Students zealously chase their academic aspirations by opting for a loan for education to fund their higher studies independently without depending on their parents. As the student loan is your first debt, you must carefully plan the journey ahead. Here we will share with you some common mistakes you can easily avoid to ensure a seamless student loan experience.

Key Highlights

·         Not conducting thorough research

·         Shortlisting financial partners based only on education loan rate of interest

·         Borrowing more than the average student loan amount required

·         Not selecting the right repayment strategy

·         Not considering the budget

Here are some student loan mistakes and tips to avoid them

1.    Not conducting thorough research

Imagine this scenario - You received an education loan and are ready to embark on your academic journey, only to discover costs and fees that were never communicated to you by your lender. Focusing on your studies can become challenging and unnecessarily stress you out. Most student-centric financial institutions will be transparent about all the fees, terms and conditions. So, you will never end up signing up for anything that can bother you.

Some useful tips to avoid this situation

·         Speak to family members and peers who have taken an education loan before.

·         Compare financial institutions based on the parameters beyond interest rates.

·         Read the fine print to understand fees, terms, conditions, and repayment options mentioned in your student loan document.

·         Connect with your lender to clear your doubts, if any.

 

2.    Shortlisting financial partners based only on education loan rate of interest

One of the common mistakes that most students make is shortlisting the education loan financer based on the low student loan interest rate alone. In this process, they ignore other important aspects that will affect their loan, such as features and benefits offered by the provider

Some aspects to check when selecting the education loan financer

·         Costs covered

·         Fees

·         Student loan processing time

·         Repayment options

·         Customer service

·         Customer ratings

 

3.    Borrowing more than the average student loan amount required

The amount you need to borrow will depend on multiple factors, such as the total cost of education. Before applying for a loan, identify the loan amount you will need by ascertaining the total cost, including the tuition fees, accommodation costs, living expenses, and travel costs, to name a few.

So, how to estimate the loan amount?

·         Visit your university’s official website to know the tuition fees of your study program.

·         Use College Course Expense Calculator, an online tool to estimate your potential educational expenses.

 

4.    Not selecting the right repayment strategy

What may be a perfect repayment strategy for one student may not always be the right repayment plan for the other. So, you must select the option that best suits your requirements. Please remember a longer tenure will come with a lower education loan rate of interest and vice versa. Ideally, the duration to repay the loan will depend on your repayment capacity.

How to develop a smart repayment strategy?

·         Pay simple interest/partial interest during your moratorium period, as it is not an interest-free period, and interest will begin to accrue soon after you take a student loan.

·         Use Education Loan EMI Calculator to check different combinations of tenure and education loan amount to find the EMI that best suits you.

·         Set aside some corpus to continue to pay your student loan EMIs in case of an emergency.

 

5.    Not considering the budget

When you take an education loan, repayment is of utmost importance as it will positively impact your credit score. A healthy credit score will unlock multiple benefits when you opt for other financial products such as credit card, home loan or car loan. Therefore, students must create a monthly budget to stick to it to ensure seamless repayment of the loan.

Some valuable tips

·         Identify the difference between your needs and wants.

·         Create a budget considering your monthly expenses.

·         Spend judiciously to save up, to pay the simple interest/partial interest during your moratorium period.

·         Consider a part-time job to earn extra bucks to support your student lifestyle.

So, here are some mistakes to avoid to enable a hassle-free education loan journey. At Avanse Financial Services, we offer loans for students to study in India and abroad. We offer education loans that cover the holistic cost of education, including tuition fees, accommodation costs, living expenses, travelling expenses, cost of learning devices, study material costs and other education-related expenses. If you have any doubts, please connect with us, and we will be glad to partner with you on your academic journey.