With education costs skyrocketing year by year, it can be difficult to fund your education from your own pockets. This is where education loans can come to your rescue. You can now cover any expense incurred during your degree independently and pay back the amount in easy instalments.
Wondering how that works? Here’s everything you need to know about the education loan repayment process.
How does the loan repayment work?
For starters, we need to understand what a moratorium period is. It refers to a specific period in your loan tenure where you are exempted from repaying the loan. EMI repayment begins only after the moratorium period, but students might also have to pay interest during this period, depending on the lender’s policies.
Most student loan repayment policies differ from lender to lender. Most NBFCs offer a moratorium period, but it is not a payment-free period. Students are expected to start paying interest as soon as they receive the loan amount. But one small waiver NBFCs offer is the option to make partial interest payments per month.
Although, you’re better off making complete payments every month instead of partial ones to not rack up interest towards the end of your tenure.
Additional Read: Facts you need to know about Education Loan
How to repay your education loan?
Here are some tried and tested methods to help you close your education loan faster –
1. Start paying early
Have a comprehensive understanding of interest rates and terms by using an EMI calculator online. Calculating student loan repayments early on can help you prepare a suitable budget for the EMIs. Once you have all this figured out, go ahead and avail of the loan.
In order to quickly get out of student debt, start repaying during the moratorium period itself. Identify areas where you can cut down expenditure and direct that money towards your loan repayment. This way, you can close your loan before tenure and save a lot of money on interest.
2. Build a budget
Build a budget that skims out all the extravagant expenses from your monthly expenditure. Cut out the unessential expenses and only spend where you have to. Direct the money you saved towards your personal loan repayment. Live sparingly now so that you can live comfortably without student debt hanging on top of your head later.
3. Pay more
Pay more than the minimum monthly instalment whenever you can. This extra money is deducted from the principal amount and helps reduce interest. You can also choose to pay off your loan partly or wholly, provided you have the funds. However, prepayments might attract penalties, so tread accordingly.
Additional Read: What are Some of the Challenges of Taking an Education Loan?
To sum up
Education loans can help you cater to all your financial needs and secure yourself a bright future. At Tata Capital, we offer competitive interest rates starting at just 10.99% over a flexible tenure of 1 to 6 years. From hostel charges to course books, we can tailor a loan plan for your specific needs.
Visit our website to check out loan eligibility and calculate monthly payments using our personal loan EMI calculator. Connect today!