Despite the current economic turmoil, financial institutions in India disbursed almost Rs.11,000 crore in the 12 months prior to September 2020. However, the outstanding education debt reached Rs.1 lakh crore till October 2020, a recent report revealed.
Hence, it is high time for the government to revise the existing education loan scheme via moratorium or any other means to solve this crisis. On the other hand, the responsibility also lies on the borrowers’ part to tackle this situation through effective financial planning.
Following are some of the ways that borrowers can follow to resolve the study loan crisis.
- Select the right loan type
Once the loan amount is decided, the next step encompasses selecting the type of loan. For instance, if you require a substantial loan amount, it would be wise to opt for a loan against property for education. This secured credit option is available against collateral and can be used for any purpose without restrictions. For instance, you can utilise the funds from an education loan for travel expenses, paying rents and other ancillary costs.
On the other hand, a conventional education loan for higher studies generally comes with end-use restrictions, and the fund can be used only to finance the course and tuition fees.
- Plan before deciding the loan amount
Determining the exact credit requirements play a crucial role in availing of a loan. For instance, the requirements generally depend on the course type, location of the institution, availability of scholarships, etc. The study course and tuition fees would be higher for a foreign university than a national institution.
Hence, it is necessary for borrowers to know about the complete course fee before applying for a loan.
- Compare interest rates
Another way to get the best deals on loan for education is by comparing the interest rates. However, it is necessary to understand the education loan scheme better to make an informed decision.
Moreover, you can also conduct a comparative study on loan against property vs education loan which one is better for you. In this regard, you can use the education loan calculator to view the instalments and facilitate repayment.
- Choose a suitable lender
Irrespective of the type of loan chosen, the right lender helps manage a loan better with affordable interest rates and better loan terms. Almost all top financial institutions, including NBFCs, extend favourable education loan scheme in India. Leading NBFCs also extend a loan against property for the education of up to Rs.1 crore to salaried borrowers and Rs.3.5 crore to eligible self-employed borrowers.
They also provide pre-approved offers that expedite and simplify the loan availing process. Such offers are available on a range of financial products such as loans against property, home loans, etc. Check your pre-approved offer by submitting your name and contact number online.
- Ensure regular repayment
Like any other debt, an education loan scheme also works best through timely repayment. To ensure that, individuals need to choose a convenient loan tenor that provides enough time to repay the loan comfortably.
While the tenor of a traditional education loan ranges from 5 to 7 years, a loan against property for education accompanies a tenor of up to 20 years. It allows borrowers to choose a repayment option as per their financial standing.
- Alternative options
While loan moratorium is a temporary relief to borrowers, they can alternatively opt for a loan balance transfer that proves to be beneficial in the long run. Loan refinancing ensures lower interest rates and better terms of service.
However, in this case, borrowers should also know about the fees and charges for loan against property if they are choosing this credit to finance education.
Along with all these points mentioned above, loan restructuring is another option that ensures unfettered repayment of a loan for education. However, in any case, adopting a transparent education loan scheme is necessary to resolve the creeping student loan crisis.