Why is it Beneficial to Apply for an Education Loan?
An education loan should be viewed as a tool that helps you to study your chosen topic at a top-tier university. It can help you lay the groundwork for a prosperous future career. However, because of the job crisis caused by the Covid-19 pandemic, today’s youth is understandably concerned about obtaining their preferred career and repaying their university loans. However, you should always keep in mind that an education loan has its own set of advantages. In order to avail these advantages, it is advisable to have a high Credit Score.
How to Get an Education Loan if your CIBIL Score is Low?
You can apply for an education loan even if you have a low CIBIL score.
Guardian’s Good Credit Score
If your parent or guarantor has a good credit score, you can get an education loan even if you don’t have a credit history. The lender will investigate your guarantor’s creditworthiness, income, and occupation.
Secured Education Loans
The bank may take collateral if you have a poor credit history. As a result, you may apply for secured school loans with collateral and provide a future for your child. This may also help to reduce the individual’s loan interest rates.
Regular source of Income
Considering the current scenario that you were unemployed for a few years and missed a few credit card and utility payments, you might have a low CIBIL Credit Score. Fortunately, if you have a stable source of income now then you can easily apply for an educational loan. In this case, your loan application will be granted regardless of your CIBIL score.
Benefits of Education Loan
There are numerous benefits of applying for an educational loan. Some of those benefits are as follows:
No Need to sell Anything
Parents sometimes sell large assets to pay for their child’s college tuition, causing long-term financial plans such as home or apartment purchases, children’s marriages, and so on to be disrupted. When you take out an education loan, banks keep your liquid assets as collateral, such as FDs, insurance, and government bonds. As a consequence, you do not have to sell any of your precious possessions.
Low Interest Rates
These loans have lower interest rates since they are especially for students to help their future education plans. Comparatively, personal loans and other forms of unsecured loans are more expensive than education loans.
Banks offer affordable interest rates on education loans, including preferred rates for top ranked colleges and institutes. To make the loan repayment process as simple and easy as possible, banks also provide a choice of collateral and co-borrower options.
There are a variety of tax advantages while availing an education loan. Interest on education loans is fully deductible under Section 80E of the Income Tax Act of 1961. Moreover, there is a greater tax benefit for students studying abroad. Each transaction done overseas that exceeds INR 7 lakh is subject to a 5% TCS under current legislation (Tax Collected at Source). As a result, if a student is studying abroad and paying for her own tuition, she must pay a 5% TCS charge. However, if the student applies for an education loan from any major bank in India, the TCS is merely 0.5%.
Pay after Finishing your Education.
This is one of the most important advantages of an education loan. The student has no obligation to make any payments, until the EMIs begin, or during the grace period. It’s major benefit is that the students can concentrate on their career during the grace period, which generally lasts the length of the course plus an additional 6 months or a year. Education loans provide the benefit of a long grace period that usually lasts the whole course. Several banks provide a six month or one year extension after the student begins working or graduates from college to repay the loan. Banks ensure that the student has a stable source of income and is capable of repaying the loan.
A student loan is a handy option to start and finish your higher education. You do not need to be concerned about the expense of your education. All you have to do now is focus on your studies, and if you have a regular job, you should be able to repay the loan. Your CIBIL score is the most essential factor that lenders consider when approving an education loan. Always make a CIBIL score login to verify your score before applying for an education loan to prevent rejection. Also, you do not have to abandon your secondary or undergraduate education objectives simply because of your financial situations.
You can always apply for an education loan to fulfil your educational goals. There are numerous ways to obtain an education loan, such as a private student loan with no cosigner. You should also concentrate on improving your CIBIL score. While this may take some time, the work will be well worth it. Your CIBIL score simply indicates to lenders that you can pay monthly bills and have the capacity to repay, correct inaccuracies in your credit record, pay current obligations on time, and produce evidence of income.