Nowadays if you are looking for quality education, then it comes at a price. Whether you are a student or a parent when you start planning for higher studies one of the key ordeals you have to face is managing the expenses that will help reduce the burden of education loan. To have the best education, I am sure you will choose the best school and a prestigious college, no matter what is your choice you will have to pay hefty fees for these schools & colleges. Therefore, it is imperative to plan your finances accordingly as it can affect your kids’ future.
If you are really looking to evade spending a lot of amount of your funds on your kids’ education, it is important you have outlined certain things. Most importantly you will have to make a smart choice for an education loan, and secondly, you should be well-versed with how to manage your finances efficiently. Let me discuss 7 helpful tips to manage the education loan like a pro.
#1. Make Sure You Don’t Default
Considering the fact that getting an education loan is not a laborious task, there has been a surge in the number of defaults. Try and not to default, because if you do, then as a student it will ruin your credibility and will affect credit score of your parents/guardian. Let us assume, if the EMIs falls due for more than 5 months, then, in that case, the bank will consider this as a bad debt. No matter what you do, make sure you have avoided such a situation.
#2. Make The Most Of The Provisions
If you are a student, then there are various relaxations when we talk about education loan. The best way to choose the genuine one is to find the one that suits your needs and requirements. If you are a meritorious student, make sure you have selected a bank that waives off margin money, i.e., the percentage of the total expenses that needs to be paid.
You need to pay margin money if the loan amount is more than Rs. 4 Lakhs. If you are a female student, you can look for a lower interest rate as there is 0.5% relaxation upon the interest payment. Besides, you should not take the whole loan amount at once. Instead, you should opt for installments as this will help in reducing the burden of the loan.
#3. Have Plans To Repay
If you are thinking about adopting a smart approach, then nothing beats having an effective plan for the repayment before the arrival of the actual time. Usually, the repayment starts after the moratorium period, and it has been named as ‘repayment holiday.’ The moratorium period is for one year after you have completed your education term or after 6 months of getting a job, whichever is earlier.
#4. Manage Rate Variation
Generally, the interest rate on the education loan is a fixed spread and a base rate, it also tends to vary from bank to bank. An education loan is also known by the name of floating rate loan. Make sure you have a buffer amount in order to tackle a sudden situation of interest rate fluctuation.
Let us assume there is a significant rise in the interest costs, EMIs remain intact. Therefore it is important you have a respectable credit score, and you can maintain by making timely payments.
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#5. Postpone Payments
Let us assume currently you are not doing any job even after the grace period of the loan amount, and you have the provision of requesting your bank to hold up the payment. On the basis of your repayment capability, there are chances that your bank will allow you to extend your loans. Generally, the term of education loan is between 5 to 7 years and if the loan amount is up to Rs. 7.5 Lakhs, this term can be extended for 10 years and for 15 years if it is more than Rs. 7.5 Lakhs. Banks don’t have a dictatorial attitude, and they do agree to the genuine cases.
#6. Make The Most Of The Moratorium Period
No, you don’t need to start making repayments for your loan immediately. You have the provision to build a corpus in the extra time. You can use either to make the EMIs or prepayments. If you want to reduce the EMIs, if your situation allows you, repayment of the interest (while you are studying) can also be made. The bank will start charging interest rates, following the disbursement of the loan amount on the yearly or half-yearly basis. The amount keeps accumulating, thus increasing your burden of debt.
#7. Settle The Higher Loan First
In case you also have previous loans, make sure you have given importance to the loans having high-interest rates. You need to have a budget to recognize the total payment you have to make on a monthly basis and allocate the largest amount to the debt having a higher interest rate. Once you have made the payment, move on to the second debt with highest interest rate and pay off that as well.
Hi, my name is Ankita Dixit. I started writing from a young age, and most of my writing skills and knowledge are self-taught. Currently, I am working as a professional writer at Paisa.co. I have written on various topics including travel, motivation, finance, technology, credit cards, insurance, and entrepreneurship, etc.