Income Tax Benefits – Education loan
offers a massive tax benefit that self-funding doesn’t. As per the Income Tax Act of India, interest paid on the education loan is eligible for deduction under Section 80E. Also, the deduction under this section can get claimed for a total of 8 consecutive years. That includes the year in which the loan gets taken or the period when the loan gets fully repaid, whichever comes first. Moreover, you can not only claim a deduction if you have taken the loan for yourself but also if the loan gets taken for your spouse or children. However, an important point to remember here is that only loans taken from gazetted financial institutions are eligible for these deductions. On the other hand, if you are a self-funded student, you cannot avail any such tax benefit on your education expenses.
Credit score advantage – You can significantly improve your credit score for future financing needs by applying for an education loan and complying with its repayment terms. CIBIL
scores play a vital role in the determination of eligibility for credit cards and approval of other loans like home loans, car loans, or personal loans. Therefore, increasing the credit score during your student-life can prove to be beneficial to you in the long run. Moreover, along with loan lenders, many employers also pay attention to credit scores as it reflects your trustworthiness. Low credit scores are usually associated with economic and personal instability. If you opt for self-funding on the other hand, you lose out on the opportunity to increase your CIBIL score for future financial needs and quick loan approvals.
Full cover – If you study abroad, there are various costs in addition to tuition fees that get incurred gradually. These costs include but are not limited to library fee, equipment charges, living and personal expenses etc. If you take an education loan, you can get assured of timely fee payments and full coverage of all those expenses that are required to support a healthy lifestyle in a foreign country. Self-funding, on the other hand, does not provide this benefit and the burden of various expenses can get accumulated with time and pose a problem while living abroad. For example, North Loop provides low-interest rate education loans that cover tuition fees, travel expenses, cost of buying books and study materials, laboratory fees, housing fees, laptop purchase and expenses for project work or study tours.
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