Steps You Should Know to Pay Off Student Loan Faster

Steps You Should Know to Pay Off Student Loan Faster

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Repaying student loans

Instant Student Loan – An Overview

In today’s world, upskilling has become the norm and many people are supplementing their education with additional degrees. However, funding higher education can be a significant financial burden, and borrowing from family may not always be an option. In such situations, taking a loan from a bank or Non-Banking Financial Company (NBFC) is often the only way to fulfill one’s academic aspirations. A well-recognized degree from a reputed university can increase the chances of landing a dream job, but unfortunately, financial constraints force many students in India to drop out of school, as reported by the National Sample Survey Office (NSSO).

Easy Student Loan

Student loans play a significant role in enabling students to pursue their educational goals. These loans provide the necessary financial aid to pay for their courses and achieve their dreams. However, it is important to focus on repaying student loans quickly once the course is over, as being in debt for a prolonged period can be undesirable. Timely monthly payments on loans are essential, as failure to make payments can damage your credit score, restrict your future credit options, and may even lead to the repossession of assets for secured loans.

If you have taken a student loan and secured a job after completing your studies, you will need to repay the Equated Monthly Installments (EMIs). Student loans can run for up to 15 years, but paying off the loan early can reduce interest payments. Paying off student loans before the scheduled end date may seem challenging, but with proper planning, it is achievable. This article will explain why and how you should pay off student loans faster and highlight the benefits. Let’s dive in!

Reasons why student loan is the best investment

The advantages of investing in an easy student loan are numerous:

  • It provides a means to finance your college education, which is considered the best option. 
  • It guarantees significant benefits and returns in the long run.
  • Pursuing higher education from a reputable institution can lead to promising career growth, thus increasing the likelihood of securing better employment opportunities. 
  • Obtaining an easy student loan offers many benefits for students and their families. 
  • One major advantage is that a degree from a prestigious university has global recognition, and multinational corporations tend to prefer hiring professionals with such degrees. 
  • Pursuing higher education opens doors to exploring opportunities in some of the world’s highest-paying countries, making it an excellent investment.

Why should you repay student loans faster?

Repaying your education loan faster is important for several reasons. First, paying off your loan early allows you to use your monthly salary for other financial goals, such as saving for a house, investing in stocks, or starting your own business. It can be challenging to manage loan payments while also trying to save for other expenses, so reducing your loan burden can help you achieve your financial goals faster.

Second, repaying your loan faster also provides you with more flexibility in your career choices. If you are struggling to make loan payments, it may be difficult to change jobs or pursue other career opportunities that could improve your income or overall job satisfaction. By paying off your loan early, you can avoid being tied down to a specific job or location simply because of your loan obligations.

Moreover, delaying repayments of your education loan can have serious consequences, particularly if you are trying to build a good credit history. Late or missed payments can damage your credit score, making it harder to obtain credit in the future.

By paying off your loan early, you can potentially save a significant amount of money on interest payments. For instance, let’s say you borrow INR 10 lakh and have to pay an interest rate of 9.45% per annum over a 15-year term. Over the life of the loan, you could end up paying a total of INR 8,74,178 in interest. However, if you choose to repay the loan over a 10-year term instead, your total interest payment would be only INR 5,47,484, potentially saving you up to INR 3,26,694. Thus, making accelerated payments towards your education loan can help you save money and reduce your financial burden in the long run.

Also read: Top 5 benefits of education loan

How to repay student loan faster – pro tips:

Here are some tips for repaying your student loan faster. An instant student loan can be very useful in funding your higher education, but it’s important to be disciplined and have a plan for repayment.

1. Choose the right EMI scheme

Many lenders offer flexible EMI schemes, and it’s important to choose one that works for your financial situation. For example, if you earn a monthly salary of Rs 50,000, you could consider paying an EMI of around Rs 15,000 towards your instant student loan. By selecting a comfortable EMI structure, you can avoid missing payments and stay on track to pay off your loan quickly. You can also change the tenure and EMI as needed to suit your needs.

