Further, education loans also don't attract the pre-payment penalty.
In case you have opted for a floating interest rate loan, you are not allowed to switch over to the fixed rate one. However, you can change your borrower, i.e., the bank from where you have taken the loan, in case you get a better deal, with some part of the loan amount paid by you to the bank which would not be deducted from the amount you have to pay. Many times, people resort to personal loans for educational purposes also, since they want more than the loan amount that has been sanctioned by the bank due to numerous reasons. However, this can prove to be very harmful in the long run, as the interest rate for a personal loan is always higher than an education loan. The repayment requirements are also not as convenient as in case of an education loan. Hence, one must take an education loan for all expenses related to studies. However, in case one does have expenses more than the prescribed loan amount, he should take a personal loan only for the excess amount, and not the entire expense.
Eligibilty
Aplicant should be an Indian national
Applicant should have one parent earning a regular source of income
Age : 16-26 years
Studies in India : upto Rs. 10 Lacs
Studies abroad : upto Rs. 20 Lac
Document required
1. "PNB Sarvottam Shiksha Scheme"t (the applicant) and the parent /guardian (the Co-applicant). - The documents should be got executed by studen
2. PROOF OF AGE
3. PROOF OF IDENTITY(Applicant and Co-applicant)
Letter from present College/institution
Photo PAN Card
Driving Licence
Passpory
Voter's Card
4. PROOF OF AGE (Applicant and Co-applicant)
Birth certificate
School leaving certificate
PAN Card
5. PROOF OF ADDRESS (Applicant and Co-applicant)
Ration Card
Utility bills
Rental agreement
Passport
Insurance payment receipt
Voter's Card
6. PROOF OF INCOME (Self Employed)
Salary Slips
Bank Statement
Form 16
Income Tax Returns
Certified Balance Sheet and Profit & Loss Account etc. with Details of Assets & Liabilities of parents or guardian
7. SECURITY/GURANTOR'S DOCUMENTS (for Loan more than 4Lacs)
Particulars of Guarantors and details of their Assets & Liabilities, wherever applicable; If immovable property offered as Collateral Security - copy of Title Deed, Valuation Certificate and Non-encumbrance Certificate from approved Lawyer of the Bank
8. DOCUMENTS FOR MAIN APPLICANT ONLY
Proof of having secured pass marks in last qualifying examination
Letter of admission in professional
Technical or vocational courses
Prospectus of the course wherein charges like Admission Fee, Examination Fee, Hostel Charges etc. are mentioned
Photocopy of Passport & Visa, in case of study abroad
Any other document/information, depending upon the case and purpose of the loan.
Six Things To Look While Applying for Educational Loans
1. Interest rates
The first and the foremost is the interest rates charged on the education loan. This interest rate is the primary factor that earns money for banks and so they want it to be higher, but the competition in the loan market makes the bank keep it to a level where the education loan seems affordable to the customer, while it earns money for the banks too. Whether the interest rate charged on your education loan is fixed or floating is also a matter of concern. Generally, the value of fixed interest rates is higher than the floating interest rates. Going for floating interest rates in this low interest regime is always a better option.
The interest rates also depend on the amount of education loan one wants, keeping in mind all the realistic requirements, a judicious comparison of various offers from leading banks will certainly help the student find an education loan that pinches the least.
2. How the interest is charged?
Though the banks defer repayments, but they start charging the interest immediately after the disbursal of the loan. How this interest is charged will determine the amount of interest you will pay. Enquire carefully whether it is charged on a daily reducing balance, or on a quarterly reducing balance. The interest rates charged on loans thus keep accumulating until you start the repayments. This can significantly increase the repayment burden. If the bank providing education loan gives an option to pay the interest portion of your education loan immediately, use it by all means.
3. The waiver period
The third most important thing to watch out is the waiver period. Banks providing education loans generally don't expect the student to pay until he gains employment after completion of the course. Check this out carefully, does your education loan provider gives you such an option? The whole idea is to get comfortable financially before the bank asks you for a repayment.
