Education loans are important for those seeking higher education. However, it can create a financial burden after graduation.
So, it is important to select the loan terms, including the repayment options to effectively manage your debt once you start repaying after completing your education.
Understanding Education Loans
Students who wish to study in India or abroad can apply for education loans. However, the maximum amount available as loan varies widely and is based on factors, such as the course and also the reputation of the institute.
These loans support various programs, such as full-time, part-time, vocational, undergraduate, and postgraduate studies in the fields of engineering, management, medicine, hotel management, architecture and arts.
6 Strategies For Loan Management And Repayment
Explore Scholarship Options: Explore scholarship options to lessen the burden of the loan.
Explore Repayment Options: Before taking the loan, explore the loan options from various banks and other lenders, including the rate of interest, the repayment tenure, including grace period after completion of the course, prepayment penalty, and so on. There are multiple options available, such as standard, graduated and income-driven. Standard plans offer set monthly payments, while graduated plans offer lesser initial payments that increase over time. Plans that are income-driven modify your repayments in accordance with your income. Selecting the appropriate repayment schedule can greatly reduce the stress and increase the effective management of your student loan.
Create A Realistic Budget: Create a budget that accounts for expenses, such as hostel fees, food, transportation and other miscellaneous expenses. This will allow you to properly manage expenses and also help maintain a disciplined spending habit when the time for repayment comes. Review your budget frequently to make sure you don’t overspend on unnecessary items either during your study or during the repayment time so that you are able to successfully honour your equated monthly instalments (EMIs) on your education loan.
Consider Loan Consolidation: If you have taken multiple student loans, it may be easier to repay them all by consolidating them into a single loan with a single monthly payment. This can also make it easier for you to manage your finances by extending your payback period or lowering your rate of interest. Just ensure you review the terms carefully to understand the impact of the loan on your budget.
Make Extra Payments: Once in your job, try to make lump sum pre-payment on your loan to reduce the principal balance outstanding on the loan. You will be able to achieve financial independence sooner by reducing your repayment tenure, which will have a big impact on the overall amount of interest you will be paying on your loan should you decide to continue with the loan through its pre-decided tenure. Also check for any prepayment penalty.
Stay Informed: Keep yourself updated on the terms of your loan repayment and keep a regular check on your loan balances. You may make better decisions about your debts if you are aware of your progress, and any changes in the rate of interest on your loan.
