Skip to main content

Education Loans - What to look for?

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

 

An education loan is given by banks and other specialised financial institutions to students who wish to complete their graduation or post- graduation studies, either in India or abroad. These loans are generally offered by banks in the following slabs: Less than Rs. 4 lakhs, Between Rs. 4 lakhs and Rs. 7.5 lakhs and above Rs. 7.5 lakhs.  
Apart from funding education needs, an education loan will also give you tax benefits under Sec 80E. Interest on education loan taken by the borrower, parent or spouse from a recognized financial institution is fully tax deductible. The loan must be taken for a full-time course, which can either be a graduate course in engineering, medicine or management or post graduate course in engineering, medicine, management, applied sciences or pure sciences including mathematics and statistics. Not all banks offer education loans. Some banks let you borrow a personal loan, which funds your education and acts like an education loan. However, it is always better to take an education loan for funding your child’s education to avail the above-mentioned tax benefits.
Are you looking at taking an education loan for yourself, your spouse or your children? Here are a few important factors to be considered:

Interest rates: As in the case of any loan, the interest rate charged by the bank is the most important parameter to be considered. The interest rate usually differs according to the amount of loan needed and is quoted as a mark-up on the base rate of the bank. Rates are either fixed or floating in nature. Education loan come with a moratorium period for repayment of the principal amount. However, interest is required to be paid immediately on the disbursal of the loan. Some banks allow you to start payment of interest at the time of starting principal repayment. But remember that this will result in accumulation of interest from the date of disbursal which will increase your repayment burden. So always opt for payment of interest from the date of disbursal itself. It is also useful to understand from the bank if the interest is charged on a daily reducing balance or on a quarterly reducing balance.

Moratorium period: Banks wait for a year after the student completes the course or for 6 months after he gets a job, whichever is earlier, before demanding repayment of the principal of the loan. As mentioned earlier, find out from your bank when the interest repayment must begin, and if possible opt for a repayment from the date of disbursal itself.

Additional charges: Similar to any other loan, an education loan borrower needs to account for other charges like processing fees, documentation costs and administration costs as well.

Collateral: Loans above Rs. 4 lakhs require you to provide a collateral security or have a co-applicant for the loan, who will act as a guarantor. Banks accept fixed deposits, mutual fund units, cash, insurance policies or real estate as collateral security.

Margin amount: Borrowers are needed to fund anywhere between 5% and 20% of the loan amount, which is considered to be the margin. Banks thus lend only 80% to 95% of the total amount required, depending on the credit profile of the borrower.

Which bank should be chosen for an education loan?

As mentioned earlier, not all banks in India offer education loans. We have analysed education loans offered by six banks in India on the basis of various parameters. Despite offering good service levels, education loans from private banks like Axis Bank and ING Vysya Bank can be avoided due to the high interest rates charged. You will get better deals on interest rates from nationalized banks. You can consider education loans from Bank of India on the back of lower interest rate and more options to reduce your interest cost in the form of interest rate concessions. Similarly State Bank of India can be considered on the back of low interest rate. Although interest rates charged by Bank of Baroda and Punjab National Bank are higher than those charged by Bank of India and State Bank of India, they are lower than those charged by private banks. Hence you can consider options from these two banks as well.

A detailed comparison is available below, where we have analysed education loans offered by 6 banks in the slab between Rs. 4 lakhs and Rs. 7.5 lakhs for studies in India. Terms will vary for a higher or lower amount of loan and if you wish to take an education loan for studies abroad. If you prefer to download the excel fil. For more details, refer to individual bank websites. Kindly note that this analysis covers offerings from major banks only & this is not an all-product comprehensive comparison. The analysis is valid on the date being published.

For further information contact Prajna Capitalon 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

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 Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

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

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. 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
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap FundsInvest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
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