4. Fees and other costs
The fees associated with the education loan such as processing fees, administrative fees, documentation costs etc. should be minimal.
5. Collateral, guarantee or security
There is a collateral clause with all the educational loans from banks in India provided the education loan exceeds a value of 4 lacs. This figure can vary from bank to bank but it is generally a norm. Make sure to ask the bank about collateral requirements and have it ready before the disbursal of loan.
6. The down payment
A down payment also has to be made with every education loan, ranging between 5%-20% of the loan amount depending on banks this money has to be paid upfront.
Comparing interest rates, various fees, collateral requirements, and down payment requirements across various banks will help you find out an education loan that fulfills your higher education dreams without burning a big hole in your pocket.
Banks Offering Loans
Bank of India
State Bank of India
Bank of Baroda
Dena Bank
HDFC Bank
Union Bank of India
UCO Bank
source:http://www.rupeetimes.com,http://www.paisawaisa.com
Proper education is one of the foundation stones for the success of any individual, and must never be abandoned for any reason whatsoever. By availing an education loan, you can get financial assistance during the pursuit of your studies in the following areas :
Any kind of fees payable to the educational institution like tuition fees, examination fees, lab fees, etc.
Hostel security, caution money or any kind of institutional fund
Purchase of laptops or any other electronic equipment essential to the course.
Purchase of books and uniforms
Travel expenses (in case of studies overseas)
Miscellaneous expenses like project work, amount for completion of theses, etc.
While funding one's studies is obviously the main purpose of taking an education loan, there are also many benefits associated with the taxes you would have to pay. Following is a slight brief of the same :
The section under which one can claim deductions from taxable income is 80 E. To be specific, the deduction is only for the interest paid, and not on the principal amount.
One would get tax benefit only if the loan is in his/her name and is taken for the purpose of pursuing higher education for self, spouse or children.
Only full-time courses would be considered for tax exemption. Neither part time courses nor correspondence ones can be exempt under the same.
One can claim deductions for as many loans he has taken for educational purposes. For instance, if you have taken a loan for self as well as your spouse, you can claim noth deductions from your income, provided it is you who is paying both the EMIs.
These deductions are only available for a period of eight years starting from the financial year when you start paying the installments.
The total fee for the entire course is usually given by the bank directly to the concerned college, educational institution. The process goes like this, once you have submitted the application for a loan, the bank would verify the estimated expense for the entire course and compare it with the amount you have applied for. It might also be a possibility that the bank may reduce the loan amount on the basis of various grounds. Banks also might charge a remittance fee for payment to education institutions abroad which are in dollars. In case you are unemployed and can't start on your EMIs immediately, your repayment would start approximately six months to one year after your course has been completed, or when you get a job, whichever is earlier, and the interest would be compounded quarterly and added to the principal. Although this option carries a high interest rate, it's beneficial for students who are going abroad or those who are financing their studies by themselves. Further, education loans also don't attract the pre-payment penalty.
In case you have opted for a floating interest rate loan, you are not allowed to switch over to the fixed rate one. However, you can change your borrower, i.e., the bank from where you have taken the loan, in case you get a better deal, with some part of the loan amount paid by you to the bank which would not be deducted from the amount you have to pay. Many times, people resort to personal loans for educational purposes also, since they want more than the loan amount that has been sanctioned by the bank due to numerous reasons. However, this can prove to be very harmful in the long run, as the interest rate for a personal loan is always higher than an education loan. The repayment requirements are also not as convenient as in case of an education loan. Hence, one must take an education loan for all expenses related to studies. However, in case one does have expenses more than the prescribed loan amount, he should take a personal loan only for the excess amount, and not the entire expense.
