Question 1

How is education loan EMI calculated?

Accepted Answer

Education loan EMI is calculated using the formula: EMI = [P x R x (1+R)^N] / [(1+R)^N - 1], where P is the loan amount, R is the monthly interest rate, and N is the number of monthly installments. Education loans typically have longer repayment periods (5-15 years) compared to other loans.

Question 2

What is moratorium period in education loans?

Accepted Answer

Moratorium period is the time during which you don't have to make EMI payments. For education loans, this usually covers the course duration plus 6-12 months grace period after course completion. During moratorium, only interest is charged, which gets added to the principal amount.

Question 3

What are the eligibility criteria for education loans?

Accepted Answer

Education loan eligibility depends on co-applicant income, course type, institution reputation, and loan amount. Generally, loans up to ₹4 lakh need no collateral, while higher amounts require security. Good credit score and stable income of co-applicant are crucial.

Question 4

Are there tax benefits on education loan interest?

Accepted Answer

Yes, under Section 80E of Income Tax Act, you can claim deduction on interest paid on education loans for higher studies. The deduction is available for 8 years or until interest is fully paid, whichever is earlier. This benefit is available to both self and spouse's income.

Question 5

What is SIP and how does it work?

Accepted Answer

SIP (Systematic Investment Plan) is a method of investing a fixed amount regularly in mutual funds. It helps in averaging the purchase cost and benefits from the power of compounding over time.

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