Tag: credit score

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!

 

3 Jobs That Can Be Harder to Get With Bad Credit

It is well known that low credit score hurts your credit eligibility. Did you know it also hurts your job eligibility? Probably not! For this is not a mandatory pre-qualification standard for most of the jobs. However if you are looking forward to make it big in the white collared job market, you probably may miss out that final call due to badly maintained credit score.

Most of us tend to learn from our mistakes. However the latter should not be the golden rule for learning. Whether you have just completed your graduation or someone who is looking forward to enhance their job profile, up-scaling your credit report may help you get hold of better opportunities.

Some employers consider your ability to increase CIBIL score as a reflector of your spotless character. It is likely that employers may initiate a background check for “security” reasons. Many jobs in the banking sector, particularly for the roles in compliance and governance such as those of treasurers, credit manager, loan officer and more require credit check.

All the major lenders including the largest public sector bank of India, SBI, private players such as IndusInd Bank, foreign lenders like Standard Chartered use credit check as a part of pre-employment screening process.

Three jobs that could be harder to get with low credit score are:

  1. Jobs that require high level of Security Clearance: From armed forces to government offices, many professionals require to go through rigorous security clearance. Herein a CIBIL report check is going to be a part of the background check. The purpose of pulling your credit report here would not be to gauge your credit worth but to make out an outline of your financial discipline. Your financial habits speak louder about your character. Thus to make out a better impression on any of the competitive exams such as CIVIL services you need to pay as much attention to your credit profile as to your examination preparation.
  2. Loan Broker
    FinTech sector is in the boom. And if you look forward to make a career as a loan broker, you ought to be really a master of maintaining a good credit history. Brokers are not the loan sellers but the loan locaters. They help borrowers find the low cost loans according to their repayment capacity. Thus before applying for the license you need to successfully put up a certificate for a good character and reputation. Your awesome CIBIL report can serve as the report card for the same.
  3. Bank Employees
    From loan officer to bank cashier, all need to ensure that they do not have red flags in their credit report. Before hiring the staff, banks make it sure that they do not have default or very high credit balance on their name. This adds to likelihood of safe financial conduct by the employees who would be interacting with public funds in large.

These are just a few examples on how bad credit can reduce the gleam of your resume. Not to forget the worst impact of low credit score is on your credit worth. It is very difficult to search loans for bad credit.

You can consider pulling out your free credit report and work for better rating. The most common factors that affect your credit score are: payment history, length of history, mix of credit, credit utilization ratio and recent credit queries. Besides do not forget to check the status of accounts wherein you serve as a Co Applicant or a Guarantor. If any of these accounts are not closed properly, they would appear with red flags in your report too.