Your student loan journey might go much more smoothly if you avoid these mistakes.
Education loans are the key to a child’s ideal university, whether it be in India or outside, for a lot of Indian families. However, individuals often miss important factors that might later lead to financial hardship in their haste to get finances. Here are some tips for avoiding the most frequent errors made by borrowers when they apply for an education loan.
Not evaluating lenders
Many applicants do not investigate what other lenders are providing and instead go directly to the bank where they already have an account. Repayment periods, processing costs, and interest rates vary greatly. Over the course of the loan, even a 0.5% interest rate differential might add up to thousands of rupees.
disregarding the obligations of co-borrowers
Parental or guardian co-borrowers are often required for education loans. This implies that the co-borrower has equal responsibility for repayment, something that many families are unaware of. The parent’s credit score suffers as well if the student does not make timely repayments. Before signing, there must be an open discussion on this.
Overspending without preparation
Without considering their true requirements, several students accept the highest loan amount available. Because living expenses, housing prices, and tuition vary by location, taking on more debt than is required just makes repayment more difficult in the future. Borrowing just what you need and arranging the remainder via family assistance, part-time employment, or scholarships is a better course of action.
The small print regarding moratoriums is missing
Most loans include a moratorium period, which is a break in loan payments while the student completes their coursework and obtains employment. However, many people are unaware that interest often continues to accrue throughout this period. The loan balance has skyrocketed by the time repayment begins. Avoid unpleasant shocks by making clear whether interest is simple or compound during the moratorium.
Ignoring the risks associated with the employment market and currency
Exchange rates and employment opportunities provide an additional challenge for students studying overseas. If the debt is in foreign currency, a declining rupee may make payments more expensive. If the economy slows down, it might also backfire to assume that you will get a high-paying job overseas right after graduation.
The bottom line
If used properly, education loans may be a lifesaver. You can avoid them becoming a financial trap by doing your study, reading the tiny language, and making repayment plans early on.