Author: Credit Sudhaar

Is it worth taking an Education Loan?

Higher education has become a need rather than a choice in recent years. People dream to do courses from premier institutes that guarantee a high paying job and a good career growth in future. But the cost of these courses is so high, that not every person can pay for them from his own pocket. Education loans come to the rescue for such individuals as it helps meet the shortfall. These loans can be repaid when one starts earning after the completion of the course. There are some other ways to finance higher education, like savings, borrowings from family and friends, selling assets like gold, taking personal loans etc. But there are many key reasons why an education loan is a preferred choice. Education loans require careful management otherwise they can become a burden too. Let’s find out whether it is worth taking an education loan.

Taking own responsibility

Students who want to preserve their family’s savings and take up the financial responsibility of their own education can easily do so with the help of education loans.

Easy accessibility

A large number of banks and other financial institutions offer education loans to students that not only cover the tuition fees but also the living expenses, cost of books etc. They have a simple application process and easy eligibility criteria. Lenders just want to make sure that the person is doing the course from a reputed institute and will easily get a job after completing the course. You can easily apply for this loan online by following a few simple steps. Some banks even offer door to door service to give you complete information regarding the application process.

No collateral

Lenders offer these loans upto an amount of Rs. 4 lakhs without any collateral. This is a boon to many students whose college fees fall within this range.

Lower rate of interest

Education loans provide for funds at a comparatively lower rate of interest than the personal loans. Even people who can afford the cost of education go in for an education loan, as they find it to be more economical. They prefer investing their savings and earning better returns.

Repayment tenure

The loan tenure usually ranges between 5 to 7 years. For loans of higher amount this tenure may even go up to 15 years. Longer loan tenure makes it easier for borrowers to repay the loan. Although the interest pay-out will be more in case of longer tenure, lesser EMI amount makes it easy on one’s pocket.

Moratorium period

Moratorium period is that time during the loan tenure when the borrower is not required to make any loan instalments. In case of personal loans there is no such period, as repayment of EMIs start immediately after the loan is disbursed. The repayment of education loans however doesn’t start until 6 months after the completion of course, or till the person gets a job. This gives students a sense of relief and they do not have to worry about loan repayments while they are studying.

Building credit history

Taking an education loan at a younger age is a good opportunity for people to start building their credit score. By the time the moratorium period gets over, the person usually earns sufficient income to make the monthly repayment. Regular monthly repayments helps in building a positive credit history that is good for one’s credit score.

Income tax benefit

Under section 80E of Income Tax Act you can avail a tax rebate on the interest amount when you start repaying the education loan. This reduces the overall cost of education loan. Personal loans do not offer such tax benefits.

Hence a high tuition fee no longer hinders students from accessing quality education.  Affordable education loans enable students to arrange for sufficient funds to get admission in their dream college and achieve their career goals. However if one doesn’t land up with a good job, the EMIs may put a strain on one’s cash flows. Late or missed payments can have a negative effect on one’s credit score. So have a contingency plan in place, so that you are able to honour your EMI repayments.

 

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Types of Personal Loans

There are different reasons today we need money for. Sometimes it’s a need and sometimes its luxury. In today’s world there is no scope of compromising either on need or luxury. A lot of time your incomes and gains do not supplement your need and for those reasons, you open up for a loan. Indian market offers you different types of loan and they are available at your disposal, provided you meet different loan criteria like cibil score and more.

The most easily available loan is a personal loan. You can get a personal loan within hours of application and get funds in your emergency situations. In some cases, there are pre-approved personal loans ready for you; where you just need to log in to your bank account and within few clicks, the disbursed loan money gets credited to your account, this again depends on various factors and also should meet all the loan criteria.

Have you ever applied for a personal loan?  If yes, did you explore all the available options before getting one? Which type of personal loan did you get? Was that a right one?

Yes, there are different types of personal loans. Each type of loan serves its purpose and has a unique selling point. It is important to understand them and go with the best option available which will suit your situation.

Fixed-Rate Loans

90 % of personal loans are fixed rate loans i.e. while applying for a loan, the lender will calculate an interest rate according to your loan eligibility and fix it. The interest rate will be fixed until you pay your loan off. This is one type of traditional personal loan which is offered by a lot of banks and if you are planning to get one, you will have a lot of options on the same.

Variable-Rate Loans

It is the riskiest type of loan if you are going for it. In this type of loan, the interest rates will fluctuate according to market trends and your interest rates might go up and down every now and then. You will end up paying more interest than anticipated. The lender also has a cap on the maximum interest rate, so that you do not burn your pocket.

