
The economy is down across the globe and on top of it the coronavirus pandemic has hit hard resulting in pay cuts and a large scale of employment. As a result, household income has seen a negative impact and this has made repaying the loans difficult. All the borrowers, including the students who have taken education loans, are facing the burden of it. If you are a student with an education loan and are finding it hard to repay or take a loan, you can consider the following five tips which might prove to be helpful.
1. Go for a collateral loan for a cheaper option
Most of the student loans provided by the bank are the ones that can be taken without collateral. However, on the other hand, it is a good idea to consider a loan with collateral as it can provide a cheaper option to students. Most of the banks that support educational loans with collateral provide the borrower with a lower interest rate compared to the higher interest loan of the unsecured loans without collateral. If you have handy assets like FD, land, and property, you can consider using them as collateral while applying for an education loan.
2. Choose to pay interest during the moratorium period
Many students also prefer to pay their education loans through Equated Monthly Installments or EMIs. However, the EMIs are not required to be paid as soon as the loan amount is received. The loan repayment can start once the borrower has a job in hand and the grace period of this is called a moratorium. Even though the borrower does not require to pay during the moratorium, the interest amount of that duration is added to the final payment. It is a good idea to pay the interest amount right during the moratorium period to reduce the overall cost of repayment.
3. Loan subsidy schemes
Most governments, with the help of different subsidy schemes, make education affordable for the students. Most of these schemes are available for meritorious students who come from economically weaker sections. There is a certain cap of the annual income below which such schemes can be availed. One can also apply for government-supported lotteries like West Bengal State Lottery and the Nagaland-state lottery, popularly known as Dhankesari for earning money which can be later used while repaying the loan.
4. Go for a shorter tenure when repaying through EMIs
Secure education loans are available for a longer tenure while unsecured education loans go for a shorter tenure. No matter which tenure you are choosing, it is always recommended that for the selected option, you can for the shorter tenure. It is because even the longer tenure reduces the monthly EMI rates, it increases the overall repayment cost. On the other hand, a short tenure might require one to pay heavy EMIs, but the overall repayment cost will be much lower. On top of that, there is no penalty in the prepayment of an education loan. Therefore, all the outstanding loans should be immediately repaid to save oneself from the burnt of the interest cost.
5. Concessional rates for women might be available
To support women’s education to walk towards gender equality, many banks provide concessional rates to the women who seek educational loans. Further, the lowest rates are made available to the women students who seek to pursue their higher education from premier institutions. If you are a women student seeking a loan, you should ask if they have special concessional rates for women. If yes, you should check whether you are eligible or not for availing of that offer. It is a good idea to check this from multiple lenders to ensure that you are getting the best value.
Once a loan is taken, it should not feel like a burden. The only way of ensuring that is through utilizing the loan to gain proper education to empower yourself in a way that repaying the loan looks like an easy job to do. Pre-planning and researching the best education loan available can prove to be a good investment of time as it will save you tons of money in the long run once your education is completed.