Research and Planning Lightens your Worries

Dylan D'Souza
With costs of professional and technical courses increasing, most students who are from middle class and poor families have been forced to turn to the banks to get an education loan. In order to help the students achieve their dreams of higher education, the central government has made it mandatory for banks to grant education loans to student who are in need of financial assistance. With this policy into effect, the number of applications the nationalized banks have been receiving has gone through the roof. However, what most applicants fail to realize is that they have to come up with a plan to repay the loan plus interest.

When a student plans to take out a loan for his or her higher education studies in India or abroad where the loan amounts can go up to a limit of Rs. 10 lakh and Rs. 30 lakh respectively, the student should consult with the family on their financial stand. It is best if students consult their parents before applying for an educational loan as the parents would have a better understanding of the family's financial stand. After consulting with the family members, students must first find out all the details such as down payment, interest rates and also about the collateral. The student and the family must be very careful when they provide property, jewellery and other items as collateral for the loan incase it exceeds Rs. 4 lakhs.

It is also important to know that unlike most loans, students who apply for education loans receive a 'Moratorium period' and can pay the loan back in six months or one year after completing the course or getting a job. However, what most students fail to understand is the fact that all banks start to impose the interest on the loan amount as soon as it is disbursed. Students and their families can utilize this time frame to pay the amount of interest; otherwise the student after getting a job will have to pay the entire loan amount with interest which will become a big burden. If a student and his or her family are able to pay the interest sooner, there will be a decrease in the amount to be paid through EMIs and they are also able to gain a concession in the percent of interest.

As loans are a burden for students, they must ensure to keep aside a certain amount of their salary every month in order to repay the loans. It is also beneficial for students to gain a tax relation from Section 80E of the Income Tax Act by taking the loan on their name's rather than their parent's name. A key advice to all students is to do extensive research and plan out the entire process right from the interest rates, collateral, to the paying back of the loan in order to escape the vicious traps that the loans will layout if not paid on time.

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