Eligibilty
Aplicant should be an Indian national
Applicant should have one parent earning a regular source of income
Age : 16-26 years
Studies in India : upto Rs. 10 Lacs
Studies abroad : upto Rs. 20 Lac
Document required
1. "PNB Sarvottam Shiksha Scheme"t (the applicant) and the parent /guardian (the Co-applicant). - The documents should be got executed by studen
2. PROOF OF AGE
3. PROOF OF IDENTITY(Applicant and Co-applicant)
Letter from present College/institution
Photo PAN Card
Driving Licence
Passpory
Voter's Card
4. PROOF OF AGE (Applicant and Co-applicant)
Birth certificate
School leaving certificate
PAN Card
5. PROOF OF ADDRESS (Applicant and Co-applicant)
Ration Card
Utility bills
Rental agreement
Passport
Insurance payment receipt
Voter's Card
6. PROOF OF INCOME (Self Employed)
Salary Slips
Bank Statement
Form 16
Income Tax Returns
Certified Balance Sheet and Profit & Loss Account etc. with Details of Assets & Liabilities of parents or guardian
7. SECURITY/GURANTOR'S DOCUMENTS (for Loan more than 4Lacs)
Particulars of Guarantors and details of their Assets & Liabilities, wherever applicable; If immovable property offered as Collateral Security - copy of Title Deed, Valuation Certificate and Non-encumbrance Certificate from approved Lawyer of the Bank
8. DOCUMENTS FOR MAIN APPLICANT ONLY
Proof of having secured pass marks in last qualifying examination
Letter of admission in professional
Technical or vocational courses
Prospectus of the course wherein charges like Admission Fee, Examination Fee, Hostel Charges etc. are mentioned
Photocopy of Passport & Visa, in case of study abroad
Any other document/information, depending upon the case and purpose of the loan.
Six Things To Look While Applying for Educational Loans
1. Interest rates
The first and the foremost is the interest rates charged on the education loan. This interest rate is the primary factor that earns money for banks and so they want it to be higher, but the competition in the loan market makes the bank keep it to a level where the education loan seems affordable to the customer, while it earns money for the banks too. Whether the interest rate charged on your education loan is fixed or floating is also a matter of concern. Generally, the value of fixed interest rates is higher than the floating interest rates. Going for floating interest rates in this low interest regime is always a better option.
The interest rates also depend on the amount of education loan one wants, keeping in mind all the realistic requirements, a judicious comparison of various offers from leading banks will certainly help the student find an education loan that pinches the least.
2. How the interest is charged?
Though the banks defer repayments, but they start charging the interest immediately after the disbursal of the loan. How this interest is charged will determine the amount of interest you will pay. Enquire carefully whether it is charged on a daily reducing balance, or on a quarterly reducing balance. The interest rates charged on loans thus keep accumulating until you start the repayments. This can significantly increase the repayment burden. If the bank providing education loan gives an option to pay the interest portion of your education loan immediately, use it by all means.
3. The waiver period
The third most important thing to watch out is the waiver period. Banks providing education loans generally don't expect the student to pay until he gains employment after completion of the course. Check this out carefully, does your education loan provider gives you such an option? The whole idea is to get comfortable financially before the bank asks you for a repayment.
4. Fees and other costs
The fees associated with the education loan such as processing fees, administrative fees, documentation costs etc. should be minimal.
5. Collateral, guarantee or security
There is a collateral clause with all the educational loans from banks in India provided the education loan exceeds a value of 4 lacs. This figure can vary from bank to bank but it is generally a norm. Make sure to ask the bank about collateral requirements and have it ready before the disbursal of loan.
6. The down payment
A down payment also has to be made with every education loan, ranging between 5%-20% of the loan amount depending on banks this money has to be paid upfront.
Comparing interest rates, various fees, collateral requirements, and down payment requirements across various banks will help you find out an education loan that fulfills your higher education dreams without burning a big hole in your pocket.
Banks Offering Loans
Bank of India
State Bank of India
Bank of Baroda
Dena Bank
HDFC Bank
Union Bank of India
UCO Bank
source:http://www.rupeetimes.com,http://www.paisawaisa.com
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