Many students today take education loans to study in some of the premium institutions of India and the world. The fees of some of the courses today are very high and not everyone can afford it. To help people get access to good education, banks and financial institutions introduced education loan. People can take this loan for the purpose of pursuing higher studies only. They have to repay it to their lenders along with interest within the tenure they took it for.
Ways to Effectively Manage your Education Loan:
- By calculating the total loan – Education loan borrowers must calculate and understand the total amount that they have to repay to the bank. This amount includes the principal amount, interest rate, fees and charges, etc. They must also be aware of all the repayment rules of the loan. When people know the total amount they have to repay to their lenders, it will become easy for them to plan their repayment.
- Plan EMI – Borrowers should set an EMI that can be paid easily. They can choose to keep it low and extend the tenure of their loan or they can choose to pay high EMIs and shorten the tenure. They should be ready to pay more money on EMIs only if they have a good income and can afford it.
- 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 – Defaulting on education loans can land borrowers into a lot of trouble. Their credit score will be affected and the possibility of getting loans in future will also be reduced. So, when people plan their education loan, they should ensure that they plan it in a way that their chances of becoming a defaulter is almost 0%. If borrowers think that they will not be able to repay the full amount back to their lenders on time, they can apply for an education loan along with a co-borrower.
- Pay other loans – Before taking an education loan, borrowers are advised to clear off all their previous loans (if they have any). They should pay off the loans that have the highest rate of interest first. Also, if they have other loans, they should plan their monthly budget well before adding the liability of an education loan. They should be sure that they can afford it to avoid a case of default.
- 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.
These are just a few tips that will help borrowers in planning and managing their education loan well. It is important that borrowers pay off their student loan. If they fail to do so, they will have to pay a penalty to their lenders.