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Any meritorious student in India who wants to study for higher education can apply for an education loan. Even the economically backward sections of the society can avail education loans under the government-sponsored subsidy schemes. Federal Bank also offers education loan facilities for pursuing various types of courses which includes graduation, post-graduation, diploma and other courses offered by reputed institutions in India as well as abroad.
Benefits of availing education loans include following:
1. Lower interest rates
When availing on any loan from financial institutions like
Banks and NBFCs, interest rates play a key role in the decision. The
interest rates for education loans are generally lower across the country.
2. Flexible Repayments
Another bigger advantage of education loan is that the loan
amount need not be repaid immediately. Loan period can be Moratorium
period+ 15 years as repayment period (Moratorium period will be course
period + one year). This makes it easy for repayment. EMIs can be
scheduled to commence after Moratorium period. That can be a relief
for students, making it easier for to pay back the loan themselves
once they get a job.
3. Covers various costs related to the courses
Costs covered under education loan includes Fee payable to
College / School, Hostel, Tuition, Examination, Library, Lab, Cost of
books, equipment, instruments, Uniform, Travel expenses, Computer (if
essential for the course), Expenses for study tours / project work /
thesis etc; Caution deposit, amount payable towards building fund,
refundable deposit etc supported by bills / receipts but cannot exceed
10% of the tuition fee.
4. Tax Benefits
Income tax exemptions are another great benefit of education
loans. The interest paid on the loan is completely tax deductible,
under Section 80E of the Income Tax Act, 1961. This helps a young
professional who availed education loan save some money during the
repayment period. Please note that there is no tax benefit on
principal repayments.
5. Helps to build Credit History
Timely repayments of education loan help to build the credit
history of the borrower and enhance his ability to access credit
facilities in future.
5. Teaches Responsibility
Another important benefit of
Education loan is that it helps to teach a student to take
responsibility for his/her studies. Apart from saving their parents
from a great financial burden, taking on a student loan also ensures
that the students are fully invested and committed to their studies.
Taking an education loan can liberate parents from financial burdens
as the student is responsible to repay his education loan after the
completion of his studies and the moratorium period.