Higher education expenses, whether in India or abroad, can dent the savings. The Indian Government, together with the Ministry of Education, has made it easier for students and parents to cover the costs of higher studies through various education loan schemes. The study loan subsidies and education loan repayment support schemes offered through different financial institutions have reduced the burden of credit.
Types of Education Loan Schemes in India
There are several types of education loan schemes available for Indian students. These include:
Vidya Lakshmi Scheme
The Vidya Lakshmi Education Loan Scheme lets students apply to multiple financial institutions with a common application form.
Padho Pardesh Scheme
Specially aimed at students from minority communities, applicants can obtain funds for higher studies overseas with the Padho Pardesh Scheme.
Dr. Ambedkar Central Sector Scheme of Interest Subsidy
One can avail interest subsidy under this scheme, which facilitates higher education abroad for students from OBC and EBC communities.
Central Scheme of Interest Subsidy for Education Loan
Students coming from the EWS category can get interest subsidy for pursuing technical and professional courses.
While an education loan is a viable funding option, loan offerings and benefits vary across lenders. Apart from considering the loan eligibility requirements, applicants must also keep in mind the loan repayment conditions to assess its feasibility. A practical approach to realistically plan your education loan would be to check the payable EMIs in advance.
The monthly instalments are calculated based on the loan amount, loan repayment tenor and interest rate. An education loan calculator calculates these numbers quickly without any errors.
Benefits of Using an Education Loan Calculator
Education loan calculators offer many advantages. These include:
Instant and accurate results: Applicants can accurately compute complex loan calculations to understand the principal amount they are eligible for, and the payable EMIs for the pre-determined tenor and interest rate within seconds.
Simple and user-friendly: An online calculator is a free financial tool, which is simple and easy to use. It requires just three variables to provide the results: the principal amount, the applicable rate of interest and the loan tenor.
Customised education loan: You can easily adjust these variables and customise the loan until you arrive at an EMI, loan amount and tenor that suits your requirements.
Plan prepayments: If borrowers choose to make pre-payments on their loan, the calculator helps them plan it more efficiently.
How to Use an Education Loan Calculator
Most lenders offer the use of free education loan calculators on their website to let users self-assess loan deals and make informed decisions. Depending on the calculator used by the lender, you can either enter the details or use a slider to adjust the figures.
Online calculators calculate your loan amount, EMI outgo and the repayment tenor on three basic parameters:
- Principal loan amount: Input the total education loan amount you wish to apply for in this field
- Applicable rate of interest: This section will require you to enter the rate of interest offered by the lender
- Loan repayment tenor: Individuals must input the duration for which they seek to avail of the education loan
Once you enter these details, the payable EMI on your education loan will be instantly displayed on the screen. You can then adjust and customise these variables as per your financial position, as many times as needed.
Features and Benefits of an Education Loan
Apart from making it easier to finance overseas studies, an education loan offers several important features and benefits such as:
- An education loan can be availed to finance further studies, both in India and abroad.
- The parent or guardian of the student should be a co-applicant for the loan application.
- Usually, no security or collateral is necessary for availing an education loan. The maximum limit for an education loan differs with every bank and lender. But if the loan principal requirement exceeds the limit, applicants can obtain high-value loans through an education loan against property by pledging their property as collateral.
- An education loan offers flexible repayment tenor, which varies with the lender. Applicants can opt for longer repayment terms in case of an education loan against property.
- Education loan EMI does not necessarily begin as soon as the loan is sanctioned or during the study course period. It offers a moratorium period of 1 year or until the student has secured regular employment.
- Borrowers of an education loan can avail of income tax benefits on the interest component of the loan under section 80 E of the Income Tax Act.
Things to Consider for an Education Loan
When seeking an education loan, keep these important pointers in mind:
- The processing fee: Usually, lenders ask for nominal or nil processing fees for an education loan. Confirm these additional charges beforehand to factor them into the loan cost.
- Loan prepayments: Students can prepay the loan in part or in full, or even pay the interest on the principal amount before the start of the payable EMIs. This helps in reducing the instalment payments and the tenor.
Summing Up
An education loan can be availed to cover not just tuition fees, but other related expenses like accommodation and travel costs. Before applying for an education loan, compare the different loan offerings using a loan calculator to select the ideal scheme.
