A student loan is a sort of loan intended to assist students with paying for post-secondary education and the associated charges, like educational cost, books and supplies, and everyday costs. It may vary from other types of loans in the fact that the financing cost may be substantially lower and the repayment timetable may be conceded while the student is as yet in school. It also contrasts in many nations in the severe laws regulating renegotiating and bankruptcy. This article features the distinctions of the student loan framework in several major nations.
Why Student Loans ?
Guard Your Savings – Taking a student education loan will allow you to safeguard your savings like MFs, FDs, ULIPs, retirement savings, and so forth and use them to meet other expenses. Additionally, in the event that you are a decent investor, you can put away your cash and get better yields and pay a part of it as a premium to the bank. Your savings can also be utilized to safeguard your education in future in case the program gets delayed because of unexpected occasions.
Get Annual Tax Benefits
This is quite possibly the main benefit of selecting a student loan. Under Segment 80E of the Annual Tax Act of India, students who take an overseas education loan from a gazetted financial organization are qualified for derivations on the interest paid on the student education loan. This decreases the rate important to be paid. They can avail this derivation for up to 8 back to back years and there is no maximum cutoff on the amount to be claimed.
Build Your Credit Score
A student loan is one of the initial techniques through which a student can build his/her credit history. Ideal repayment and compliance with the terms of repayment will assist the student with building a solid credit history which he/she can later use to his/her advantage for future financing needs.
Get the Benefit of the Moratorium Period
Repayment for secured loans starts after the moratorium period – which can be a half year or a year after the program gets over. This allows students the opportunity to completely zero in on their education during their review years instead of paying off their obligations.
Easy Visa Approval
Visa authorities of most nations want to guarantee that the progression of funds remains steady and that the financing source is reliable. At such a stage, student loans, especially from public area banks assist a student with getting easy approval for their visa as the regular progression of funds is assured and government banks are reliable.
Helps in Arranging Large Funds Upfront
Many nations like Germany, Canada, Australia, and so on, expect students to show proof of funds for the whole planned duration or 1 year of their stay in the country, for which they have to pay the total amount forthright. Paying such a large aggregate all immediately turns into a burden on your pocket. In such cases, education loans help to alleviate this burden by bearing the whole amount and dispensing it straightforwardly to the college.
Provides a Safeguard Against Unexpected Expenses
Students who self-store their education have to bear the additional expenses and arrange for extra funds in cases where they are hit by unexpected expenses. Students who take a student loan for abroad don’t have to stress over unexpected expenses as they can demand the bank to dispense the additional amount.
Types of Student Education Loans
You probably comprehended the reason why taking a student loan is superior to self-financing. Presently, let us illuminate the various types of overseas education loans available for our readers. Basically, there are two types of student loans for concentrating abroad. They are – Secured Loans and Unsecured Loans. Allow us to talk about each one of them underneath.
Unsecured Student Loan
It is a student loan for which the borrower doesn’t have to vow any security (collateral). This loan is best for students who don’t have any collateral to offer. In any case, it ought to be recollected that an unsecured education loan has a higher rate of revenue (as against secured loan) and is more hard to be approved. They also have a more limited repayment period and require certain repayments to be finished during the review period as well. Also, a base parental pay is mandatory for this sort of education loan.
Secured Student Loan
A secured education loan is one where the borrower has to offer tangible or intangible security. The security can be as immovable property, FDs, LIC insurance, land, and so on This sort of loan takes longer for approval as the bank has to confirm all the reports related to the security being promised. Be that as it may, it has lower student loan Financing costs, longer repayment period, and no repayment during the review period. This loan also has higher chances of approval and parental pay isn’t aa choosing factor with regards to approval.
Things to Watch Out for in a Student Loan
While taking a student loan for abroad, students should read the agreements laid somewhere near the bank with great care. They ought to also compare the different loan plans and then take the final choice. A few things that should be remembered are as per the following:
- Interest Rate
- Moratorium Period
- Handling Expense
- Margin Cash
- Prepayment Penalty
- Tax Benefits
- Expenses Covered
- Loan Repayment Period