Student loans, commonly known as education loans, are best utilized to meet the costs associated with attending colleges, either domestically in India or overseas. Banks in the public and private sectors offer loans, and unlike other consumer loans, education loans have a moratorium period and a one- to two-year loan repayment extension.
Undergrads do not have to undergo a credit check, but parents and guardians must meet certain requirements in order to be granted credit, including providing proof of income and collateral. Although student loans are costly, both public and private banks have cheaper interest rates than those offered by non-banking financial institutions.
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Pros and cons of education loans
Discussing the advantage
Afford college, of course– Although costly, higher education is still essential. You can receive full assistance from an education loan if your current financial status prevents you from attending college.
Family responsibilities fulfilled –There are opportunities for a relieved life when your parents shoulder your financial burden for a while, especially if it involves college.
Your financial independence– Your ability to study and achieve your goals, as well as to pursue higher education without financial limitations, is made possible by education loans. A strong repayment plan could enable you to create the perfect financial environment for yourself.
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Discussing the Disadvantage
A burden after all: Let’s face it, repayments are difficult and intimidating. A default on a loan lowers your credit score and makes it more difficult for you to get new loans in the future.
Past Due: Not being able to pay back a single EMI on time puts pressure on you to find additional funds to make it through the remaining EMIs. Therefore, failing to make even a single EMI payment can result in ongoing lateness.
Not adaptable. At all – You have very little flexibility when studying with a student education loan when it comes to switching schools or courses. Lenders will charge you additional fees and service charges if you leave your college or university early.
Considerations before requesting a student loan
Understand the terms and conditions of the loan: This covers elements like the interest rate, the length of the repayment plan, and any potential costs or penalties. It’s crucial to go over the fine print and, if you have any questions, to ask them. It’s wonderful to have a parent, guardian, or even a family attorney. They will respond to inquiries you never would have thought to make.
Compare interest rates and fees: Since not all lenders are made equal, it’s a good idea to shop around and compare the fees and interest rates of several lenders to make sure you’re getting the best offer. You must choose the most advantageous interest rate offered by the lender because they differ. Continue looking for the greatest one
Consider the total cost of the loan: This covers the total amount you borrow as well as the interest you will accrue during the loan’s term. Make sure you have the money after you graduate from college to pay back the loan.
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Recognize the possible repercussions of defaulting: There are severe repercussions for loan default, including harm to your credit report and possibly legal action. Collateral is occasionally involved as well, which in some circumstances could pose a serious issue. Thus, before taking out a loan, be sure you have the financial capacity to pay it back.
Examine the requirements for eligibility: Verify that you meet the requirements before applying because different lenders have different requirements. This could include details about your income, credit score, or intended school.
Maintain documentation and communication with the lender: Following the submission of your loan application, be sure to maintain track of all loan-related paperwork and stay in regular contact with the lender. By doing this, you can make sure that the loan application process runs smoothly and that you are informed of any crucial deadlines or updates.
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The final word
It’s critical to keep in mind that taking out an education loan is a big decision that should not be made hastily. You’ll be in a better position to make an informed decision that will help you pay for your education without having a detrimental effect on your future finances if you take these six factors into account before you borrow money.
Before you sign on the dotted line, don’t be scared to research the terms and conditions of the loan, ask questions, and make sure you understand them completely. It’s also crucial to remember that the Indian government offers a number of education loan programs, including the Interest Subsidy Scheme for Education Loan (ISSEL) and the Central Sector Interest Subsidy Scheme (CSIS).
Before applying for a loan from a private lender, it’s a good idea to look into these programs and see if you qualify for any of them as well.
Conclusion
Getting an education loan can be a fantastic way to finance your studies, but you should always make an informed choice before doing so. You can make an informed decision that will help you pay for your education without negatively affecting your future finances by carefully reviewing the terms and conditions of the loan, comparing interest rates and fees, calculating the total cost of the loan, being aware of the potential consequences of defaulting, meeting the eligibility criteria and keeping records, and keeping in touch with the lender.
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