A vital first step in handling your finances and guaranteeing a stress-free loan payback process is planning your education loan repayments. You may handle this financial commitment with confidence if you understand the repayment procedure, your options, and practical methods, whether or not you have taken out an education loan to pursue higher education in India. We will give you professional advice and insights in this extensive guide on how to manage your college loan properly, plan your repayment, investigate your options, and make decisions that will make your repayment process easier.
High defaults of about 8% in the education loan portfolio have made PSBs cautious and go slow on the sanction of such credit. However, it is critical to recognize the broader societal benefits of investing in education. To address these concerns, measures that effectively control default risks, promote responsible borrowing, and provide support to borrowers over their loan repayment journey are required. This technique ensures that education loans have a positive and long-term impact on both individuals and the economy.
Keeping your credit score high is another reason it’s critical to pay off your student loan debt on schedule. When hiring, the majority of reputable companies look up your credit score. Banks consider your credit score before approving any more loan applications you may submit. We will cover all the necessary information to assist you in developing a repayment plan that works with your financial situation and financial objectives, from comprehending the length of the education loan repayments period to examining interest rates, subsidies, and tax advantages.
Here are 7 quick strategies to help you handle your student loan debt wisely and prevent yourself from becoming overwhelmed by it
1. Select the best repayment plan
Choosing the appropriate education loan repayments plans is the best approach to managing student loans. You will have a selection of repayment alternatives from your lender. Select the option that best fits your spending plan. You must remember the duration of your moratorium. In this manner, you can determine how much time you have left before your first EMI starts to accrue savings and find employment. Consider how much you hope to make in your first job as well. You can determine the appropriate tenure and EMI with the aid of all of this. If you don’t prepare ahead, you can choose an EMI that is significantly higher and more expensive.
Also Read: What Expenses Are Covered Under An Education Loan And When Can You Start Paying EMIs?
2. Select a shorter loan term
Choosing a short tenure is an ideal way to handle education loan repayments. Although a shorter duration may result in higher EMIs, it will also help you save a significant amount of money on loan interest. This does not, however, imply that you choose unaffordable EMIs or overspend. Instead, decide on the shortest duration you are capable of handling. To determine how much you can afford to pay each month, utilize an EMI loan repayment calculator for school loans.
3. Automate your payments
Your financial stability may suffer greatly if you fail to make loan installments. It may have an impact on your credit score and result in late penalties for you to pay. You may easily prevent missing education loan repayments by setting up automatic withdrawals from your savings account. Without you having to worry about missing any EMI penalties, these payments will be sent on schedule. Maintaining a good credit record will be greatly aided by making regular payments. A good credit report, in turn, can help you in the future when you seek loans. Additionally, using a loan repayment calculator can assist you in planning and managing your repayment schedule effectively.
Also Read: A Guide to Boosting Your CIBIL Score and Landing the Perfect Education Loan
4. During the moratorium, pay off interest
Your payments for an education loan don’t start as soon as you receive the money. They start as soon as the moratorium expires. The embargo starts after you finish your course and lasts for either six months or a year. While your payments do not begin until the moratorium expires, the interest on your school loan starts adding up the moment you receive the funding. Therefore, it would be wise to begin paying this interest while you remain enrolled in classes. Maybe this is the finest advice anyone can give you about student debt.
Consider working part-time while attending college. The money you earn from this work will help you pay off your student loan to some extent. You will significantly reduce the total amount you must pay back to your lender if you pay off this basic interest early. Select part-time work that won’t put you under too much stress if you’re unsure about what to get. You might attempt to make money from a pastime. If you play an instrument, for instance, you might think about teaching lessons. You may even think about instructing students in the subject you are studying at lesser grades.
5. Make additional loan payments
Did your employer give you a bonus? Or maybe you received a gift of cash from relatives. If you get some additional funds, you should think about making greater payments on your student loan. Overall, this is an excellent strategy to lessen the stress of repayment. You may be able to settle your student loan earlier if you make bigger payments toward it. One of the best strategies for effectively managing student loans is this one. Make sure, nevertheless, to find out whether there are any pre-payment penalties assessed by your lender. Before submitting your loan application, you can find out from the fine print or ask your lender if there are any penalties by utilizing a loan repayment calculator.
6. Refinancing your education loan if needed
You’re likely to have an additional debt on top of your student loan. Take credit card debt and auto loan debt as examples of two debts you could hold simultaneously. Consider refinancing if you wish to handle your loans more effectively.
Select a lender who offers possibilities for refinancing at lower rates of interest. This won’t be a problem for you with your payments. You may have unanticipated expenses when repaying your student loan because life is unpredictable. Therefore, even the smallest interest savings might still greatly impact you.
7. Tax Benefits
Education loans provide the opportunity for tax deductions under Section 80E of the Income Tax Act. The amount of the deduction depends on how much interest is paid back on the loan within a year. There is no maximum deduction amount. These deductions can also be claimed by anybody responsible for repaying the loan, such as a student’s parent, guardian, or spouse.
It’s important to note that while education loans offer tax-saving benefits to those who take them, only the person repaying the loan can claim these deductions.
Remember to consider all outcomes and opportunities when arranging your student loan payback to make it simpler both financially and mentally. Suppose you haven’t received a credit sanction yet and are still planning or evaluating the potential of payback. In that case, it may be beneficial to invest to build your existing corpus of savings to minimize the amount of credit you require, which in turn may reduce your loan’s tenure or interest rate.
Remember that the influence of your student loan on your financial future is long-term, so treating the process with attention and responsibility is crucial. By avoiding these mistakes, you can set yourself up for a prosperous and debt-free existence after graduation.
Varthana provides customized education financing solutions for those pursuing higher education. These loans cover not just tuition but also other expenses such as books, equipment, and other educational costs. Explore Varthana’s resources for more information about applying for a student loan online.
Social