Having to pay for college will instill in your child a sense of responsibility in addition to learning the value of money.
Par Chaitali Dutta
My son wants to take out a study abroad loan. I am not in favor of it and would prefer to sell a property and finance its tuition fees. What would be your advice and how are interest rates and repayments calculated?
—Raj Kumar Verma
There are pros and cons of both options. In favor of the loan are the facts that the interest rates are currently low and you will be able to get a cheap loan. Having to pay for college will instill in your child a sense of responsibility in addition to learning the value of money. Interest paid on the student loan is also eligible for the taxable income deduction, which you can claim, in case you pay the interest before the start of the EMI. The downside here would be that it comes at a cost which is the interest you have to pay on the loan. If you sell the property, you convert an asset into an investment for your child’s future. There is no interest involved here. However, look at the loss of opportunity that would be the rental receipts for this house. You can also realize capital gains on the sale, where tax is applicable. Currently, real estate is going through a period of weakness in terms of rates. You may have to wait for an appropriate selling price and a suitable party to close the deal.
My home loan has been disbursed and I have chosen the EMI date as the 15th of each month. If I had opted for the 7th day of each month, would my interest expenses be reduced? Also, can I change the date after a few months?
—Madan Kanti
For periodic monthly interest, this date is irrelevant because you have to pay interest for the 30 or 31 days immediately preceding it. If you are looking for a lump sum payment, the earlier in the month the better. Yes, it is possible to change the date of the EMI after consultation with your banker.
Are there prepayment penalties for prepaying a gold and student loan?
—Sangeeta Garg
In general, there are no prepayment penalties for such loans. However, it may be advisable to check your letter of arrangement for such a restrictive covenant, if applicable. Sometimes financial institutions, in their enthusiasm to book the business, may not mention these clauses in detail.
The writer is founder, AZUKE
Personal finance advice (www.azukefinance.com).
Send your questions to [email protected]
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