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Pursuing an international study program gives students the opportunity to discover themselves and helps them gain an understanding of a different culture. It influences a student’s career path and boosts his self-confidence. However, the dream to study abroad may not materialize for all. Some individuals face financial difficulties and hence give up their dreams.
In such a situation, borrowing an education loan is the most feasible option. It is the ticket to your dream college and a bright career. However, it is wise to consider all loan-related aspects before borrowing finance to study abroad. There are numerous education consultants offering overseas career counselling in Mumbai. These consultants provide comprehensive information on various loan aspects.
The following six things need to be taken into consideration while availing a loan to finance your foreign study program.
- Choose the right lender
There are numerous banks and Non-Banking Financial Companies that offer education loans for international courses. Such financial institutions have varied interest rates and different terms of the contract. Check the bank’s fees and charges, like pre-payment fees, legal charges, and late payment charges. Some banks offer loans at a lower rate of interest, but levy higher charges and fees. Also make sure you have the option of an early repayment of loan. Take all these factors into consideration before signing on the dotted line.
- Get to know the terms of the deal
It is important to understand numerous terms like interest rate, loan tenure, and grace period before applying for a loan. Students applying for a student loan have to repay the principal amount along with a certain extra amount, known as the interest rate. This additional amount is the cost of servicing the loan. Another term to understand is the tenure of the loan. It refers to the period of repaying the loan. While the arrangement differs from bank to bank, education loans have to generally be repaid post the moratorium period. The moratorium period is the time during which the student is studying (till they start working). During the moratorium, students have to pay only the interest on the loan. The loan repayment begins once they start working.
- Apply well in advance
Applying for a student loan at the last moment is a strict NO-NO. Banks and Non-Banking Financial Companies have certain documentation procedures that need to be followed. The process may take time if all the documents are not in place. You may therefore submit your loan application well in advance in order to avoid any kind of hassles later. In case you wish to keep property like your house for collateral against the loan, ensure that all the house papers are in place. Having all the documents in order streamlines the application process, thus ensuring that the loan is disbursed at a quicker rate.
- Use a co-signer while applying
Applying for an education loan with a co-signer maximizes the chance of getting a loan. Generally, parents of students assume equal liability for the loan. Having a co-signer not only makes it easier to obtain the loan, but also helps in obtaining attractive interest rates. In case you are working professional, check if your firm offers any company-sponsored education programs. If such an opportunity is available, check whether you are eligible for them and apply accordingly.
- Have a repayment plan
Upon completion of the course, it becomes necessary to strategize your finances to repay the loan. All unnecessary expenses need to be cut to the minimum and the main focus should be centered towards repaying the loan. Overseas education consultants recommend that students repay the loan as quickly as possible so to lift the burden of debt. Repaying the loan as early as possible also helps to reduce interest, thus leading to significant savings.
- Tax deduction
Taking a loan for higher studies abroad not only helps to fulfil your dreams, but also helps in tax-saving. The interest paid on education loans may be claimed as tax deduction Under Section 80E of the Income Tax Act, 1961. In order to be eligible for this deduction, the education loan should be taken from an Indian scheduled bank or a gazetted financial institution. There is no upper limit on the amount of interest that may be claimed as deduction under this section. The parent/main applicant may claim the deduction once they begin the repayment of the loan, up to a period of eight years. e parent/main applicant receive the benefit of tax deduction.
Borrowing an education loan is a long-term investment. It is necessary to understand the implications of such a decision before applying for a loan to finance your education abroad.
There are numerous institutions which provide overseas career counselling in Mumbai. You may approach such educational centers and seek answers for all your loan-related queries. You may seek the guidance of Study And Work Abroad, a reputed education consultancy in Mumbai. Consultants offer assistance to students seeking education loans for their study abroad program. They help students land the best terms of the contract in respect to attractive interest rates. Study And Work Abroad also provides loan application assistance and helps students gather all the necessary documents.