With the rising cost of education, a large number of students are availing education loans. The purpose of an education loan is to cover all the expenses incurred while studying. Though an education loan is a great financing option for students to fund their education, the burden of its repayment can have adverse effects in the long run. Therefore, it is essential for students to have an efficient strategy to repay their education loan.
If you are a student looking forward to availing an education loan, you can make use of the below-mentioned suggestions to repay your education loan faster.
Calculate your EMI beforehand
While applying for an education loan, you should calculate the EMI beforehand. Having an estimate of your EMI will make the repayment process a lot easier. You can calculate the EMI with the help of an online EMI calculator. Make a note of the interest rate carefully because even a slight variation in the interest rate can increase your repayment burden significantly.
Create extra income
Students usually begin the repayment of their education loan after completing their education. However, it is wiser to start repaying the loan while pursuing education by getting a part-time job.
Focus on your savings
While pursuing your education, you should manage your expenses wisely and save a monthly amount for the repayment of your education loan. You can also consider setting up a recurring savings fund. Each month deposit a fixed amount to it and automate the process to make it consistent and more manageable. These savings can be very helpful in repaying the loan faster.
While repaying your education loan, you can consider increasing the EMI amount. This will not only reduce the loan term but also help you save more on the interest amount. If you have sufficient funds, then you can also consider prepaying your education loan. It is advisable to read the prepayment clauses set by the financial institution before opting for it.
You can refinance your education loan in the following ways:
- You can opt for a loan transfer. Transferring the education loan to a lender that offers a better interest rate can help you reduce the overall cost of borrowing.
- You can also negotiate with your present lender for a lower interest rate. Since the risk attached with the education loan would be comparatively lower after you start working, the lender may agree to reward you with a better interest rate.
Though an education loan can help you get better quality education and secure your future, it is not advisable to stretch the loan for a long duration. Keeping the debt burden for a longer period will take a toll on your financial status in the long run. Therefore, it is best to repay the education loan as soon as possible.
Since personal loans are multipurpose unsecured loans, you can also consider availing a personal loan for education. Lastly, do not forget to read all the terms and conditions of the loan agreement carefully before signing it. This will help you avoid any inconvenience in the later stage.