Advantages of Taking An Education Loan
It may not be news for you that education is getting costlier with each passing year. In such a situation, the first instinct that most parents have is dip into their lifelong savings to fund their child's education. Another common option they may opt for is selling off assets like gold, property etc.
However, these options are not always enough or ideal. If you are to see the continuing rise of education costs, these options may by not work at all in the future. Hence, many experts advise on taking an education loan for funding their child's higher education. However, an education loan is not just a last option but a strong alternative to pay for a higher education.
Hence, here are all the benefits of taking an education loan:
Protection of savings
As mentioned above, for many parents the primary medium of paying their child’s educational expenses is dipping into their savings. However, taking an education loan means you will leave your savings undisturbed. This can help you achieve your long-term financial goals like retirement funds, children's marriage, buying a new house etc. Moreover, It will ensure that you do not have to depend on anyone for financial support after you retire.
Coverage
The basic education loan package covers the basic tuition fee for the higher education. However, these days pursuing a higher education has a lot more expenses. Hence, you can opt for a package that doesn't just cover course fee, but it also covers other expenses like accommodation, exam fee, library charges, lab fees. Moreover, you can also cover the expense of books, travel, etc. with an education loan. This, in turn, reduces a parent’s financial burden immensely.
Tax benefit
While you may assume that an education loan is simply a way to pay for higher education, it offers many more benefits. As per Section 80E of the Income Tax Act., the entire interest you pay on education loan qualify for income tax deduction. This income tax deduction can be claimed for up to eight years.
Moratorium period
One of the primary concerns that any borrower has with any type of loan is about paying it back. With students, the situation may feel even more frightening as they do not have a source of income yet. However, taking an education loan offers a feature known as moratorium period.
A moratorium is essentially like a holiday period given to the borrower during the loan term where he/she does not have to repay the loan. In case of an education loan, this period can range between 6 months to 1 year from the date of completion of the course. This gives the borrower enough time to look for an income source and plan their repayment.
Credit history
A credit history is vital part of any individual’s finances. The credit score based on this history is a decisive factor in approval for any type of credit. The best way to create a favourable credit history to borrow money and successfully pay it back. Hence, timely repayment of education loan will keep your credit score positive and make getting a loan in the future easier.
Today, higher education in India can cost up to INR 25 lakh and higher education in a foreign country can cost up to INR 1 crore or more. Most of us hardly know few people that has or can arrange that much money through savings or assets. Hence, an education loan can give you the support you need to get a quality education and a better life.