The Pros and Cons of Taking Out an Education Loan

The Pros and Cons of Taking Out an Education Loan: In today's era, education has become very expensive, especially higher education. Whether studying in India or abroad, college fees, hostel charges, books, and other expenses can be very high. Not every family can raise so much money at once. In such a situation, many students resort to education loan.

Education loan is a way in which students can meet their education expenses by borrowing from a bank or a financial institution. Later, when they start working, this loan has to be repaid in installments.

Many student search online for private student loans, student loans without cosigner, apply for student loan, student loans no cosigner, personal student loans, student loan providers and best college loans etc. related all points.

But just like everything has two sides, education loan also has advantages and disadvantages. In this article, we will know in detail why education loan is taken, what are its benefits and what things should be kept in mind so that there is no difficulty later.

The Pros and Cons of Taking Out an Education Loan:

Pros of Education Loan:

1. The dream of higher education is fulfilled:

The biggest advantage is that with the help of education loan, students can study in the course or college of their choice. If admission has been obtained in a good college, but the fees are very high, then that opportunity is not missed by taking a loan.

2. There is no financial burden on parents:

Many parents spend their life's earnings on their children's education. Taking an education loan reduces this burden a little, and they can use their savings for retirement or other needs.

3. Loan is available at a low interest rate:

Education loans generally have a lower interest rate than other loans. Many government banks offer education loans at an interest rate between 8% and 11%. In some cases, the government also provides interest subsidy.

4. No installments have to be paid during studies:

Education loans have a "moratorium period", that is, you do not have to pay any installment as long as the studies are going on or 6 to 12 months after the studies are over. During this time the student can find a job.

5. Tax exemption is available:

As per the Indian Income Tax Act, interest on education loan is tax exempt. This means that you will not have to pay tax on the amount of interest you are paying.

6. Help in becoming self-reliant:

When students take responsibility for their own education expenses, they become more responsible. The responsibility of repaying the loan makes them hardworking and self-reliant.

Cons of Education Loan:-

1. Pressure to repay the loan:

As soon as the education is completed, the pressure to repay the loan increases on the students. If they do not get a job on time or they do a low-paying job, it may be difficult to repay the installment. This can cause mental stress.

2. Burden of interest:

Although the interest rate is low, sometimes the total amount becomes very high. If the loan is to be repaid in 5-7 years, then this amount can double including the interest.

3. Problem in case of not getting a job:

In a country like India, not every educated person gets a good job. Many times students do low-paying jobs or remain unemployed. In such a situation, it becomes difficult to repay the loan and the credit score may also deteriorate.

4. Legal action in case of not being able to repay the loan:

If a student is not able to repay the loan on time, then the bank can initiate legal proceedings. This can have a bad effect on the mental state of the student and his family.

5. Impact on plans to go abroad:

Some students want to work abroad after education. But until the loan is not repaid, there may be problems with visa or other formalities. In many countries, the burden of debt can affect your immigration process.

6. Impact on future plans:

If the student has taken a very big loan, then future plans like marriage, buying a house, buying a car can be postponed. Because first they have to repay the loan.

Things to keep in mind while taking an education loan

If you or your children are thinking of taking an education loan, then keep some important things in mind:

1. Take loan only as per your need:

Take loan only for the expenses that are necessary. Do not include unnecessary expenses so that the total loan is less.

2. Understand the interest rate and terms well:

Read and understand things like bank interest rate, moratorium period, processing fee, repayment period carefully.

3. Be aware of government schemes:

The Government of India often brings schemes like "Credit Guarantee Scheme", "Interest Subsidy Scheme". These can reduce or waive interest.

4. Choose the right course and college:

Choose a course and college from where there is a good possibility of getting a job after studies. This will make it easier to repay the loan.

5. Repay the loan on time:

Try to start paying the installments as soon as the moratorium period ends. Delay may increase the interest and spoil the credit score.

Conclusion:

Education loan is a very good option for those students who are financially weak but are good in studies and have big dreams. This loan gives them a chance to become self-reliant and also an opportunity to study in good colleges. However, some responsibilities and risks are also associated with it. 

Taking a loan without thinking can bring problems in the future. Therefore, while taking a decision, take a loan keeping in mind your family, career plan and financial situation. If education loan is taken by planning properly and working hard, it can become the biggest capital of your career. I hope you get all point about student loan interest rates, private education loans, undergraduate student loans and education loan finance etc. from this above article.