Take out a student loan? 5 things you need to keep in mind
Pursuing higher education has become an expensive affair lately. This is why most parents prefer an education loan to fulfill their children’s dreams. These loans are very useful when it comes to courses in top institutions, which are expensive and parents are unable to afford. Although student loans can be funded by jobs that are recuperated after completing the course, it can be a heavy burden if not handled well. Those who are ready to opt for this facility must first know all the details so that they will have no difficulty in repaying this.
Notably, the banks in our country have facilitated the payment of school fees through such loans, but there are few things that need to be known. A very important aspect that you should know is that if you do not earn money when taking out a loan, your parents/guardians can become co-applicants, which would be necessary in full-time courses, while you would be the debtor major.
Before taking such a loan, you must be very clear about the amount that will serve your purpose. Proper research should also be done on the interest charged on the loan. Here are five things you need to keep in mind:
1. Knowledge of your bank
There are many banks that offer student loans, but security is necessary for them. Those wishing to take advantage of this facility should choose a bank that will offer the best moratorium period, interest rate as well as repayment terms. You should also ensure that you have the option of repaying the loan early, knowing whether you are allowed to pay EMIs upfront or make partial payments on the loan.
2. Keep an eye on the details
If you are planning to study in India or abroad, you need to know the details of your further studies and the loan amount you have taken. If you are abroad, you would face interviews at the airport about your purpose and details despite having a VISA. You must have adequate preparation to answer such questions, in addition to knowing our personal data very clearly.
3. Cost higher than EMIs
Generally, people go for the loan with a longer term so that they have to pay less EMI, but the cost of the loan in this situation will be much higher due to the interest payment. Therefore, if you can have a higher paying job after completing the course, you should prefer a shorter loan term instead. Your EMI would be higher, but the loan will be cheaper and you can finish it faster.
4. Moratorium periods
These are vacation periods that are actually the duration of the course, plus one year after the end of the course, or 6 months after getting a job, whichever comes first. You don’t need to make any payments on your loan during this time, but interest will accrue. If you can repay the interest during the moratorium period, it will help ease the burden of the loan, in addition to reducing the cost of the loan when you actually start paying EMIs.
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5. Defaults and Extensions
If you are unable to land a job for certain reasons you may find it difficult to make the banks understand. In exceptional circumstances, banks may extend your refund or moratorium period. You should know that this happens in really exceptional cases. However, you should never miss paying your student loan. If your parents are co-borrowers, this will hamper their future credit opportunities as well as yours.