If your children are studying in classes between nursery and class X, then the school fees may be pinching your pocket. In metros like New Delhi and Kolkata, school fees are seen touching six digits. To give you some relief, there are banks that offer loans for such fees.
Who can get this loan?
You should be a citizen of India and your child must get admission in a recognised school. Banks will ask for identity proof, proof of income, student’s mark sheet and admission proof.
What can you use it for?
The loan amount can be used to pay fees for examination, library, laboratory, hostel, to purchase books, equipment, instruments, uniforms, personal computers, laptops wherever required.
Interest rate: The interest rate on such loans is around 12.5-14.8%.
According to a loan portal, Bank of Baroda charges 12.8% per annum, while Central Bank of India lends at 13.8% per annum.
Loan amount: The loan amount is in the range of Rs 4,000-4 lakh.
Yearly sub limit: The loan has sub limits for each category, such as tuition fees and laboratory charges.
Loan tenor: Loans for each yearly sub-limit is repayable in 12 equal monthly installments.
Disbursement: The bank will directly disburse the amount to the school.
Tax benefit: In case of loans taken to pay fees, only the interest component is deductible under section 80C of the I-T Act, and not the principal.
What about repayment?
The first installment for the loan repayment is to be paid 12 months after the first disbursement of each year’s loan component.
What should you do?
If your income is not enough for your child’s fees, then there are cheaper options available such as loans against securities, gold and property.