5 Important Questions to Ask before Picking an Education Loan Provider

Getting an education loans is much easier now-a-days due to friendly policies of the banks transparency in the process. With the rising cost of education, self-financing higher education from prestigious colleges and universities can be cumbersome. Education loans have gained much preference in the recent past by students willing to be financially independent and parents looking for safer investment options.

Even though many trusted and reliable financial institutions have now ventured in the field of education loans, there are some basic questions that you should be asking before picking the right education loan provider:

1. Is my bank a trusted and reliable education loan provider?

Many banks and financial institutions extend education loan to higher education aspirants. However, it is crucial to avail an education loan from a trusted source.

HDFC Credila is India's 1st dedication education loan specialist. We have funded education of thousands of students studying in 35+ countries at 2100+ colleges and universities. HDFC Credila has been and continues to remain a preferred choice of thousands of students and their parents.

2. Keep up-to-date with events back home

Every bank has a different rate of interest and accordingly, EMIs can be different too due to variation in ways of computation. It is important to know the interest rate of each bank and the way EMIs are calculated before reaching a decision.

3. In how much time do I have to repay the loan?

Usually the maximum time period given to repay the education loan is up to 10 years. However, it varies in consonance with the loan amount. If the amount is larger you may need more years to pay and if the loan amount is less than it may get paid back in lesser number of years.

The education loan tenure usually comprises of the study duration, grace period after the completion of the course and the repayment period. In some banks, only the interest part of the loan is to be paid for the duration of the course and the entailing grace period.

4. Will I get any tax benefits?

Deductions under Section 80E of the Income Tax Act of India, 1961 are applicable for education loan applicants planning to pursue higher education in some specific disciplines. These deductions are only applicable on the interest part of the loan and can significantly bring down the effective interest rate, thus helping you save money. It is worth noting that loans taken from relatives and non-approved banks and financial institutions are not eligible for tax benefits. Thus, taking an education loan from an approved bank is a wiser choice.

5. Shall I apply for education loan or take financial help from parents/friends/relatives?

Your decision to pursue higher education will delight your parents, but your decision to extract a large portion of their hard-earned savings can leave them without financial adequacy in their old age. It is always a wiser decision to avail education loan than to borrow money from parents or relatives.

Also, with financial institutions like HDFC Credila, you can avail tax benefits that help lower the effective rate of interest, which may not be a case with loans taken from friends and relatives.