3 cost of an educational loan you should keep in mind.

Educational loans are simply amazing. They give wings to your aspirations and allow you to chase what you deserve. However, these finance solutions come at a cost and this article will discuss some of the factors that contribute to this proverbial price tag.

1. The charges.

One of the first factors that influence the cost of an Educational Loan is the charges involved. Of them, the first and more formidable is the processing fee. This can account for an upfront expense which could be as much as 1 or 2 percent of the amount you’ve applied for.

An important thing to note about this cost is the fact that it will not be refunded, come what may. Even if your application does not go through, this amount will not be given back to you. So before you apply, ensure you’ve taken all the steps you can to ensure approval of your application.

If possible, latch on to a lender that has zero processing fees or offers to waive off the same if you have good result in your schooling and/or college career. This is a benefit that may be extended to you even if you have surpassed the rest on your entrance exams.

Besides for the processing fee, there are numerous other Study Loan charges as well. These include late payment charges, cheque bounce charges, prepayment charges, etc. Now, you should know that, though all lenders will have a list of charges, the number of charges they have under this list & how much they charge against each charge will vary from one lender to the next. This makes it extremely important to compare before you apply.

2. The down payment.

Some lenders will require you to pay a down payment. Without this down payment, they might even refuse the loan. Usually, the amount of down payment, which also referred to as margin money, is higher for a higher loan amount. Fortunately, you can avoid paying this amount by choosing to borrow from a non-banking finance company – they usually provide 100% finance solutions.

3. Interest rates.

Of course, the last cost of educational loan is the interest rate. Yes, you’d have to pay anything between 9 and 14 percent in this regard, which is much lower than personal loans. Also, you can avail lower rates by offering down payments & collateral even if you’re not required to do so. Also, as mentioned above, some lenders offer lucrative benefits to those with a stellar academic record, of which lowered rates could be one of them.

It’s important to know that educational loan interest rates help you save money as well. This is through the tax deductions offered under section 80E of the Indian Income Tax Act. It states that the interest amount you pay in a year can be used to claim equal deductions on your taxable income.

We hope this has given you a better understanding of the cost of educational loans. Good luck and all the best with your studies!

Related Blog – Why it makes sense to opt for educational loans?