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The interest rate is the amount of money that a lender charges on the principal loan amount. There will be a monthly payment needed in addition to the principal amount if you take out a loan to fund your study abroad program. Interest rates on student loans may vary based on several factors, including the borrower’s creditworthiness, the loan type, and the lender’s policy.
To make sound decisions about getting loans for higher education, it is essential to have a thorough understanding of the interest rates on student loans for studying overseas.
SI = (P x r x t)/100
Here:
Example – Let’s consider a scenario where you take a loan of INR 50,000 for 1 year with an interest rate of 5%. Applying the formula, the interest amount comes out to be INR 2500. Consequently, when you repay the borrowed sum, an additional payment of INR 2500 is required as a fee.
A = P (1 + r/n) nt
Here:
For example – If you borrow 10 lakhs INR at a 10% interest rate for 5 years.
Secured loans are considered to be a safer option as they require the borrower to provide collateral. By offering this guarantee to the bank, the borrower can enjoy a lower interest rate on their loan. On the other hand, unsecured loans do not involve any collateral, resulting in higher interest rates being charged for this type of loan.
The applicant profile includes information about the student’s prior academic records, past work experience, income history, credit score, and other factors.
When someone applies for a loan, having a co-applicant or co-borrower can assure that the loan will be repaid even if the main applicant is unable to do so. This is because the co-applicant’s credit score and income are taken into consideration to assess the level of risk involved, which in turn affects the interest rate offered.
The interest rates of education loans can be influenced by various factors, such as the current market conditions, the overall economic environment, and trends in interest rates.
Interest on an education loan begins when the money is given to the student. While studying, most lenders charge simple interest. Once the study period and grace period are over, compound interest is applied.
Various subsidies are available from the government to ease the financial strain on students. Some of these include Padho Pardesh, Dr. Ambedkar Central Sector Scheme, and Central Sector Interest Subsidy Scheme.
Central Sector Interest Subsidy: It’s an interest subsidy program for those in lower economic categories. The student is eligible for the interest subsidy given that family income does not exceed INR 4.5 lakhs.
Dr. Ambedkar Central Sector Scheme: This program aims to offer financial support to students from Other Backward Classes and Economically Weaker Classes who wish to pursue their education abroad. Through this interest subsidy scheme, the government aims to encourage and promote foreign education opportunities for these students.
You can get the subsidies by getting in touch with the bank or lender in concern. To proceed, you must apply along with several required documents. These documents consist of an original income certificate, an agreement for interest subsidy, a student letter issued by your institute, a self-declaration form, and some additional documents.
You may get a tax deduction on the interest paid for a loan taken for higher education under Section 80E of the Income Tax Act of 1961. This deduction applies to the total interest amount of the Equated Monthly Instalments (EMI) paid in a financial year.
The cost of your tuition, living expenses, study materials, and accommodation while pursuing a degree will all be covered by education loans.
You can get an education loan from either public or private banks without having to provide any collateral. Just be aware that the interest rate could be elevated.
Shiksha Udaan Capital aims to support your dream of attaining a high-quality education and provide students with easy access to personalized educational finance alternatives.
