Tips to Help You Manage Your Education Loan Effectively
Latest Updates (2025)
- RBI guidelines enforce transparency in interest rates, collateral requirements, and repayment terms.
- The interest rates on education loans are linked to external benchmarks and are floating (approximately 10.25% to 14.00% p.a.).
- The Model Education Loan Scheme (MELS) 2022 is the current regulatory framework.
- Banks are now offering loans up to ₹50 lakhs for abroad studies with clear moratorium and repayment plans.
Table of Contents
Many students aspire to study at premier institutions in India and abroad. However, the fees for some courses today are very high, making them unaffordable for many. Education loans help students to fulfill their academic aspirations. However, it is important to manage your loan effectively to avoid becoming a defaulter. Read on for essential tips on effective loan management.
How to Manage Education Loan Effectively?
Pursuing higher education often comes with a financial cost, and for many students, education loans make it possible to achieve their dreams. However, it is essential to manage your loan wisely to avoid stress and ensure smooth repayment. Read on to know more about the ways to manage your education loan:
By Calculating the Total Loan Amount
Education loan borrowers should carefully assess the total repayment amount, which includes the principal, interest, fees, and other charges. Understanding the repayment terms and conditions is essential for effective financial planning. By knowing their exact repayment obligations, borrowers can create a structured plan to manage their loan payments efficiently and avoid financial strain.
Plan Your EMI
Borrowers should set an EMI that aligns with their financial capacity. They can opt for lower EMIs with a longer loan tenure or higher EMIs to repay faster, depending on their income. Higher EMIs should only be considered if they are affordable.
Use Grace Period or Repayment Holiday Feature Smartly
The grace period is not the same for every type of loan. Education loans also have a grace period/repayment holiday feature and borrowers should use it smartly to lower down their EMI. One way borrowers can reduce their repayment amount is by paying off a part of the interest during their study period itself.
Avoid Defaults
Failing to repay an education loan can harm your credit score and affect future loan approvals. To avoid this, plan your repayment carefully. If repayment seems difficult, applying with a co-borrower can improve approval chances and ease the burden. Smart financial planning ensures timely payments and reduces stress.
Earn and Pay
When people start earning, they should begin paying off their education loan. They can choose to pay lesser amount at the start if their salary is low and increase their EMI payments later.
Consider Debt Consolidation
In case you have multiple education loans, or multiple loans, you can consider debt consolidation. However, when opting for debt consolidation, do ensure that you don’t end up paying more interest.
Maintain a Good Credit Score
It is important you maintain a good credit score so that it becomes easier to avail yourself of an education loan. If you pay your loan on time, you will be able to avail yourself of loans in the future in a hassle-free manner.
What are the Consequences of Not Repaying Education Loan on Time?
It is important to repay the education loan on time to ensure financial stability and a good credit record. Read on to know more about the consequences of not repaying education loan on time:
- Negative impact on credit score: Not repaying your loans on time has a negative effect on your CIBIL score. Your CIBIL or credit score drops, making it harder to get future loans or credit cards.
- Difficulty in getting future loans: Once your CIBIL score drops, it will be harder for you to get a loan. Banks may reject your applications for personal, home, or car loans due to poor repayment history.
- Increased interest and penalties: Delayed payments can lead to extra interest charges and late payment penalties, increasing your total debt.
- Legal action by the bank: In some cases, if you don’t repay your education loan on time, the bank may take legal action or involve recovery agencies.
When you borrow a loan, it is important to repay it on time. Doing so will help you maintain your credit score, avoid unnecessary penalties, and ensure financial stability for both you and your co-borrowers.
Be Money-Smart with Our App
FAQs on Education Loan Tips
- How can I manage my finances, including education loans, while studying abroad?
Managing finances while studying abroad involves budgeting, tracking expenses, finding student discounts, and considering part-time work. It's also important to plan for your education loan repayments. For detailed tips on managing your finances and loans, check out our full guide on Managing Money While Studying Abroad.
- Can a co-borrower help in loan repayment?
Yes, having a co-borrower can improve your chances of getting your loan approved and make repayment more manageable.
- Is it better to opt for a longer or shorter loan tenure?
A longer tenure reduces EMI but increases interest, while a shorter tenure leads to higher EMIs but lower overall interest. Choose based on your financial situation.
Disclaimer
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.