Tag: cibil report

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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Spend For Your Kids, And Get Tax Benefits!

Bringing up a child in today’s world is an expensive proposition. Right from the vaccinations, to kindergarten school, various additional classes and of course higher education continues to burn a hole in the parent’s pockets. So all parents will be happy and curious to know that how some expenses made for their children can actually get them tax benefits. Though I am sure this is not a driving force when it comes to doing the best for their children but, it definitely does help if you can save some money while taking care of your children’s needs.  Here is a list of tax deductible expenses made for kids:

  • Tuition Fees:

There would hardly be any parent who would not like their child to be provided with the best education facilities. The tuition fees paid by parents whether it is for a school, college or university is allowed as a deduction under Section 80C (up to Rs. 100000) of the Income Tax Act. This deduction is allowed for two dependent children per parent, so if both the partners are working they can both claim deductions for two children each.

  • Education Loan Interest:

Often higher education needs to be supported with the help of an education loan. Even if one plans well and saves for their child’s higher education, they still may have to supplement the expenditure with a loan or in some cases they may totally be dependent on a loan to fund the higher education of their child. It is important that the guardian has a good credit score if they want to apply for any loan as a good score improves the prospects of getting a loan approved. When takes an education loan, the interest that is paid on the education loan is tax deductible under the Section 80E of the IT Act.

The education loan is provided a for a full time graduate or post-graduate course from a recognized financial institution for pursuing studies in areas of engineering, medicine, management, applied or pure sciences. Taking other loans to finances education may not be a good idea. While personal loan is much more expensive as compared to the education loan, they like gold loans or loan against securities do not have any tax benefits attached to them too!

  • Health Insurance Premium :

Getting health insurance for yourself and your family is important as the cost of medical care is spiraling out of control. It is especially important that children have adequate health insurance cover just like adults. Health insurance bought by an individual for himself/herself, his/her spouse and children are eligible for deduction from the income up to Rs. 25000 annually.

  • Amount Spent on Treatment of Disabilities or Certain Illnesses:

As per Section 80DD of the Income Tax Act, expenses made for medical treatment of dependent children and other relatives too suffering from disabilities are eligible for deduction. The limits for the deductions are Rs. 75,000 for disability of at least 40% and Rs 125,000 for impairment that is more than 80%. Section DDB provides relief on expenditure made for treating specified illnesses for self, dependent family members which include children. The limit for this deduction is Rs. 40,000.

  • Income from Investments Made in a Kid’s Name:

Parents generally plan for their kids secure future by saving for them or making investments in their name. The income that is generated from these investments is added to the parent’s income. Income earned from investments that are in a child’s name can be claimed as a deduction (from the total income) up to an amount of Rs. 1500. This deduction can be claimed for two children.

  • Some Additional Allowances:

A few more allowances are allowed as deductions from the income as per the IT Act. They are hostel allowances of Rs. 300 per child and education allowance of Rs. 100 per child. These deductions are available for maximum two children and these expenditures must be made in India. Medical expenditure made up to Rs. 15000 per year is also allowed as a deduction subject to a limit of Rs. 150,000 annually.

So as we said earlier that parents would not make expenditure on their children based on the tax rebates they get or do not get but these rebates can help you save some money in a world where inflation is constantly on the rise!

 

The Credit Card Secret That Could Boost Your Credit

A credit score plays a very big role in your daily life. The credit score can determine the interest rate when you opt for a loan or any financial product. Even if you have a good credit score which is suffice for taking a loan, there is no harm in boosting your credit score a bit before going for the loan. If you have 700 hundred as a credit score which is excellent but gaining an extra twenty will do you no harm.

But how do we achieve it in short span of time?

So here are some credit cards secrets on how you can boost your credit score from good to excellent which will save you a lot of money.

Don’t keep your credit utilization zero, use it wisely.

It is suggested by experts that one should use some limit of their credit card instead of not using them. We Indians have the tendency to opt for a credit card just for backup purposes and never use it, but this will affect your score more severely rather than using it. Use your credit card for grocery shopping or so which most of the people tend to do it via cash. This practice will not only help you boost your credit score but you also get award points. Determine your usage limit every month.

Pay your bills on time

Once you have used your determined credit limit, do make sure you pay your credit card dues on time. A we all know we need to make payment every 50 days of the limit used, the more regular you are on making payments the more your credit rating boosts. Use your credit card wisely and make payments time to time.  Vice versa if you do not make the payment on time the credit score goes for a toss and then it’s a long way to go.

Don’t close unused credit cards.

If you get a credit card try making small transactions on a regular basis and do not close the credit card account. If you make a decision that you do no need a credit card and paid all the dues related to the same this will affect our credit score. Always keep your credit card open and make small transactions on a regular basis but do not close it.

Don’t get a new credit card unless you need it

Don’t go for a new credit card unless you need one. Getting a new credit card means you will have to use it and sometimes the credit card converts from need to luxury. As you start making luxury expenses, you realize you are paying more than what you expected on the credit card bills. Again you will be stuck with overdue and will find no way out of this.

 

Check for errors on your credit report

Not only you need to pay your dues on time but also check on your cibil report from time to time. You can opt for a free cibil report from various online portals and check for errors, just don’t go through any banks to check your cibil score, so it will indicate that you were applying for a loan and were getting rejected on the same. Get a proper idea about your credit score ups and downs.

This is a few things you can control about credit scores and take it to your advantage. It’s easy to own a credit card, but you can avail the benefits of it if you use it wisely and know the hidden features upfront.