Contents
If your course costs you 15 lakh, you must calculate boarding and other living expenses and decide your loan amount so as to not borrow more than you require as it will make repayment easier.
KEY HIGHLIGHTS
- Avoid going with the first lender. Shop around for the lowest interest, compare interest rate and other charges
- Avoid picking the lowest payment as the payment plan with the lowest monthly payment has the longest repayment term, which increases the total interest
- Make sure that if you are buying an expensive loan, it covers college fee, textbook, boarding etc
New Delhi: Education loans have become extremely popular in the last couple of years. Higher education is becoming costly and more people are choosing to go abroad for higher studies which have contributed to the demand education loans. Education loans have made it easier for students to pursue higher education in India and abroad.
It may be noted that borrowing money to pay for your education is an important decision and there are several things that you need to consider before getting an education loan. Even though interest rates for student loans are not as high, it can still add up quickly if you’re not careful with timely payments and can easily land you in debt and spoil your credit record.
5 mistakes to avoid while getting an education loan
1. Borrowing more than you require: Banks and other lenders offer education loans as high as 40 lakhs. However, just because you can borrow this much money, it does mean that you should. If you borrow more you will have to repay it with interest which is not something you want. If your course costs you 15 lakh, you must calculate boarding and other living expenses and decide your loan amount so as to not borrow more than you require.
2. No comparison: There are several banks, NBFCs and P2P lending platforms which offer education loans and the interest rates on such loans vary from lender to lender. You need to compare and research so as to not miss out on getting a loan at a lower interest rate. Avoid going with the first lender. Shop around for the lowest interest, compare interest rate and other charges to make sure that you end up with least repayment amount.
3. Long term repayment plan: Most lenders offer different repayment options to students. Students can either choose the payment plan with the lowest monthly payment or they can choose the highest payment they can afford. Avoid picking the lowest payment as the payment plan with the lowest monthly payment has the longest repayment term, which increases the total interest.
4. Cover: Education loan is to furnish education which means that the loan amount must be used for college fee and textbooks. When you get an education loan, try to make sure that the amount is used for educational purposes. Try to fund your living expenses by earning through a part-time job or other savings.
5. Details: Always read the fine print of the document. Go through the details of the expenses that will be covered under the loan. Since many students lack experience in handling personal financial matters, they end up borrowing expensive loans to only later find that not much is covered under the loan. Make sure that if you are buying an expensive loan, it covers college fee, textbook, boarding etc.
