How to Minimize the Burden of Education Loan
Education does not come cheap, especially if you are planning a degree in a foreign country. To make higher education easier, banks and government have joined hands to make education loans for abroad studies easily available to students. While these loans have helped numerous students to fulfill their dreams, at the same time they have also burdened some students and forced many parents to put their hard earned savings at risk for dreams that can be quite unrealistic. Contrary to what is believed, not every college guarantees a job and gives a happily ever after, or even a stable salary to repay your loans.
Most people find the idea of education loan to be a burden. But if you plan your finances well, there is a reasonable chance that taking an education loan for your higher education could be the best decision of your life.
Here are a few ways you can reduce the burden of your loan:
- Look out for possible scholarships
It is suggested that you explore all the scholarship options before you start hunting for the right education loan. If you can find an opportunity to save your hard earned money for the future, then why not? It is always better to look out for opportunities that will reduce your burden of loan.
- Create a repayment strategy that is realistic
Many students fall into the trap of creating unrealistic repayment plans only to end up getting disappointed later. So, before you create a repayment strategy, make sure you have account for all the expenses that you are going to incur. Plan for your basic lifestyle and living expenses like lodging, food and accommodation before you plan the loan repayment.
- Choose the right kind of education loan
Choosing the right kind of education loan is the biggest challenge, especially when there are a myriad of options to choose from. So, consider your options well and pick one that is most suitable for your needs. Ideally, low interest education loans with flexible payment plans should be the basic consideration.
- Consider all aspects of your loan
To avoid future financial burdens, you need to consider all the minute details of your loan. So, make sure you read the fine print and ask questions. You must be aware of formalities and documents you will need and about fluctuations in the rate of interest.
- Learn to make a few sacrifices
Let us be realistic. If you take an education loan for higher studies, you need to make some changes to your lifestyle. While some expenses cannot be compromised like food and lodging, there are many other expenses that you can let go of. For instance, you need to eat, but eating out at a high end cafe with friends’ everyday may not be a good idea. You need to make a budget and stick to it for the entire month. Also make sure you leave some room for emergency expenses.
- Make use of moratorium period
In case of education loans, fortunately the repayment does not start immediately. The extra time can be used to save money for prepayments of EMI or partial payments. You can also consider repaying the interest even before the EMIs have started. This can significantly reduce your financial burden.
- Do not be a defaulter
With easy disbursement of loans, there has been a rise in the number of defaulters. If your EMIs are overdue for more than 90 days, you and your co-borrowers (usually parents) may end up spoiling your credit scores. In such a case, you will not only spoil your reputation with the bank but also put your collateral at risk.
- Give up on the idea of perfect job
Every person has their own idea of perfect. While there is no reason why you should give up on your dreams, but chasing and waiting for the perfect job while your EMIs are getting overdue is not a good start. So, while you are looking for that perfect job, it is suggested that you take up what is readily available so that you have a steady source of income at hand.