To effectively manage your finances and guarantee a stress-free education loan for abroad studies repayment process, you must plan your education loan repayment. Having a solid understanding of the repayment process, available options, and practical strategies will enable you to confidently manage this financial commitment, regardless of whether you have taken out an education loan for study abroad or to pursue higher education in India. We will give you professional advice and insights on how to manage your education loan effectively, plan your repayment, investigate your options, and make decisions that will make your repayment process easier in this extensive guide. We will discuss important topics to assist you in developing a repayment plan that works with your financial situation and financial objectives, from comprehending the length of the education loan repayment period to examining interest rates, subsidies, and tax advantages.
When taking out an education loan for abroad studies, students are eligible for a moratorium. Ideally, the borrower is not required to make any loan repayments during this time. This is the duration between finishing the course and beginning employment, and the RBI has requested that banks grant a one-year moratorium following the course completion. To learn more about education loan for abroad studies check this https://www.gyandhan.com/study-abroad-education-loans
Is it possible to pay back an education loan for abroad studies while studying abroad?
Whether you must repay while you are a student will depend on the payment option you choose. The next concern that arises for students is whether they must begin loan repayment while they are still enrolled in classes, once they are aware of the total number of equal monthly installments (EMIs) that must be paid back. It is advisable for students to be aware of their various options for loan repayment in order to make informed plans.
A student’s top priority is always finding employment so they can pay back the loan within the moratorium period. Beginning at the beginning of the final year, the student must conduct job research in order to guarantee a well-paid position. To ease your concerns about repaying your loans, it is best to do your homework beforehand and enroll in a course that guarantees high-paying employment prospects.
What happens if your student loan is not repaid?
There is a genuine possibility that an education loan for abroad studies will turn into a non-performing asset (NPA). Simply put, an NPA is a loan for which the borrower has not made principal or interest payments within the allotted repayment period for the education loan. Among the many repercussions of defaulting on an education loan are the following:
- The bank will label the loan as non-performing if you don’t make your EMI payments for three months in a row.
- Collateral held by the borrower will be in jeopardy. The collateral you provide could be seized by the bank and used to recoup the loan balance.
- Both the co-applicant’s and the borrower’s credit scores will be impacted if the loan is declared non-performing. This will reduce your and your co-applicant’s ability to borrow money in the future.
A wise education loan repayment plan begins after disbursal, all it requires is a combination of planning & diligence.
- Financial Analysis:
- Assess your financial situation during the moratorium period.
- Determine if you can afford total or partial interest payments.
- Gain clarity on your financial liability and repayment capacity.
- Explore Subsidies and Benefits:
- Investigate available subsidies and benefits.
- Utilize features like margin money, lower interest rates for women, and government schemes.
- Check for interest subvention for differently-abled or economically weak students.
- Loan Disbursement Strategy:
- Opt for installment-based disbursement.
- Interest is calculated on the amount disbursed, not sanctioned.
- Reduces overall interest burden by taking smaller loan amounts over time.
- Interest Rate Considerations:
- Choose fixed interest rates for stability.
- Understand the impact of interest rate fluctuations on EMIs.
- If on a floating rate, plan for potential interest rate increments.
- Loan Transfer Opportunities:
- Consider transferring the loan to a new lender with a lower interest rate.
- Improved job profile post-education can facilitate a lower interest rate.
- Results in reduced EMIs and overall repayment burden.
- Tax Benefits (Section 80E):
- Explore tax benefits under Section 80E of the Income Tax Act.
- Avail benefits for interest paid on education loans.
- Understand eligibility criteria and documentation requirements.
- Foreclosure Option:
- Understand foreclosure as the early repayment of the loan.
- Can be initiated voluntarily or by the lender in case of default.
- Consider foreclosure to clear the outstanding amount before the due date.
By incorporating these strategies, you can create a comprehensive plan for repaying your education loan, making the process more manageable and financially sound.
Ways in which students can lower their education loan for abroad studies loan burden
- Loan Repayment During Study Period:
- Consider making small repayments during the study period, focusing on interest.
- Helps prevent interest accrual and reduces the overall borrowed principal.
- Eases the financial burden post-graduation.
- Part-Time Employment:
- Explore part-time jobs or internships to generate income.
- Utilize free time effectively to offset education expenses.
- In the USA, assistantship stipends can provide a significant income stream (e.g., approximately $12 per hour, up to 20 hours a week).
- Internship During Summer Break:
- Leverage summer breaks for internships to gain industry experience.
- Earn between $3000 to $5000 during the break.
- Use internship earnings to make substantial repayments on the education loan.
- Financial Impact Example (for USA):
- Provide a concrete example of potential earnings and their impact.
- For instance, earning $12 per hour, 20 hours a week, leading to an annual income of $900 to $1000.
- This translates to INR 58,000 to INR 65,000, demonstrating how these earnings can be directed towards loan repayment.
By adopting these strategies, students can proactively manage their financial responsibilities, reduce reliance on loans, and pave the way for a more manageable repayment journey post-graduation.
A crucial part of your overseas education experience is organizing the repayment of your student loans. You can guarantee a well-organized and effective repayment plan by being aware of your loan terms, making a budget, looking into repayment options, setting payment priorities, and getting expert advice. Recall that prudent money management and proactive planning will support your long-term financial security and enable you to fulfill your objectives beyond repaying your student loans. Additionally, GyanDhan is a reliable partner that can offer priceless support when it comes to aid with student loans.