Alternatively, you could set up a standing instruction for auto-pay at your bank. This will ensure that your EMI is deducted on time each month, helping you avoid missed payments and any additional charges.

2. Increase the volume of the EMIs

One way to pay off your student loans faster is by increasing the amount of your EMI payments. This can be achieved by getting a high-paying job, receiving a salary increment, or both. For instance, if you were previously paying Rs 15,000 per month, consider increasing it to Rs 25,000, but only if you are financially capable. It’s important to avoid agreeing to an unrealistically large EMI that may strain your finances.

3. Start early

Starting to repay your student loan early is a crucial aspect to consider when looking for a loan. If you start repaying the loan during the moratorium period, you can save a significant amount of money on interest payments. The moratorium period is the time frame during which you don’t have to make any loan payments, which usually begins after the loan has been disbursed. By making payments during this period, you can take advantage of a 0.50% concession in the interest rate, which can lead to substantial savings over the loan’s repayment term.

For example, suppose you take out a Rs 50,000 student loan with an interest rate of 7% per annum for a ten-year term, and the moratorium period is one year. In that case, your total interest payment without any prepayments would be Rs 24,840. However, if you start repaying your loan during the moratorium period, you can save approximately Rs 1,290 in interest payments, which can make a considerable difference in the long run.

Therefore, it is essential to plan ahead and begin repaying your instant student loan as soon as possible to take advantage of the interest rate concession offered during the moratorium period. This can help you save money and become debt-free sooner.

Defaulting on a loan can be detrimental, so it’s essential to be both practical and smart when it comes to repayment. By doing so, you can learn how to pay off your student loans quickly. Additionally, you can use any windfall gains, bonuses, or increments to prepay your loan.

4. Consider ways to boost your earnings

If you have some spare time outside of your regular job, you may want to think about taking on part-time work to increase your monthly income. This will allow you to have a greater amount of disposable income, which can help you to pay off your education loan more quickly.

There are numerous possibilities to explore. For instance, you could provide tutoring services to children in your building, manage the cash register at a nearby eatery, work as a driver for a ride-hailing service, or look into various online freelance opportunities.

Identify a job that fits your interests and invest a few hours in a part-time role until you have a solid financial strategy and feel confident about repaying your student loans in a timely manner.

5. Choose a shorter loan tenure

To pay off education loans earlier, one simple approach is to make larger payments. One way to achieve this is to select a shorter repayment term or pay back the loan earlier than the set period. However, selecting a shorter tenure can lead to higher monthly installments (EMIs), which can be difficult to manage. Therefore, it is recommended to choose a relatively shorter loan tenure that allows you to make payments comfortably and helps you to pay off the loan quickly, while also controlling the interest payments.

For example, let’s say you took out an easy student loan with a repayment term of ten years. If you choose to make larger monthly payments or pay extra every year, you can pay off the loan in seven or eight years instead. This will save you interest payments and enable you to become debt-free earlier.

However, if you choose a very short tenure, such as two or three years, the monthly payments will be very high, and you might not be able to afford them, leading to missed payments and late fees. So, it’s important to select a repayment tenure that balances your financial situation and enables you to make consistent payments without putting excessive pressure on your budget.

6. Consider refinancing

One option to accelerate the repayment of your student loans is to explore refinancing possibilities. As you have now entered the workforce after finishing your education, the likelihood of qualifying for a more favorable interest rate is increased. Therefore, you might want to investigate options from non-banking financial companies (NBFCs) like Varthana, who may offer an education loan with a better interest rate.

A good education is the first step toward a successful career. You should not have to give up your dreams due to a shortage of funds. Taking out a loan for higher education allows students to continue their studies at the universities of their choice. Taking an education loan is a prudent decision as it reduces the strain on your family savings and eliminates the need to liquidate your investments in fixed deposits, mutual funds or bonds. Read about Varthana’s guide to applying for a student loan online.

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