Many students prefer an education loan over having their parents finance their education as it allows them to fund their education independently. Instead of depending on parents or liquidating family savings, students choose to take responsibility by opting for a student loan. We applaud the spirit of students like you who aspire to earn a self-made badge. To responsibly repay the education loan is equally important. This article will shed some light on some important aspects of education loan repayment.
But before we understand the education loan repayment, let’s understand what exactly an education loan is.
Education loan
It is that amount that students can borrow from an education loan provider to finance their academic aspirations. You can repay the education loan over a period of time through easy Equated Monthly Instalment (EMIs).
Why is education loan repayment necessary?
Repaying the loan is just as important as opting for an education loan in a student’s journey. The repayment of an education loan will have a direct bearing on your credit score. Non-repayment will have an adverse effect on your CIBIL score, which will affect your potential to get better deals on other financial products such as car loans, home loans, or credit cards in future.
Also, please remember that if you skip the EMIs for a few months, your education loan provider will have no choice but to declare your education loan as a non-performing asset, which will have severe repercussions on your collateral (if any), your loan portfolio and your overall financial health. This will affect not only your credit score but also your co-applicant’s credit score.
Education loan repayment strategies
Once you take an education loan, ensure you have your education loan repayment strategy in place. So, are you thinking about how to plan it? Here’s how.
1) Contribute during the moratorium period
Most education loans come with a moratorium period. The moratorium period is like a grace period where you are exempted from making payments against your education loan. The moratorium period will vary depending on the education loan provider. However, it would be an effective education loan repayment strategy to make small contributions in the form of simple interest or partial interest.
This is essential because interest starts to accrue from the day you take an education loan, regardless of whether you make the repayment during the moratorium period or not. So, paying off a small amount during the moratorium is a wise decision. Secondly, it instils financially prudent habits early in your life.
2) Education Loan EMI Calculator
Before opting for an education loan, you must find the right mix of tenure and EMI. The Education Loan EMI Calculator is a smart online tool where you can enter the rate of interest, tenure, and loan amount to find your estimated EMI amount quickly. This calculator makes life simpler as the results are super quick. Since you can try different combinations, it aids in creating an education loan repayment strategy that best suits you.
3) Create a corpus
You should consider creating a corpus for education loan for the same reason you create family savings – emergency. The best example would be the current pandemic which has created financial hurdles. Hence, when you opt for an education loan, you must start planning to repay the amount. This planning should include saving money right from the time when you decide to pursue higher education, setting aside some amount every month from whatever money you earn, spending judiciously, especially if you are staying abroad so that you can continue with the education loan repayment in case of any emergency.
4) Broader vision
Your academic success and employment potential will play a pivotal role in your education loan repayment. Hence, it is imperative that you carry out in-depth research when you plan your higher studies, whether you study in India or abroad. Learn about the demand for the course, if it offers lucrative opportunities and more. If you have a promising career, it will assist you in paying off your education loan easily.
So, these are some essential things that you must know about education loan repayment. If you want to earn a self-made badge, you too can opt for an education loan. At Avanse, we offer education loans that cover the holistic cost of education, including tuition fees, travel expenses, study material costs, learning devices, and more. If you need any assistance, we at Avanse will be glad to assist you. All you have to do is connect with us. All the best!
