When it comes to paying for college, student loans are a significant factor. This has led to a number of misconceptions and misunderstandings about education loans, which is not surprising. Here are some myths about education loan to study abroad to remember. This helps to avoid getting involved in a financial farce.
You have to be wealthy to study abroad
The assumption that a student pursuing a degree abroad must be from a wealthy household is all too understandable. In actuality, the majority of people continue to believe that only wealthy families can afford to send their children to study abroad.
This misconception was more plausible a decade ago because of the expense of studying abroad. However, things are now different. Students can now apply for scholarships and different loan programs offered by different loan lenders for educational loans.
For students from households with less financial stability, government banks also offer interest-subsidy programs for education loans. At the end of the day, a student’s ability is prioritized over their financial situation.
Self-financing is better than taking an education loan
Wealthy families are more likely to believe that self-financing is preferable to borrowing money for education. Because they do not want to go to the bank, gather the necessary paperwork. And wait for the loan to be approved when they can arrange all the finances themselves.
One of the most notable advantages of an education loan for abroad studies. As mentioned in Section 80E of the Income-Tax Act of 1961, is the education loan income tax exemption. This part allows you to claim a specific portion of the interest you paid on your student loan when you file your ITR.
Collateral is compulsory to get an education loan
We generalized it to education loans, spreading the message that having collateral is required for education loans. Because it is common knowledge that any loan, such as a home loan or a car loan, requires collateral as security.
Collateral security is indeed required for education loans. However, this does not always have to be the case. Education loans for international students are divided into two categories. It is based on the need for collateral: secured loans (require collateral) and unsecured loans (Which do not require collateral).
An unsecured loan is better than a secured loan
Because customers don’t have to put up any collateral, getting an unsecured loan first seems preferable. Because it takes less time and has less paperwork.
Private banks and NBFCs typically lend unsecured education loans. In contrast to public banks, who can only charge an ROI of 9%, private banks can charge an ROI of up to 13.5%. In addition to the ROI, private banks also have a predefined list of colleges. It is because they only offer education loans.
You can get a larger loan amount at a lower ROI and additional benefits. This includes a longer repayment period and a payment-free moratorium period if you choose a secured education loan from a government bank.
You have to repay the loan during your course
For private lenders like private banks and NBFCs, this statement is only partially accurate. In the case of government banks, it is untrue.
The majority of government banks offer a period of no payments. That is, candidates who obtained their student loans from government banks do not need to start making loan payback contributions until the conclusion of the moratorium period. (Course length plus 6–12 months)
While with private lenders, the co-applicant or student is only required to begin making interest payments. during the actual moratorium period (Rarely do private lenders ask for EMIs payment right after the first disbursement).
Education loan repayment is a burden
Humans have a propensity to remember bad news more so than good. There are a lot more students who have been able to manage their money better. They make loan repayments on time. But many individuals believed that repaying student loans was a burden after hearing about a few students who didn’t.
Since the education loan covers all of the student’s living and other costs, the student can always work part-time jobs. Work for campus employment to earn a weekly paycheck to start saving money for the EMIs and interest payments during the moratorium period (in the case of private banks and lenders).
Conclusion
We already know that getting the chance to study abroad is not always simple. Securing adequate funding is one of several crucial phases that make up the overall process of pursuing higher education overseas. Keep yourself informed and avoid believing any of the common misconceptions about student debt. Requesting a callback will put you in touch with our team if you need help with your student loan application.
