The great Benjamin Franklin said, “An investment in knowledge pays the best interest.”
However, sometimes it is students who end up paying interest to be able to pursue quality education. With rising tuition fees, education loans have become a common way to fund higher studies. In some instances, borrowers have a hard time repaying the interest on their loans. As a result, many have to borrow additional loans to close off their student debt, thus falling into a loan trap.
If you’re considering taking a loan for your higher studies or are struggling to pay your existing loan EMIs, here are some tips that can keep you away from an education loan trap.
Apply for a moratorium extension
Student loans usually have a longer tenure as EMIs typically start after you’ve completed the course. In India, student loan tenures can go up to 15 years. In addition, lenders also provide a moratorium period ranging between six months to a year, during which you should ideally look for employment.
However, if you’re not able to find a job in the moratorium period, you can ask your lender for an extension. Depending on your relationship with the lender and the reasons you provide, the lender may extend this period.
Look for a part-time job
If you’re struggling to find a job and have EMIs piling up, you can opt for a part-time job. This will ease off some burden of your education loan debt. Not only that, but you might also be able to improve your skills while working part-time, making it easier for you to get the right full-time job.
Restructure your loan
You can renegotiate the loan terms with your lender if you’re having a hard time paying the EMIs. If you explain your financial situation to your lender, they may relax the norms. This is also known as restructuring a loan.
For instance, a lender may only charge a simple interest rate on the loan until you get a job. Moreover, you can also liquidate an investment to pre-pay the debt. Finally, lenders also offer you the option of replacing the co-signer with someone who can pay the EMIs until you start earning.
Additional Read: What is Debt Consolidation? How Can a Personal Loan Help?
Choose the course and college wisely
One of the ways you can avoid the dangers of a debt trap early on is to enrol in a programme that offers lucrative job prospects. While choosing the college, check their placement record and faculty credentials. Doing this will improve your future employment options and ensure that you have a steady source of income to close the loan.
Additional Read: What all courses are applicable for Education Loan in India?
To sum up
By asking for a moratorium extension, getting a part-time job, and renegotiating your loan terms, you can easily prevent yourself from falling into a debt trap. It’s also essential to compare different lenders and choose the one which offers the most favourable terms.
Need a loan for higher education? Get in touch with India’s leading lending Institution – Tata Capital! We offer personal loans for both domestic and overseas education via a hassle-free application and documentation process.
Visit our website today to check your personal loan eligibility.