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A Student's Guide for Paying off Education Loan in India

IndianMoney.com Research Team | Posted On Thursday, May 09,2019, 05:05 PM

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A Student's Guide for Paying off Education Loan in India

 

 

An Education loan is the money borrowed from banks and financial institutions to manage education-related expenses. This type of loan helps bridge the gap between the required amount and the shortfall, thus helping you pursue and achieve your educational goals. An education loan can be availed by students who want to pursue higher education either in India or abroad.

The primary borrower of the education loan is the student along with his parent or guardian as co-borrower. An education loan can be availed to fund full time, part time and vocational courses. An education loan can not only help fund your education, but also helps you save on taxes as well as reduce the financial burden on families.

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A Student’s Guide for Paying off Education Loan in India

Education Loan Repayment:

Educational loans need not be repaid during the course period. The loan can be repaid after the course is over. Some financial institutions provide a moratorium period of 6 months to a year to secure a job and make the repayment process easier. The full repayment period ranges from 5-7 years. Throughout the period, the bank charges a simple interest rate on the loan. The payment of simple interest during the course period lowers the EMI burden on the student for future repayments.

SEE ALSO: Education Loan Procedure

How to Pay off Education Loan in India?

A badly managed education loan can lead to cash crunch and economic misery. Education loan helps students across economic backgrounds avail funds and strive for quality education which helps achieve career goals. In the past students who were able to secure scholarships could finance their education. With the increase in prices of different courses and up gradation in bank policies, a student loan has become popular among the masses. However, a borrower must also have the necessary information on the education loan repayment and must know how to manage it.

Remember never to misuse the moratorium period. The moratorium period is not an interest-free period and so the interest keeps on accruing for this period along with the already existing loan. Therefore it is wise to start repaying the education loan as soon as possible and build a good credit score.

Education Loan Repayment Tips:

Given below are some useful tips for education loan repayment:

  • Planning is Crucial for Education Loan Repayment: Make an effective plan of 4-5 years for education loan repayment. Create yearly targets, so that you are able to meet the payment schedule for education loan.
  • Pay a Bit Extra money with Each Installment: If you want to pay off the loan early, you can choose to increase EMIs and pay a bit extra along with each installment of your student’s loan. This will not only help repay the loan early, but will help save interest across the loan tenure. Education loan repayment is all about how soon you pay off the principal amount.
  • Get a Part-Time Job: studying abroad is costlier than pursuing a course in India. To pay off education loan early, many students take up part-time jobs while pursuing education abroad. A part-time job not only enables you to pay off the loan as per schedule, but also helps save money to ease up the whole process of loan repayment. This tactic is also used by students pursuing post-graduation courses in India.
  • Pay Variable Loan first: Education loans are of two types: One with fixed interest rate and the other comes with a variable interest rate. So, if your education loan is a variable one, it is wise to pay it early and avoid delays. Variable interest rate loans are susceptible to changes and a rise in the rate of interest may result in an added burden on your shoulders. So, if the current variable rate is lower, then consider paying off your debt to stay on the safer side.
  • Take Help From Employer: Some employers offer special terms for employees with a student loan. They agree to pay a lump sum at the time of joining the Company, towards the student loan of an employee. This type of arrangement reduces the loan burden and helps the student pay off loans in time. However, this can mean a lower salary and other employment terms and conditions.

SEE ALSO: Paying off Education Loan in India

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