Higher education can be costly without a scholarship. But there’s no better investment than a good degree. If you’re short of funds, consider a study loan from a bank. It’s easy to get and reduces taxes. “Any loan taken to ultimately improve your economic status is a good loan,” says Harsh Roongta, CEO of apnaloan.com. Some points:
Who’s eligible?
Loans are offered for diploma, undergraduate and post-graduate study in India or overseas, to pay for tuition, security deposits, books and equipment (including a computer), and travel.
How to apply
Find out from the bank about all documents required. Some banks allow online applications. Check if your college has a tie-up with any bank—if so, you may not require collateral.
How much?
For studies in India, you can get upto Rs10 lakhs; Rs20 lakhs for overseas. For loans above Rs4 lakhs, you’d be required to meet at least 5% of expenses from your own funds for study in India; 15% for study abroad.
Any collateral?
Zero for loans below Rs4 lakhs. For Rs4 lakhs to Rs7.50 lakhs, you may need a third-party guarantee. Higher amounts will require collateral of a like value. Banks also assess the student’s ability to repay after the course.
What interest rate?
Differs from bank to bank and is normally in the range of 12 to 14.5%. Shop around.
When do I repay?
Although you’ll have to pay simple interest on the loan from the start, only a year after completing the course, or six months after getting a job—whichever is earlier—is any repayment of the principal expected. Some public sector banks provide a “repayment holiday,” during which no repayment, either of interest or principal, has to be made, but the interest adds up.
Tax benefits
On study loans, the full amount of interest paid is tax deductible.
