A foreign education loan is a way to finance your overseas studies. With the availability of a loan, students from a middle class background can now afford to go to school abroad. To apply for a foreign education loan, you must be able to prove that you are a qualified student and are eligible for the loan.
When choosing a foreign education loan, you should keep in mind that interest rates vary from one lender to another. However, many lenders use the London Inter Bank Offered Rate (LIBOR) to determine the interest rates on their education loans. The LIBOR fluctuates every two months, and these fluctuations affect the final interest rate for a foreign education loan. The value of currency also plays a huge role in determining the interest rate for a foreign education loan.
The duration of repayment varies from bank to bank, but most public sector banks release ninety percent of the loan amount for education. The remaining 10% must be repaid by the student. Therefore, it is important to calculate the repayment period using current exchange rates. Then, the student can start saving and repay the loan early.
Another important benefit of a foreign education loan is that tax benefits are available. Interest paid on the loan can be deducted from the borrower’s income tax return. Under the Income Tax Act, Section 80E allows borrowers to claim interest paid on an education loan as an education expense. However, these deductions can only be claimed for eight years.