Q.1-10. Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some questions.
Most students dream of going abroad or joining one of the premier institutes in India to pursue higher education. However, this is usually an expensive proposition and, sometimes, out of reach for those belonging to the middle class. The best way to have access to all higher education options is via student loans. Nearly all banks offer preferential rates and terms for students looking to pursue higher education and no collateral is required for loans of less than Rs 4 lakh. There are several steps to paying off a student loan once you get a job. The first is to understand that the student or his/her guardian is liable to pay interest on the loan for the duration of education — that is, till the time the student is studying, the interest component of the loan must be serviced. The other aspect is that EMIs start after the first year of course completion or after six months from the date of getting the job, whichever is earlier.
Generally, students get loans at a lower rate compared to most other loans. Keep paying at least the interest component, since failure to do so may result in the bank considering this also as loan and charging interest on the interest component. Once you get your first job, ensure that you make a strict budget and adhere to it. Prepare a budget based on past financials and predict the probable future income. Also, it is important to factor in inflation into the budget. One of the major mistakes made while budgeting is over- or under-valuing an expense — this could lead to lower-than-optimum savings. One should study spending patterns over a period of time, and learn from these to correctly estimate the budget. This will ensure that there is enough money each month for living expenses, savings and repayment of loan.
There may also be cases of employers offering to pay off bank loans in lieu of signing on a bonus or in return for a bond that you will work there for a certain number of years. While this can go a long way in easing one’s loan burden, it is advisable to be cautious as there might be terms and conditions that the employer may include that could be detrimental in the long run — always check the fine print. Also, the loan repayment process should be automated (this is called an auto-debit facility) — the bank directly deducts the EMIs from your bank account each month on a predetermined date. Some banks may even offer a discount on the interest rate on your loan if you opt for the EMI facility. If you get placed in a well-paying job, you can reduce your loan repayment time period. This will lead to higher EMIs, but lower overall interest payments. This is because you pay more of the principal amount rather than paying more as interest. This will be beneficial in the long run as the total repayment will come down substantially.
Remember to take all possible deductions available under the Income Tax Act. Interest paid on these loans are also fully deductible from taxable income under Section 80E, up to eight continuous years, starting from the year in which the interest is first paid.
Q-1 In which of the following ways is the education loan different from other types of loans?
(A) EMIs start after the first year of course completion or after six months from the date of getting the job, whichever is earlier.
(B) The bank does not ask for collateral for a loan amount of less than Rs 4 lakh whereas it is required in case of other types of loans.
(C) It is offered at a lower rate of interest.
(D) During receiving education the interest component of the loan needs to be serviced which is not the case in other types of loans.
01. Only A and C
02. Only B and C
03. All except A
04. All except D
05. All of the above
Q-2 How is getting the loan repayment time period reduced beneficial for the borrower?
01. It reduces the mental burden one feels till one has repaid the loan amount fully.
02. After full repayment one can go for another loan, if required.
03. It reduces the overall interest component of loan.
04. It raises the credibility of the borrower which helps in getting loan amount sanctioned in future.
05. It is beneficial neither for the bank nor for the borrower.
Q-3 How does correct estimation of the one’s budget helps a person who has taken loan?
01. It helps in ascertaining the credibility of the bank and the possibility of taking loans, in future.
02. It helps in ensuring that one has enough amount for regular expenses, savings and for repayment of loan.
03. It helps one decide how one can maximize one’s expenses to be able to lead a luxurious life.
04. Only 2 and 3
05. Not mentioned in the passage
Q-4 Why, according to the author, does pursuing higher education remain out of reach for those who belong to middle class?
01. They do not have access to get adequate information about the process involved to receive higher education.
02. It requires one to remain committed to studies which poses difficulty for them
03. They remain contended with the education received comfortably and therefore do not want to put in effort or money in pursuing higher education.
04. It is an expensive proposition.
05. Not mentioned in the passage
Q-5 Which of the following could be the reason/reasons for which one fails to save the optimum amount?
01. When one fails to correctly estimate one’s expenses.
02. When one does not value money.
03. When one spends the money on one’s current needs.
04. When one spends a lot of money for humanitarian causes.
05. All of the above
Q-6 Which of the following is FALSE according to the passage?
01. In auto-debit facility the bank directly deducts the EMIs from the bank account each month on a predetermined date.
02. Budget can be correctly estimated by studying the spending patterns over a period of time
03. Most students dream of joining premier institutes in India to pursue higher education
04. Student loans offer higher rate of interest.
05. All of the above
Q-7 Choose the word most SIMILAR in meaning to the word printed in bold, as used in the passage.
Collateral
01. Security
02. Attendant
03. Vision
04. Repayment
05. Interest
Q-8 Choose the word most SIMILAR in meaning to the word printed in bold, as used in the passage.
Adhere
01. Probe
02. Violate
03. Observe
04. Disregard
05. Stick
Q-9 Choose the word which is most nearly the OPPOSITE in meaning as the word printed in bold as used in the passage.
Probable
01. Calculated
02. Contributed
03. Uncertain
04. Paid
05. Expected
Q-10 Choose the word which is most nearly the OPPOSITE in meaning as the word printed in bold as used in the passage.
Detrimental
01. Thoughtful
02. Inexplicable
03. Adverse
04. Favourable
05. Onerous
Answers
Q.1. (5)
Q.2. (3)
Q.3. (2)
Q.4. (4)
Q.5. (1)
Q.6. (4)
Q.7. (1)
Q.8. (5)
Q.9. (3)
Q.10. (4)
