Child's education on mind? You need to read this!
What's the story
In India, saving for your child's education is no longer optional, thanks to skyrocketing costs. Minors' education savings loans provide a financial safety net for future educational expenses, guaranteeing funds are there when you need them most. This article shares tips on how to effectively manage these loans in India.
Fundamentals
The basics of education savings loans
Child education loans for minors in India are tailored financial solutions that allow parents or guardians to access funds for their children's future education. These loans can be used for various purposes, such as paying for school fees, college tuition, buying books, and other expenses related to studies. With flexible repayment options and competitive interest rates, these financial instruments serve as a beneficial tool for proactive long-term educational planning.
Qualification
Eligibility criteria explained
To apply for a minor education savings loan in India, the applicant (parent or guardian) needs to fulfill specific eligibility criteria established by the lending institution. These typically include age restrictions (for both the minor and applicant), income stipulations, and documentation for identity and residence. Some banks might also necessitate a co-applicant or guarantor for the loan application.
Financials
Interest rates and repayment options
Interest rates on education savings loans for minors differ between banks and financial institutions, typically ranging from 8% to 12%. As always, one should compare rates from several lenders before choosing. Repayment terms are flexible, with options to extend up to five years following the completion of the child's education. Certain plans offer moratorium periods during which only the interest is to be paid.
Incentives
Tax benefits worth considering
One of the significant advantages of loans for minors' education savings is the tax benefits under Section 80E of the Income Tax Act. Parents or guardians can claim deductions on the interest paid over eight years, beginning from the year they start repaying the loan. It is essential to consult with a tax advisor to understand how these benefits apply to your situation.
Selection
Tips for choosing the right plan
When selecting an education savings loan for your child in India, start by comparing interest rates from various lenders. Analyze repayment terms and be mindful of additional fees. Assess the flexibility in fund utilization and ensure there are no prepayment penalties. By following these steps, you can choose a plan that aligns with your financial circumstances and your child's educational aspirations.