The Pros and Cons of Taking Out an Education Loan

The Pros and Cons of Taking Out an Education Loan: In today's time, it is every student's dream to get a good education. But due to the increasing cost of higher education, it is not easy for everyone to pay college or university fees. In such a situation, "Education Loan" comes as a big support. It is a financial means through which students can meet their study expenses.

But is taking an education loan the right decision? It has its advantages, but there can also be some disadvantages. In this article, we will understand all the things related to education loan in simple and easy language - its advantages, disadvantages and precautions related to it.

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The Pros and Cons of Taking Out an Education Loan:

What is an education loan?

An education loan is a loan that banks or financial institutions give to students for their studies. With this, students can pay college fees, hostel expenses, books, laptops, travel etc. Usually this loan has to be repaid only when the studies are completed and the student starts working.

Pros of Education Loan:

1. Opportunity for good education:

Not every student has money for studies. But with the help of education loan, they can get admission in expensive colleges or universities. This increases their career opportunities.

2. There is no financial burden on the family:

By taking education loan, parents do not have to sell their savings or property. Students themselves take responsibility for their future.

3. Low interest rate:

The interest rate on most education loans is lower than other personal loans. Apart from this, many times interest discount is also available under government schemes.

4. Time to repay:

One special thing about education loan is that there is no need to repay the loan for 6 months to 1 year during studies or after completion of studies. This is called "moratorium period". This gives the student time to get a job.

5. Tax exemption

Under Section 80E of the Indian Income Tax Act, tax exemption is available on the interest paid on education loan.

6. Motivation to become self-reliant

Taking an education loan gives a sense of self-reliance and responsibility to the student. They understand that they have to repay the loan, so they remain serious in studies and are aware of their career.

Disadvantages of education loan:

1. Burden of interest -

Although the interest on education loan is low, but if the studies are expensive and the loan amount is high, then the interest has to be paid for years. This can increase financial pressure.

2. Worry of not getting a job -

Not every student gets a job immediately after completing studies. In such a situation, the burden of repaying the loan increases and mental stress can occur.

3. Impact on credit score -

If the loan is not repaid on time, it can spoil the student's credit score. This may make it difficult to take any other loan in the future.

4. Pressure on the family -

If the student is unable to repay the loan, the bank can recover the loan from the guarantor (often the parents). This can also put financial stress on the family.

5. Staying in debt for a long time -

It can take many years to repay the education loan. This can cause the student to delay marriage, buying a house, or other financial decisions.

6. Promotion of expensive education -

Some people believe that due to the ease of getting education loans, colleges and universities are constantly increasing the fees. This is turning education into a business.

What things should be kept in mind while taking an education loan?

Taking an education loan is not a small decision. Before this, some important things should be kept in mind:

1. Decide carefully how much loan to take -

Do not take more loan than needed. Take loan only as much as you have to spend. Meet the rest of the expenses with scholarship, part-time job or help from family.

2. Understand the interest rate and other terms -

Before taking a loan, read its interest rate, moratorium period, repayment time, penalty etc. carefully.

3. Check the quality of the course and college -

Do not take admission in any college by taking a loan. Study only in a recognized institute that gives good placements by taking a loan.

4. Estimate future income -

Estimate how much salary you will get after completing the course. Take a loan accordingly so that there is no problem in repaying it.

5. Make a plan to repay the loan -

As soon as you get a job, make a budget and start working on a plan to repay the loan. It is important to pay EMI on time.

What can be the options for taking an education loan?

If you do not want to take an education loan, then there are some other ways:

1. Scholarship:

There are many scholarship schemes in India and abroad. These can cover all or some of the expenses of studies.

2. Part-time job or internship:

Working for a few hours along with studies can also help in expenses.

3. Affordable government universities or open learning:

If private colleges are expensive, then look for options like government universities or open universities like IGNOU.

4. Online courses:

Nowadays, many good quality online courses are available which are affordable and also help in getting a job.

Conclusion:

Education loan is a good medium through which students can fulfill their dreams. It can give a new direction to their career. But it is important that before taking it, complete information is taken and a decision is taken thoughtfully. It is a responsibility, not just a facility. If education loan is taken by planning properly, then it can prove to be a boon. But if the loan is taken without preparation, then it can also become a burden. Therefore, caution is the biggest solution. We hope you get all point related to sofi student loans, discover student loan and school loans etc. from this article.