Why Applying for Study Abroad Loans Better than Self Financing?

To study in the UK, the US, Canada and other distinguished countries is a dream of many students. Not only does the quality of education draw attention to the world-class education institutions in these countries, but the abundant career opportunities that offer a shot at a better future make for a compelling reason to study abroad. However, with the rising educational costs, pursuing an education abroad can be overwhelming.

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Pursuing higher education abroad has a significant appeal to it. Not only do students gain access to world-class opportunities, but studying abroad opens doors to new perspectives and transformative experiences.

However, over the last few years, as educational expenses have considerably risen, many students have reconsidered their decision to study abroad. While several consider self-financing, many others don’t have the necessary financial resources they can rely on. Fortunately for them, education loans become invaluable.

Not only do these educational loans for abroad studies open doors to a host of opportunities, but also reduce the financial burden parents typically bear.

What is Self Financing?

Self-financing or personal financing involves using personal savings or family contributions to finance your education abroad. Self-financing allows students and their parents to exercise financial control and independence without incurring debt.

What’s better is that self-financing reduces the burden of keeping up with loan payments and schedules. However, studying abroad incorporates a lot of diverse expenses that are not limited to course fees.

Self-financing an education abroad requires arranging significant capital upfront. Moreover, as self-financing limits spending in other aspects of life, it may not be feasible for everyone. This is where a study abroad education loan comes into the picture.

Benefits of Education Loans

Education loans are specifically designed for fulfilling the financial requirements of students pursuing higher education. These loans are tailored to individual educational needs and cover a large aspect of study abroad expenses, including tuition fees, accommodation, textbooks, study materials, transportation, and living expenses that can add up significantly over time.

Offered by several financial institutions, banks and NBFCs, at preferential terms, these loans are either collateral-based or unsecured. Some of the benefits of education loans include:

Reduced financial burden

Studying abroad requires a substantial amount of money. And while dipping into your savings sounds like a great option, it restricts your financial standing on a day-to-day basis. Not only is it likely that these expenses don’t cover complete educational expenses, but can eventually deplete personal or family savings. A study abroad loan, on the other hand, allows students to cover 100% of their educational expenses and keep their savings intact.

Competitive interest rates

Generally, the interest applicable on a loan depends on the credit score of the borrower/ co-borrower, their repayment capacity, borrowed loan amount, and other terms and conditions that may differ from lender to lender. While some lenders apply fixed interest rates, others may offer floating rates that are tied to a fixed interest rate and become variable based on market conditions, SOFR reset date and the spread. Compared to other loans, education loans are typically offered at a lower interest rate which makes it all the more feasible for borrowers to manage their monthly payments.

Tax benefits

Education loan comes with tax benefits. In India, interest paid on education loan EMIs during a financial year can be claimed for tax deduction under Chapter 6A of Section 80E of the Income Tax Act of 1961. These tax benefits alone can provide some financial relief to students and their families. While there is no maximum limit to this deduction, it is advised to consult with the financier to narrow down all details beforehand.

Educational loans for abroad studies are a practical alternative to paying from personal savings. They not only help spread the educational cost over time but also allow students to build their credit and develop financial literacy.