Keep the following points in mind before taking an education loan.

1) Banks provide education loans to pursue academic and job-oriented courses approved by them. They cover the tuition fee, hostel expenses, books and useful equipment, travel for overseas courses and other expenses essential to completing the course.

2) The maximum amount of the loan ranges from Rs 10 lakh for Indian courses to Rs 20 lakh for studies abroad. Banks may consider a higher loan depending on the course. Margins are required for loans more than Rs 4 lakh.

3) Parents are required to be joint borrowers for all loans. If the loan amount is more than Rs 7.5 lakh, tangible assets are required as collateral security. For loans between Rs 4 and Rs 7.5 lakh, a third-party guarantee may be required.

4) Repayment commences one year after the course ends or six months after the candidate gets a job, whichever is earlier. The EMIs are calculated with a tenure not exceeding 10 years for loans up to Rs 7.5 lakh, and 15 years for higher amounts.

5) The entire interest paid on the education loan is tax-deductible under Section 80E. The deduction for interest payment is available for eight consecutive years, the first year being the year in which the repayment starts.

Source: Centre for Investment Education and Learning

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