Education loan is required by many students who wish to pursue their higher education which has higher fees.
There are certain education loan tips you need to take before getting an education loan to avail the full benefit of the loan amount.
Education Loan Tips before taking the Loan
Choose a course with good job security
To repay the education loan you need a source of income immediately after completion of your studies.
So, choose a college where you have a guarantee that you will get a job as soon as you complete your higher studies.
It is an important step to research the course you wish to pursue regarding the job opportunities.
Be sure to select the perfect course that will offer you a maximum amount of Return on Investment. This tip allows you to get a good benefit.
Evaluate all the course-related expenses
Check on all the expenses that are related to the course and the college which you wish to pursue.
These expenses will include the cost of living, the tuition fees, any course equipment costs, accommodation expenses etc. Using this tip gives a good benefit.
So, before taking the final decision regarding the amount of the education loan you wish to take, properly evaluate how much will the total course cost.
Decide the amount of loan to be taken
You must check all the required expenses and evaluate the need for the loan. Do not apply for a loan amount that you can afford by using your savings.
The amount of loan decides the burden you need to bear with the loan amount.
So, take an education loan for the least possible amount.
This tip helps you get a good advantage to take proper education loan amount.
Consider different bank options
There are many options available in the market which offer you an education loan. Check out all the options and choose the best option.
The factors to be considered in this case are interest rate, loan amount, loan tenure and other costs of the loan.
Calculate the total loan amount
Calculate the total amount of the loan which you need to repay to the bank. This includes the amount of principal, interest rate, fees and other charges to be paid.
Learn about all the other rules of repayment of the loan as per the terms of the bank. It helps you plan your repayment process.
This tip helps you to calculate the loan amount.
Plan your monthly instalments
A monthly instalment is a burden you need to bear every month. Plan your EMI carefully consider all your other expenses too.
You can choose to keep your EMI amount low and take up a loan with longer loan tenure. Or if you wish to take up a shorter tenure and choose to pay a higher EMI amount.
This tip helps you plan your monthly instalments properly.
Choose a loan with longer repayment tenure
It is an important decision you need to make regarding your education loan. When you research banks, make sure to check on their loan repayment tenure.
If you choose an education loan having a longer tenure of repayment, you will have a lesser amount of EMI to be paid monthly.
This tip will help you choose your education loan tenure.
Check what all expenses does it cover
An education loan you take should cover all your required expenses. Most loans provide only the Tuition fees, lab and equipment expenses.
But ensure that you won’t have any problem meeting with the accommodation expenses, living costs etc.
So, this tip will help you choose a loan which covers up all those expenses too.
Need for a collateral security
An education loan will need collateral security for an amount after a specified limit. A secured loan can be with the help of immovable property or with any assets like a fixed deposit etc.
A guarantor can also help you get an education loan. It requires the student’s parent or a guardian who needs to be a co-signor for the loan.
The amount of interest from an education loan can be claimed as a deduction under section 80E of the Income Tax Act.
This deduction is available only for 8 years after taking the loan.
Choose to pay automatically
Choose a payment method where your monthly payments are automatically deducted from your bank account.
It reduces the work of making payment by yourself. There is no reminder required to make the monthly payment of your EMI.
An automatic payment method can be chosen at the time of applying for the education loan.
Consider the grace period of the loan
The grace period is different for different types of loans and also based on different banks.
The grace period is an additional period provided by financial institutions to repay your loan amount.
Grace period for education loans should be an advantage to lower down your EMI. One-way borrowers can reduce the repayment amount is to pay off a part of the interest during the period of their study.
Understand the repayment process
There are different ways in which you can repay your education loan. Understand clearly the terms of repayment available in different banks.
The various types of payment process include payments through cheque, payment to the same bank directly, or payment to another bank.
Choose the best method of repayment which would give you the most benefit of the loan repayment.
Be aware of the Pre-payment fees of your loan
If there are any extra charges imposed by the bank for pre-closure of the loan, it is always better to get rid of the debts as soon as possible.
A percentage of the outstanding balance is charged in case you wish to take over your loan.
It will help you to reduce your principal amount which will again reduce the amount of interest on your loan.
Earn and pay is the best choice
When you start earning an income, you will be able to pay off your loan amount. You can choose to pay a low amount at the beginning of the tenure in case the starting salary is low. You can always choose to increase your EMI once your salary is increased.
These tips will help you to properly plan and manage your education loan without having much burden on the repayment process.
In case of failure to repay the loan amount, the borrower needs to pay a penalty to the lender. So, choose wisely the terms of your education loan.