If you wish to pursue higher studies, you can do it with the
help of education loans. Banks and NBFCs provide loans to deserving students at
relatively low-interest rates. These loans help you bear all the costs
associated with the higher degree. Once you’ve completed your degree, you can
begin repaying the loan in Equated Monthly Installments. However, it is
essential to manage the loan from the time it is sanctioned. Here are some loan
management tips for you.
You must evaluate all the expenses related to the course
The costs of achieving a higher degree are not just limited
to tuition fees. There are several miscellaneous expenses such a cost of books,
dormitory fees or rent, library costs, travel expenses, food, and so on. You
also have to calculate the value of the education loan – the loan processing
fees, evaluation and administration charges, stamp duty, etc. While applying
for the loan, you must factor in all the costs associated with both the loan
and the expenses until you attain your degree.
Check if you can avail any financial aid
If you wish to reduce the cost of your education loan in India,
you should check if you can avail any financial assistance. Meritorious
students can typically avail financial grants and scholarships, which can help
reduce the cost of the loan. You do not have to repay the sums you get as
financial aid. Look out for awards on the internet. You could even ask your
current educational institution to assist you in securing these grants.
Ensure you have the necessary collateral
A student loan is usually a high-value loan. Typically, if
the principal loan amount exceeds ₹400,000, banks ask you to provide some
security or collateral to sanction the loan. For students, their parents can
serve as guarantors. You could also serve as a guarantor for your spouse
pursuing higher education in India or abroad. The guarantor generally provides
collateral or security. Banks accept properties, gold, fixed deposits, LIC
policies, etc., as collateral, which is returned only when the loan is repaid
in full.
You can start earning while you’re still studying
Let’s say your student loan in India
was taken to pursue higher education in the USA. If you can manage it, you can
take on a job after school hours and keep putting money aside. This money can
be used to cover certain personal expenses so that you do not have to depend on
your loan entirely. You can set a portion of the income earned from the
part-time job to make payments during the moratorium period as this helps
reduce the interest rate on your loan considerably.
Opt for mid-tenure loans
Typically, education loans in India can be repaid in tenures
lasting up to 15 years. However, it is not very wise to opt for long-tenure
loans. While the EMI may be lower, choosing longer tenures can increase the
interest pay-out considerably. As such, the overall cost of your loan can
increase manifolds. Evaluate your capabilities before determining the loan
tenure. If you think you have bright prospects ahead of you, you can opt for a
mid-tenure loan and repay it before schedule, without worrying about prepayment
penalties.
Final word: Repaying the education loan, just like
repaying any other loan can prove to be quite the challenge. Therefore, you
must devise strategies to manage these loans from the onset. Having a clear
loan repayment plan enables you to pay off your loan on time, without
defaulting.
