Education Loans Bolster Students Discipline

Most parents believe in the oriental theory that the better they are able to finance their child?s college education, the higher their performance and career would soar. They believe that if an individual is not burdened by the heavy weight of an education loan or does not have to work a part-time job to support himself, he will have spare time to achieve more. Contrary to this approach, recent researches show that kids whose educational expenses are incurred entirely by their parents, tend to overlook the true value of the excessive funds spent on their college education? often leading them to misuse both money and time. In the light of the present scenario, many enlightened parents take up this opportunity to inculcate a nascent form of financial discipline among their kids. Welcome the education loan!
So, here?s why an education loan can be good tutoring for your kid:
Develops Financial Know-How
When a student is taking a loan, he is committing to the lender that he will pay equated monthly instalments (EMIs) for the stipulated tenure. In a way, he is upholding that his account will have a sufficient balance on a monthly basis to pay instalments for the loan he has taken up. This realization inculcates a sense of financial discipline in the individual. He also comprehends that if he defaults on his payments, he would be damaging his credit record, which in turn, might jeopardize his future loan applications. By allowing kids to make wise decisions w.r.t. money, a parent actually lays the foundation for their future financial well-being.
Helps build credit history
Nowadays, a good credit score has become crucial to one?s financial success. Lenders study applicants? credit history to make assumptions about their position to avail of credit. The lower the credit score, the riskier the lender feels it is to lend money to an individual, and the higher interest rate it tends to charge if it is opting to approve one?s loan request at all.
Since an education loan is usually the first loan an individual avails of in his credit life, by setting up a good repayment pattern, one can build an impressive credit record. This, in turn, will be immensely useful when one seeks home loans, automobile loans and credit cards in the future. Therefore, an education loan is the smartest way to start building an early credit record- hence, easing out future prospects of your financial life.
Fosters Independence
Those days are past when an individual would resort to friends and family for a substantial financial help. With the onset of instant loans, a person can always borrow money from a lender bank and tread the path of financial independence. The maximum favour you could need from your acquaintances would be to ask them to be the guarantor while ensuring them of your reliable repayment capability. In this way, loans benefit people in learning to become competent and confident in managing the financial aspect of their lives. Enables tax saving
An education loan not only funds your college studies, but also helps save tax. As per Section 80E of the Income Tax Act, 1961, the interest payments on your education loan can be claimed as a deduction on your income tax.
Leads to Improved Self-Management
If an individual realizes that he will be paying for his own higher education, chances are that he?ll work harder in school to get academic scholarships so that the loan amount is lower. When parents fund for education, often it looked upon as an entitlement ? free money to be spent as one pleases. On the other hand, an education loan transfers the burden from the parent to the student. Since the student will be paying out of his own pocket for his present education, he will tend to make the best use of his term at college.