Student loans play a crucial role in the lives of countless aspirants pursuing higher education. Yet, there are plenty of myths about student loans that can cloud their decisions. These misconceptions can lead to confusion and poor decision-making. So, let’s debunk some of the most prevalent myths about education loans. This will enable you to proceed with the education loan process with confidence.
Key highlights:
- Debunking Student Loan Myths
- Myth: You’ll never be able to fully repay your loan
- Myth: You should consider borrowing the maximum amount possible
- Myth: You should choose a student loan with the lowest possible interest rates
- Myth: Obtaining a student loan without collateral is impossible.
- Myth: Since education loans are meant for students, there is no need to have a co-applicant
- Myth: Student loans cover only the tuition fees that have to be paid to the university.
- Myth: Students should have a robust credit score to get education loans.
- Myth: Liquidating assets and family savings are better than student loans.
Debunking Student Loan Myths
Myth: You’ll never be able to fully repay your student loan
Fact: With effective repayment strategies, you can repay your student loan. Most student loans come with a moratorium period where you don’t have to worry about paying your EMIs. However, at Avanse Financial Services, we advise making some small payments in the form of simple interest (SI) or partial interest (PI) during this time.
Remember, this isn’t an interest-free period, so interest starts piling up right from day one. Furthermore, making those SI/PI payments can help you build some solid financial habits. Once the moratorium wraps up, you’ll be ready to tackle your student loan with manageable EMIs.
Also, setting up a rainy day fund can help you handle your student loan payments even when situations like a health crisis pop up. So, it’s smart to be careful with your spending and set aside some emergency corpus to continue with repayment even during emergencies.
Myth: You should consider borrowing the maximum amount possible
Fact: One of the facts about student loans is that borrowing either too much or too little can really increase your stress. When opting for a student loan, ensure you borrow the right amount. You can use the Education Loan EMI Calculator to understand estimated EMIs, the College Course Expense Calculator to know your potential college expenses and the Education Loan Eligibility Calculator to know the approximate education loan amount you are eligible to borrow based on your current finances.
Also Read: Everything You Need to Know About Education Loan Repayment
Myth: You should choose a student loan with the lowest possible interest rates
Fact: This is one of the most common student loan myths. In fact, there are other parameters that should also be considered when opting for an education loan, such as time taken to sanction the student loan, costs covered, customer service, repayment options, features and benefits extended to you, to name a few.
Myth: Obtaining a student loan without collateral is impossible.
Fact: Financial institutions, including Avanse Financial Services, offer both secured (with collateral) and unsecured (without collateral) student loans. You can choose between the two based on your financial requirements and personal preferences, and this is one of the facts about student loans.
Myth: Since education loans are meant for students, there is no need to have a co-applicant
Fact: An education loan is often the first credit in a student’s life. Therefore, financial institutions will need a co-applicant who will share the responsibility of repaying the student loan. The co-borrower must be an Indian citizen and should be a parent, legal guardian, sibling or other blood relative.
Myth: Student loans cover only the tuition fees that have to be paid to the university.
Fact: Education loans cover the holistic cost of education, including tuition fees, travelling expenses (airfare), accommodation costs, living expenses, the cost of learning devices and other education-related expenses.
Also Read: How to Get an Education Loan: A Brief Guide
Myth: Students should have a robust credit score to get education loans.
Fact: Let’s bust this myth by sharing some facts on student debt. Students are often first-time borrowers and usually have no work experience and no credit score. Keeping this in mind, new-age lenders prioritise their student profiles to determine their employability potential.
Therefore, financial institutions will evaluate parameters such as academic scores, entrance exam scores, the pedigree of educational institutions and continuity in education, to name a few. Also, the financial background of your co-applicant will be thoroughly analysed.
Myth: Liquidating assets and family savings are better than student loans.
Fact: If you choose to liquidate assets or dip into family savings to self-finance your education, you will have nothing to fall back on during emergencies. So, one of the student debt facts is that when you opt for an education loan, you can fulfil your academic aspirations and let savings be savings. This approach will empower you to become Atmanirbhar and enable your parents to set aside some funds for rainy days.
So, whether you want to opt for an education loan for studying abroad programmes or to study in India, student loans are prudent to finance your education independently. To know your estimated EMIs better, you can use the online EMI education loan calculator. If you have any more questions, please contact us. We will be glad to assist you.
