The prevailing misconception surrounding education loans is that they are exclusively available to students from disadvantaged family backgrounds. But, the fact is that they are a viable option for families who can fund the education of their children. Here, you might question the need for education loans if you already have the financial resources.
Despite being often overlooked, education loans can assist in developing positive financial habits. They enable the effective organization of your finances and offer various advantages.
In this post, we will discuss the reasons to obtain an education loan.
To effectively manage household expenses, categorize them for clear allocation between expenditures and savings. Compartmentalizing finances provides clarity on the desired savings amount. Saving for a child’s education is valuable, but it doesn’t mean dismissing education loans.
Savings and loans can complement each other to enhance financial management. Relying solely on savings for educational expenses strain savings and investments, potentially necessitating premature liquidation of fixed deposits and mutual funds.
Funding your children’s education is a wise choice, but it impacts their capabilities of being self-reliant. They often forget the value of money. Education loans can serve as a valuable tool for teaching your child how to handle their finances.
By utilizing education loans, your child can learn the art of setting financial goals and working towards achieving them, regardless of the circumstances. This cultivation of financial discipline at an early stage can have a lasting impact on their sense of responsibility as they mature.
Education loans offer an excellent opportunity to establish a solid credit history. As your child’s credit score improves, they become eligible for future loans of similar nature. With this, the child becomes financially independent and opens doors for future loans, if required.
Education loans provide the advantage of borrowing money at comparatively lower interest rates. Additionally, a strong credit score increases the chances of your child being approved for future credit with favorable interest rates.
Education loans prove especially valuable when pursuing higher education abroad. International education encompasses not only tuition fees but also living expenses and various other costs.
In many instances, relying solely on savings will not suffice to support your child’s education overseas, unless you have been diligently saving specifically for their education from an early stage. If the student deserves financial assistance, education loans are not only readily accessible but also manageable for them to repay while simultaneously obtaining their degrees from renowned institutions abroad.
Finally, an additional advantage of taking out education loans is the tax benefits associated with them. Education loans provide relief from paying taxes on the interest paid as the benefit is applicable to the interest amount and not the principal amount.
Once your taxable income has been assessed, you can take advantage of this tax benefit on the interest component without any upper limits. Typically, these benefits are availed by either the student pursuing an undergraduate or postgraduate course or their legal guardian.
As an education loan comes with several benefits, you should consider obtaining it for your child.
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