When you take an education loan, you get the financial aid needed to pay for your course and achieve your dreams. However, once your course is over, you need to focus on finding the fastest way to pay off student loans, as staying in debt is never a desirable thing to do. Fortunately, there are some easy ways in which you can do so. Take a look at this article to learn more about how to pay education loans faster while staying within your budget too.
How to repay education loan faster – the top tips:
A student loan is handy as it gives you the required funds at the right time, with the help of which you can complete your higher education. This is why you should be very disciplined and always know how to repay education loans faster. Here are some great ideas for you:
1. Choose a proper EMI scheme:
Most modern-day lenders offer flexible EMI schemes. You need to choose a repayment structure that suits your financial capacities. Say, for example, you earn a monthly salary of Rs 50,000, and you can consider paying an EMI of around Rs 15,000 towards your student loan. This will help you to pay the EMI comfortably each month without it becoming a financial challenge.
There is nothing worse than missing an EMI, as that puts a brake on your attempts to clear the dues. The fastest way to pay off student loans is to stick to the EMI plan without defaulting, and by choosing a comfortable EMI structure, you can easily achieve this. In fact, you can change the tenure and the EMI as well to suit your requirements.
Alternatively, you could set a standing instruction for auto-pay at your bank for deducting the EMI on time so that there is no default and additional charges for missing your payments.
2. Increase the volume of the EMIs:
How to repay an education loan faster? A simple answer to this is by repaying more each month. Basically, you should look to increase the volume of your EMI. You can do this if you get a very good job with a high salary, or you get an increment and earn more now.
If you were previously paying Rs 15,000 as your student loan EMI each month, try to increase it to Rs 25,000, and that will help you to pay the loan off faster. However, only apply this method if you are financially capable. Do not agree to an unrealistically large EMI, as that will put a huge financial burden on you.
There is nothing worse than defaulting on a loan, so try to be practical as well as smart with the repayment, and you will know exactly how to pay student loans fast.
Moreover, you can pre-pay your loan with all windfall gains and bonuses and increments that you receive.
3. Look to increase your income:
If you have some free time on your hands after your work hours, you can consider some part-time employment to increase your monthly income. When you have higher disposable income, you would have a higher repayment capacity for your education loan and would be able to repay it faster.
There are many options available here. You can offer tuition classes to the kids in your building. You can handle the cash counter of a small restaurant in your neighbourhood. You can drive an app-based cab. You can even explore the many online freelance employment options.
Find a vocation that suits you and put in a few hours into a part-time job till you have a good financial plan and confidently know how to pay student loans fast.
4. Ask your employer for assistance:
If you are looking for ways to repay student loans faster, turn to your employer for help. Many employers in India (and in some other countries as well) have schemes that allow employees to take internal loans to clear off their student loans.
Check with your employer if such a financial scheme is available in the organization. You can get the loan at a lower rate of interest, and the EMIs would directly be deducted from your salary in a smooth and convenient way.
You can borrow the entire sum from your employer and close the student loan. There is usually no prepayment charge on student loans in India, so this would definitely work in your favor.
5. Consider refinancing:
If you are wondering how to pay student loans faster, you could consider refinancing options. Since you have started working after your education is completed, your chances of availing a better interest rate are high. So, you could check options with modern lenders such as Tata Capital for a education loan with a better rate of interest, especially if you can provide collateral.
Points to ponder:
However, you need to understand that even though everyone is in a hurry to repay debt, and it is a good idea, an education loan is one of the good loans available in India as you also get tax benefits along with it under section 80E of the Income Tax Act. Also, education loans are usually cheap, with a high repayment tenure of about 8 years and a moratorium of 12 months.
Remember that loan is another product and if you have got your education loan at a lower rate of interest, there is no real harm in continuing the same as long as you can avail tax benefits. However, if you can manage to pay off your education loan earlier than the scheduled duration through pre-payment, your credit score will surely improve. Also, you can invest the EMI amount thereafter towards investing for your future financial goals. Thus, being debt-free is crucial, but not at the cost of being financially burdened. This could help you build a healthy investment portfolio for you in the long run.