Education loan repayment can be a burden if you don’t plan it in a smart and learned way. Many students see the education loan repayment as a major liability. Very often, they ignore the fact that if there’s a little amount of contemplation and planning is done before selecting the loan, all these uncertainties can be put to rest easily.
To plan the education loan repayment, you must understand the policies and several other aspects of education loan repayment. Read on to get thorough know-how of protocols and tactics to plan your education loan repayment process in an effective way.
Do You Need To Repay Education Loan While Studying?
Once students are aware of the number of EMIs they need to pay for their education loan repayment, the next question that crosses a student’s mind is if they need to repay while studying. To plan their loan repayment the right way, they must know the different repayment options.
Students who take an education loan are designated to a moratorium period. Ideally, during this period the student does not need to make any loan repayment. This is the time between the end of the course and the start of a job and RBI has asked banks to provide a moratorium period of one year after the completion of the course. A moratorium period acts as a financial cushion for students and gives them time to find works after completing their course.
How Planning Loan Repayment Can Help Students Save Big?
Planning your loan repayment properly can not only help students lower their financial burden in a formulated way but can also help to save big. And this planning can begin quite early, as soon as the loan is disbursed. Let’s take a look at ways in which students can lower their education loan burden while studying.
- Getting a Part-time Job Such as Assistantship
Working part-time during your education not only helps you with your living expenses but you will also be able to save some amount that can be used to repay the education loan.
- Get an Internship During the Summer Break
Study abroad Students are allowed to do internships during their summer break. This not only helps them get the applicable industry experience but also helps them earn between $3000 to $ 5000 that can again be used to pay a part of the education loan.
We also advise students to build a budget and stick to it. Removing luxuries and needless spendings and saving every penny should be a goal. This not only helps you save money but also get used to a lifestyle that is not extravagant. This will be helpful when you start earning and have money to spend but are wise enough to stick to your budget.
What Are The Top Tips on Interest Amount Repayment?
The first tip here is to study your financial condition and then decide whether you can manage to pay the full or partial interest during the moratorium period. This analysis will give you a clear picture of your financial liability and your ability to repay and thus help you plan and repay in an organized manner without any hassle.
Students should take advantage of features such as margin money, lower interest rates for women, benefits of schemes like Rinn Raksha, Interest subvention by banks for differently-abled or economically weak students and take advantage of the various premiums offered by the government.
Students are advised to take the loan amount in installments rather than in one go. Because the interest is calculated on the amount disbursed and not on the amount sanctioned. Hence, taking loan amounts in installments will help students to reduce their interest burden.
Students should opt for fixed interest rates while taking an education loan. As interest rates can change and thus affect their EMIs. If they have already opted for a floating rate of interest, we suggest you understand interest fluctuations and plan for increment.
Students should also understand the pre-payment policy of the lender and then take decisions on prepaying the loan or not.
What are the Pitfalls of Using a Longer Repayment Loan Tenure Extension?
Now that you are aware of how you can efficiently plan your interest amount repayment, let’s look at the pitfalls of using a longer repayment tenure. The additional interest that a student needs to pay when the loan tenure is extended is the biggest harm of such an extension. This additional interest puts a needless financial burden on the student. We advise you to stay away from this.
How Does Refinancing Help You?
As stated above, refinancing your education loan is much better than opting for a longer repayment tenure. This is because the student can negotiate for a lower rate of interest once they get a job and save their hard-earned money. An unsecured loan at 13% can simply reduce to 11.5% once the student gets a job. The lower rate of interest will reduce their EMIs and thus make education loan repayment a bit easier.