Installment Loans

Installment loans are something where the installments and the period to repay are determined while you are opting for a loan. They can be secured or unsecured. This type of loan is best for people, who are looking after debt consolidation, funding house repairs etc.

 

Payday Loans

Usually used by salaried individuals, also called as cash advances. In emergency situations you can withdraw cash advance against your pay cheque, the interest rates are very high as compared to traditional loans. It is recommended to be used only in emergency situations as it has high personal loan interest rate.

Convertible Loans

This is majorly practiced in credit cards. If you have over spent your limit and finding it difficult to make payment of the full outstanding amount, it is best to convert them into easy installments. The interest rates will be higher than market standards, but you will be at ease and this will not hamper your cibil score.

Single Payment Loans

A single payment loan is something which cannot be availed by everyone; they are specifically designed for business individuals and entrepreneurs. If a person is awaiting a payment and is in urgent need to money the person can opt for a single payment loan, in which he/she has to make the payment in single installment with a lump sum amount as interest.

Credit card loan

Your credit card lender can also offer you a personal loan with easy installment option depending on your repayment patterns. The installments are compiled in your credit card statements. This loan is only given on the discretion of the credit card lender; you cannot opt for it on your own.

You may need funds for various occasions, and getting them immediately is always the priority, but always go with thorough research before settling for a lender and also the type of loan. As this will help you in the long run of the loan commitment and live in financial harmony.

 

The World Of Gold Loans

India is a country that is in love with the shiny yellow metal; gold. We Indians love to buy gold on various occasions, be it the birth of a child, a wedding or on festivals like Diwali and Akshaya Tritiya. Thus, it is likely that each household will have some amount of this precious metal which can come to their aid in times of need. As the name suggests gold loan is a loan that is given against gold which is used as collateral. Taking gold loan has its own benefits and drawbacks which we discuss here apart from the process involved in getting gold loans.

 

Gold Loans In India:

Almost all leading banks and various other NBFCs provide the option of taking a loan against gold. This is a secured loan that is given against gold ornaments, jewellery and gold coins based on the market value of the gold. The lender maintains some margin and the rest is disbursed as loan to the borrower. Thus if the value of the gold ornaments is Rs. 10,000 and the lender maintains a margin of 20% then the borrower can get Rs. 8000 as loan. Most lenders offer the facility of giving you an instant loan or they provide the loan the same day, which means you can have access to funds immediately when required. Most of the lenders do not charge any pre-payment penalty and processing fee but some may do so, thus one must check these aspects before applying for a loan.

 

Lenders also offer flexibility in repayment options which means one can repay the amount in monthly installments or pay the interest monthly and pay the principal at the end of the term or repay the entire amount at the end of the term. The borrower needs to provide a valid identity and address proof along with the Aadhar Card and the PAN card depending on the lender’s policies. Lenders do not seek to check the applicant’s CIBIL Rating before sanctioning these loans however some may have a minimum age criteria for the applicant.

 

Advantages of a Gold Loan:

Gold loans have some advantages over other sources of funding when someone requires funds for miscellaneous requirements.

  • Processing of gold loans is fast and the borrower can get funds immediately or within hours.
  • The borrower can choose to repay only the interest during the loan tenure and may pay the principal at the end of the term which gives flexibility to the borrower.
  • No income proof or credit check requirement for getting the loan sanctioned. As the gold serves as collateral the lenders are not worried about the safety of their funds.
  • When compared to personal loan interest rate the gold loans are available at much better rates which makes them cheaper than the most popular source of funding when money is required for miscellaneous uses.

 

Disadvantages of Gold Loans:

Every coin has two sides; there are certain disadvantages to taking a gold loan too which we describe here briefly.

  • Gold generally carries a lot if emotional value with it, thus parting with it may not come easy to the owner. There are occasions when one would like to wear their ornaments and if they are lying mortgaged in a bank then it might not be possible to do so.
  • Pledging gold for funds make sense only if the margin of safety that the bank keeps is reasonable else taking the loan may not make economic sense.
  • The flexibility of repaying just interest during the loan tenure may have its drawbacks also as the borrower may find themselves overwhelmed at the end of the term and may find it difficult to repay the principal. In other loans the EMIs have the interest and the principal component, thus there is more discipline approach to repayment.

So hope the above discussion gave you a valuable peek in the world of gold loans!