Be it a professional degree or one of the many courses in niche domains, higher education has become expensive. Spending a few lakhs on a child's higher education can be financially stressful for many parents.
The entire loan process can be made less tedious if students plan in advance and exert due diligence.
Here are a few points to bear in mind:
Stay within limits
Do not borrow beyond your capacity. Families on a tight budget and with numerous other financial commitments need to work out the loan amount possible. Keep the EMIs in the range of 20 to 30 percent of your future monthly earnings estimate. The burden of a huge debt quite early in your career is stressful. So, borrow as little as possible.
Research the courses
Before opting for a course, students must research if it is recognised by the UGC, AICTE or similar governing councils. Students who want to study abroad should be very careful when selecting the institute and the course. Be it a professional or technical course, research well on the placement history of the institute and track record.
The lure of studying abroad and easy availability of loan shouldn't influence your decision.
Avail subsidies
Simply because a lender is willing to give a loan upfront doesn't mean that you pay an exorbitant fee. A borrower has the responsibility to repay. If a course doesn't enable you to earn enough to repay the loan, maybe you are paying too high a fee.
Some lenders offer interest rate subsidies for girls, and have special schemes that you can compare.
Margin money and interest
Arrange for margin money and interest payments. Some lenders demand collateral in the form of bonds, securities etc for the student loan. You may be expected to pay up as much as 5-15 percent of the loan amount as margin money. The applicant must make arrangements for margin money before loan disbursement.
A borrower also needs to arrange for interest payments during the period of moratorium. Moratorium period is that timeframe when students do not pay monthly installments towards their education loans - usually until their course ends or they get a job.
Avail tax benefits
Students can avail tax benefits on the interest component of their EMIs, once their repayment clock starts ticking for the stipulated years. For this, the loan should be taken from any financial institution or bank, or any approved charitable institution only. Further, the loan should be taken for higher studies.
Use an education loan wisely to meet your career aspirations. However, exert caution and due diligence while borrowing money.
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