Skip to main content

Children Education Loan

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

   


You've wisely earmarked certain investments for your child's education. For some reason, though, a shortfall looms. Perhaps the cost of the course selected by your child is more than what you planned. Or s/ he wishes to go abroad for higher studies. And you were unprepared for that. An education loan can bridge the gap.

 

In their eagerness to embark on a career, children may not grasp the significance of taking loans – or of repaying them. Its perhaps the first time they face a loan officer – and the first ever situation of negotiating a loan.

This, therefore, calls for greater parent participation.

But first, heres the lowdown on education loans.

A primer

Education loans are available for studies beyond the plus- 2 or higher secondary school. They can be availed of by a student with parents/ guardians as co- applicants, or by a parent for a child. Various banks and financial institutions provide loans for education, both in India and abroad. Though each institution has its own set of rules, they are fairly standardised across the board.

The limit for education in India is ₹ 10 lakh and ₹ 20 Lakh for education abroad. Interest rates on the loan vary from 9 to 14 per cent per annum. Of the cost of the education 15 per cent is to be provided by you; the balance can be funded by a loan if the total cost of education crosses ₹ 4 lakh. If you intend to take a larger loan amount, you may have to provide third- party guarantees or additional collateral.

Such loans generally cover costs of admission, tuition, boarding and books; for studies abroad, travel cost is included. Payments are made directly to the college every year. Of course, good academic performance constitutes one of the terms and conditions in order to continue to be eligible for the loan. Progress reports need to be submitted regularly during the period of the loan. Details of such terms and conditions are available on websites of banks and financial institutions.

Courses that usually get preference

Generally medical, engineering and MBA courses figure higher on the list of approvals for loans. While for banks, education loans are considered part of priority- sector lending. they have to ensure that such loans do not turn into non- performing assets (NPAs).

In the last few years the number of education loans becoming NPAs has risen, primarily because of the unfavourable economic environment.

One of the factors for the provision of loans is the repayment capacity of an applicant. It is usually easier, therefore, to secure loans for courses which have a greater chance of employment and income generation. The repayment capacity of a parent taking on a loan for a child will be taken into consideration.

The reason is that there is the greater likelihood that the parent already has loans to his/ her name like a home loan or a vehicle loan. This naturally affects repayment capacity and reflects in an application for an education loan.

What parents should take cognizance of?

Parents are advised to have open discussions with their children about money and taking loans. Both affordability and willingness to fund a child's higher education should be openly discussed.

Parents should consider several aspects before they sign for educational loans for their children. The primary one is their own preparedness for retirement. A retirement corpus should not be touched in order to fund any other goals. In such cases, a student taking an education loan would be a far better idea. S/ He can start repaying the loan once s/ he starts earning. Most banks provide a pause period for re- payments. Repayments are generally due on securing a job or six months from completing a course, whichever is earlier.

If you actually begin paying off the interest component during the course period, you will get one per cent on the interest rate. If a person is unable to secure employment on completing a course, the parent will have to start repaying the loan. So parents have to prepare for the worst case and judge how such payments will affect their own finances.

Of course, a student will start life – and a career – with the burden of debt. S/ He will have up to eight years to repay the loan in full. Naturally, that will affect her/ his own financial goals. For them, the prime responsibility would be to pay off the student loans as quickly as possible so as to free up cash flow towards their own financial goals.

The person who has taken the loan (parent/ child) will be eligible for tax benefits under Section 80E of the Income Tax Act, 1961. This offers deduction of the interest amount from your income, the benefit only applicable on the interest.

This tax benefit comes over and above the benefits available under Section 80C. However, tax benefit should not be the primary reason for taking a loan; and instead should be looked on as a byeproduct of fulfilling a need.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now