Nowadays, students prefer taking control of their education financing rather than depending on their parents. They view student loans as a fantastic tool for achieving their academic aspirations independently. This growing sense of responsibility and self-reliance is admirable. Since study loans are often the first credit that students take, it is advised that they understand the education loan better. So, here’s what you must know about student loans.
Key highlights:
- How Education Loan Works
- Let’s Understand How Does an Education Loan Work in Detail
- What Are the Benefits of Taking Student Loans?
- How Does an Education Loan Work – Secured and Unsecured
- How to Repay Education Loans?
How Education Loan Works
A student loan is the amount that is borrowed from a financial institution to finance your education. You can repay your education loan through easy Equated Monthly Installments (EMIs) over the years. This amount can be utilised to pay for your tuition fees, accommodation costs, travelling expenses, etc. A student loan is available to study in India and to study abroad.
Let’s Understand How Does an Education Loan Work in Detail
What Are the Benefits of Taking Student Loans?
Before diving into how student loans work, let’s understand several advantages of taking student loans. Here are some reasons why opting for a student loan is a prudent choice:
Atmanirbhar
Education loans empower you to fund your studies independently without relying on anyone. You can take pride in earning your self-made badge by funding your education on your own.
Let savings be savings and assets be assets!
You no longer have to disturb your family savings or liquidate your assets. With an education loan, you can set aside your savings for a rainy day and use the savings only for emergencies.
Enhance your creditworthiness
So, how do student loans work to build your credit history? The answer lies in the repayment. When you repay your student loans, you develop a robust credit history. It will unlock several benefits when you opt for other financial products such as a home loan, car loan or credit card.
Don’t worry about expenses.
If you are wondering how an education loan works in your favour, you will be amazed to know that it covers the holistic cost of education, including tuition fees, travelling accommodation costs, living expenses, learning devices, and other education-related expenses.
Also Check: Things Every Student Must Know About an Education Loan EMI Calculator
How Does an Education Loan Work – Secured and Unsecured
Financial institutions offer both secured (with collateral) and unsecured (without collateral) student loans. You can select between the two based on your financial requirements and preferences.
For secured student loans, you will need to provide an asset as a security. Residential property, fixed deposits and non-agricultural land are some common forms of collateral accepted for secured education loans. Unsecured student loans do not require you to offer any asset as collateral.
How to Repay Education Loans?
Interest Servicing During the Course
Student loans often come with a moratorium period, which is like a grace period, where students are exempt from making the repayment. However, it is advised to make small contributions in the form of simple interest (SI) or partial interest (PI).
The moratorium period is not an interest-free period, and the interest begins to accrue from day one. Therefore, you must start paying SI/PI during this period. Furthermore, this will instil financially prudent habits, too.
Also Check: A Quick Guide About an Education Loan for PhD
EMI Payments During the Course
You can choose to pay the EMIs when your study programme is on instead of waiting until the completion of your education.
EMI Payments After the Course
Once your education has been completed and you start working, your regular EMIs will begin. You can design your repayment strategy depending on your financial needs.
Now that you know how an education loan works, you can embark on your academic journey by opting for a student loan. At Avanse Financial Services, we offer student loans for studying abroad and studying in India.
Our student loan comes with several benefits, such as 100% financing, quick loan sanctions and flexible repayment options. To learn more about education loans, please contact us. We will be glad to assist you on your academic journey.
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