Guide for parents taking education loan for kidsIt’s a competitive world! Every sector has its own set of challenges and breakthroughs. Likewise, the education sector has progressed leaps and bounds to provide the best learning aids to the current generation. But these educational benefits are available for a high price that is not affordable for all income groups. Parents dream to give their child the best of education but it is difficult due to the hike in annual fees for different courses in India and abroad.
This is where education loans play a significant role in building your child’s career. As a parent, you should not abstain from the idea of taking a personal for education. An education loan not only supports your child’s education but also offers attractive tax benefits.
Let’s have a look at why an education loan is logical today, and what are the factors you need to consider while taking such a loan and the pitfalls that one should watch out.
What factors should parents consider while taking education loans?
With the cost of education touching the sky, educational loans have become the need of the hour to cope up with the rising expenses. Numerous financial services and NBFCs have come up with various schemes and discounts for providing educational loans at a low interest rate and economical processing fees.
Here are certain guidelines for parents while taking an education loan:
- Parents should not worry about a collateral - Parents often hesitate to opt for education loans due to the fear of mortgaging assets/property for the loan. Break this myth and go for the educational loan today as it is totally collateral free. Education loan is also a type of personal loan that is of collateral free nature. This reduces loan sanction time and makes the process hassle-free.
- Parents should check for the interest rate - Interest rate is one major factor that influences the loan amount and instalments. If the interest is high, the repayment amount will increase. Hence, parents should compare different interest rates that lenders and financial companies offer and shortlist the suitable one from a credible source.
- Make use of moratorium period - This is only applicable to education loans and certain lenders or any government based financial company does not begin the loan repayment period until the student finishes the course of studies or completes 6 months of the job.
- Parents can rely on instant personal loan apps - Making a loan application through an official web site or an instant loan app ensures paperless way of verification with minimal documentation. This ensures faster approval of loan. So always choose a lender who provides online education loan for quick approval and disbursal, before the admission dates run out.
- Parents should not get into defaulters list - While taking an education loan seems easy, paying back requires planning. If you default in repaying the loan, it may spoil the credit score and affect the borrower’s financial stability. If EMIs are overdue for 90 days, the lender categorizes the loan as a non-performing asset.
Besides, the above guidelines, parents as a borrower should be aware of the eligibility criteria and mandatory documents to avoid loan rejection at any stage:
- Citizenship should be compulsorily Indian
- Students applying for education loan should have scored 50% at least in HSC and graduation level
- Obtained admission in India or abroad on merit basis
- Income proofs reflecting a regular income of the student’s parents/guarantor
- KYC documents
- Last 6 months of bank statement
- Copy of admission letter from the college/institute with fees structure
- Academic certificates – mark sheets and passing certificate