Personal Loan

What Are the 3 Things to Know Before Applying for a Personal Loan Covering Higher Education Cost

Thinking of doing an executive MBA from a premier B-school, but the cost is becoming a hurdle? Keep your worries aside. Your dream of pursuing an executive MBA course can very well come true if you take a personal loan. You can apply for it to fund your studies.

Many financial institutions are willing to offer you a personal loan for higher education. So, go online and compare all the available options. The documentation process is very simple, while the loan approval process is very fast. But when you apply, do keep these things in mind:

1) Check the CIBIL Score

TransUnion CIBIL is an agency that maintains your credit history and generates your CIBIL score using past data. Your CIBIL score matters a lot when you apply for a loan. A good CIBIL score increases the chance of a loan approval. Having a clean history can help you get a loan at the lowest possible interest rate. In contrast, a low CIBIL score may prompt the lender to reject your loan. At best, the lender may offer you the loan at a high interest rate. So, knowing your CIBIL score in advance can help you improve it before you apply for the loan or rectify any errors.

2) Choosing the EMI

Choose an equated monthly instalment (EMI) you can repay smoothly till you complete your course. The personal loan calculator helps you arrive at the EMI. You can tweak the tenor and the loan amount until you find the best option. Ideally, you should choose a longer tenor so that your EMI goes down and the loan repayment becomes smoother.

Banks offer personal loans, too. But for a faster approval, you can apply at a non-banking financial company (NBFC) like Bajaj Finserv. They offer you up to Rs.25 lakh in personal loan for minimal documentation.

3) Discipline

A personal loan EMI begins from the first month. So, follow the payment schedule the lender has stated. Track all the payments. Pay all your EMIs on time. One miss and the lender will charge you a penalty. And that will affect your credit score too. You must build a good credit score before you apply for a loan in future. Timely EMI payment can also invite some loan-related offers, like a top-up.

4) Tax Benefits

When you opt for a loan, you expect some extra benefits in the form of income tax deduction. And the benefit does exist here. You can claim a tax deduction on a personal loan meant for higher education. But know the rules first. The loan EMI consists of an interest and a principal amount. Under Section 80E of the Income Tax Act, you can claim a deduction on the interest you pay in a financial year. There is no upper limit on the interest amount. You can claim the deduction for eight years or the loan tenor, whichever is shorter.

5) Beneficiary

You can claim the tax benefit for your own education as well as for your child’s. But, only one person can claim the tax benefit for the personal loan. For instance, if you claim the tax benefit, your child cannot. So, keep this mind when you plan your taxes. 

So, now no need to shelve your higher education plans merely for cost issues. Take a personal loan and see your efforts bear fruit. But, do keep the above points in mind when you take a personal loan.

Leave a Reply

Your email address will not be published. Required fields are marked *