Pursuing an education in overseas universities has always been attractive. In our times, it no longer remains a distant dream. Education loans for foreign diploma courses can help you achieve your desired career-oriented goals. Let’s understand the key aspects of such a loan.
There is an abundance of foreign universities and courses available for an undergraduate diploma or a post-graduate diploma. Before procuring an education loan, you must identify the course you wish to pursue and the university offering the same.
Make an application to a foreign university and secure your admission. Jot down the fee structure, payment timelines, and the cost of living overseas like stay, meals, travel, etc. This ensures that you borrow the right amount at the right time and do not end up paying interest on unutilised borrowings.
Overseas education involves different costs like the course fees as well as incidental costs of accommodation and travel. You may check whether the education loan covers all expenses and whether you are required to contribute 5% to 10% of the funds required. You can also use a personal loan EMI calculator to check the amount of loan eligibility.
The personal loan interest rates on education loans range from 6% to 15%. It also depends on whether the loan is secured or unsecured. For instance, an education loan secured by fixed deposits or any other security may carry a lower interest rate as compared to an unsecured loan.
Interest is one of the most important factors in the loan decision-making process. However, a low-interest rate does not necessarily mean that the loan would be good for you. There are many factors like tenure and collateral which must be considered along with the interest rate.
Education loans up to Rs. 4 lakhs can be obtained without any collateral under the Credit Guarantee Fund for Education Loans (CGFEL) Scheme of the Government. Loans from Rs. 4 lakhs to Rs. 7.5 lakhs may require a third-party guarantee.
For other loans exceeding Rs. 7.5 lakhs, the lenders demand collateral or security while granting an education loan. The security may be in the form of land or house property, vehicle, shares and bonds, or fixed-income securities. Gold is also accepted as security in physical form (coins or jewellery) or in paper form (sovereign gold bonds or gold ETFs).
Education loans secured by collateral provide a safety net to the lenders, and you can benefit from lower interest rates as compared to unsecured loans.
Education loans have to be repaid by the student over a period ranging from 12 months to 84 months. Some lenders also provide a moratorium or a grace period up to one year after course completion. Repayment commences after the completion of the moratorium.
Before disbursement of the loan amount, you must complete the process of documentation. This includes submitting:
- KYC documents of the applicant
- Educational certificates like SSC and HSC certificates, marksheets, graduation and post-graduation certificates, entrance examination scores for JEE, CAT, TOEFL, etc.
- Bank statements and income tax returns filed
- Ownership documents or certificates for collateral provided
- Letters from the foreign university confirming admission, scholarship certificate, fee structure, and payment timelines
- If the documentation is in order, the educational loan agreement is executed by the lender and the applicants
Benefits under income tax
Interest on an education loan is allowed as a deduction under Section 80E of the Income Tax Act up to a period of eight years. The taxable income reduces to that extent.
The terms of education loan are designed in a simple and fair manner so as to encourage students to pursue overseas courses. Go ahead and plan your dream career with the backup of a personal loan for education.