3 Myths about education loan busted

1. 3 Myths about education loan busted

2. Education loans are a tried and trusted method of paying your education expenses and thus learning a course of your choice. They also learn about good financial habits while paying back the educations loan amount. Many myths about education loans exist. This article will bust all the education myths for you.

3. The interest is levied as soon as the loan is sanctioned A popular misconception says that the interest is levied on the educations loan amount as soon as it is sanctioned to the student. As the name suggests; it is a misconception. The interest is levied on the loan amount when the money is disbursed in your account and not before that. Also, the interest is levied only on the part of the loan amount that is disbursed to the student. For instance, If you are studying in the first year of B. Tech course then the bank will sanction the loan amount for all the 4 years of B. Tech but only disburse the loan amount to pay the fee of the first year. And the interest will be levied only on that amount of money. As your college demands a fee for the second year, and the bank disburses the amount equal to your second year B. Tech fee then the interest will be levied on the total amount of money you borrowed in the first and the second year of engineering. And so on.

4. Tax benefits are applicable on the EMIs The second myth revolves around the tax returns on the EMI of the educations loan. People believe that they get tax benefits on the education loan EMI. This is partly true. You do not get tax returns on the EMI. You only get tax returns on the interest paid with the EMI while clearing off your education loan. According to the Section 80E of the Income Tax Act, 1961, the student gets tax deductions only on the interest he pays until the loan amount is paid back or until 8 years from the time the student starts paying back the loan, whichever comes earlier.

5. Getting an unsecured loan is easy People believe that you can get an unsecured loan of a huge amount of money without pledging anything or proving your ability to pay back the loan. This is false as well. The lender verifies the credit-worthiness of the borrower before giving him an education loan. The lender looks at the credit score of your co-borrower, the financial worth of your family’s combined assets and the net income of your family, before moving to the next criteria. The lender weighs your academic performance, the reputation of the university you have got a seat at, and the job prospects of the course you have decided to do. Based on these two types of criteria, you are given an study loan

6. We hope this article was helpful to you.