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Everyone seems to be familiar with one term Education Loan. We all were made familiar with this term by then Finance Minister Yashwant Sinha in the Union Budget. The student loans have increased many folds in the last eight years. The loan has increased ten times since 2004. The report of EspArito Santo Securities revealed that education loan grew by 35 % between 2004 and 2012. Banks expanded credit by 23 % during this period.
According to Google Ad words Key tool, over one lac Indians search ‘education loans’ and other related terms on the search engines. Going by the trends and the statics you must have got an idea about the popularity of Education Loans in India. The importance of loans has increased because of the importance of education and continuous stress on education.
The government insists that the deserving should not be denied of this facility. Education is expensive, especially if you are aiming at a premium institute. Getting your child educated is an expensive affair but everyone wants to send their children to the best of the institutes for higher education. Education loan is a big help.
The increasing number of loans give rise to increasing number of defaults. The list of defaulters has also increased. Obtaining of loan is an easy task whereas payment of the loan is a burden. The inability to pay back the bank brings you in a bad light as well as your child. The default spoils your credit score. If the EMI is overdue for 90 days, It is classified as not- performing asset. Collateral is at risk if the loan amount is more than Rs. 7.5 lacs.
Shed away your loan burden with these simple tricks and repay your loan amount within the prescribed time and maintain your credit worthiness and position to avail any kind of loan in future.
1) Repayment Strategy: The repayment period starts after a year of the end of the studies or six months after the job whichever happens earlier. Start strategizing beforehand.
2) Capitalize on Provisions: Students get many relaxations. Make use of these to pay your debt. Several benefits are:
⇒ Margin payment: You pay for the expenses while bank pays for the rest of it on all loans above Rs. 4 Lac. The Rule says 5 % for studying in India and 15 % for studying abroad. Meritorious students get relaxation on this rule.
⇒ Girls get heavy concessions. They are eligible for a lower rate and get 0.5 % concession. They are also entitled to special schemes.
⇒ Do not take the entire loan amount in one, this increases interest burden.
3) Make use of Moratorium Period: You do not pay immediately. Make use of this delayed period to make payment. Start paying some of the interest while you are studying.
4) Pay as you earn: Start paying your debt as soon as you start earning. The salaries are lower in starting years and rise after that. Similarly, pay less in starting years and then more in years later
5) Fluctuation Rate: The Interest rate is usually fixed and does not change across the spread of 2-3 years or even more. There might be slight differences in the rates of different banks. If you earn good and are able to save, save money in case the interest rates fluctuate and rise.
Start cutting on costs and expenses as much as you can so that you save money and can repay. If you are not able to manage with the current salaries work extra hours or take up odd jobs to make money. Shed out your free days for money.
This is the only way you can repay your loan amount. You were an extended loan because the bank feels you will be able to repay. You could get a grace period for repayment but not for the lifetime. Inability to pay back loan has serious consequences. You will be in debt forever.
Start thinking of repayment the moment you avail the loan. Start saving money and find ways to repay. Paying a hefty amount all at once can be problematic for you. Shed your loan burden with the above ways and stay debt free.