Education Loan Repayment

One of the major benefits of an education loan is its flexible repayment structure. You can get a repayment tenure of up to 15 years, at your convenience. Based on your financial situation and repayment capabilities, select a tenure. Another flexibility offered by lenders is a moratorium period. While you study, you are not required to repay the loan. This enables you to stay completely focused on your academics.

Once you complete the course, you are usually provided an extra 6 to 12 months to find a job. This gives you plenty of time to start earning, which can help you pay off your loan easily. The terms of this period may differ from one lender to another as well.

 

You can repay the education loan you got on Bajaj Markets through partial interest, simple interest, and EMI options. 

• Partial Interest: The initial instalments paid during the course period consist of a part of the interest costs. You can start repaying the principal after course completion or at the end of the moratorium period.
  

• Simple Interest: Pay interest calculated on the loan’s principal amount over the tenure
  

• EMI Options: Start repaying both the principal and interest in EMIs immediately after loan disbursement or after the moratorium period

 

Reach out to your lender to understand each of these options better and choose the one that best fits your needs.

Here are some things you can do to ensure a smooth loan repayment:

• Start Early

During the initial phase of the loan, when you are studying, you may not have to pay any EMIs. Conversely, some lenders may ask you to make interest-only payments. A great way to stay ahead of your repayments is to start early and pay regularly. How can you do this? Let’s say you earn a small sum of money through an internship or a small part-time job. Direct such income towards repaying your loan, even during the moratorium period. This can help reduce the overall interest costs and pay off the loan faster. 

• Create a Budget

Having a proper budget helps you allocate your funds well. Consider your income and expenses when budgeting. This will help you determine the amount you can direct towards repaying the loan. For this, you can use online tools like education loan EMI calculators. These help you check the instalment amount and the total interest costs. It also provides an amortisation schedule. The insights from this schedule can be useful in planning possible prepayments, etc. 

• Use Autopay

Missing deadlines can lead to penalties and additional charges. This can lead to a substantial increase in the loan cost. To avoid this scenario, consider setting up auto payments. Discuss with your bank and set up a mandate for automatic payments. On a set date each month, the fixed instalment amount is then deducted from your account. Timely payments enable you to manage your finances better and build your CIBIL score.  

• Go for Fixed Rates

When applying for a loan you are usually presented with the option to apply for a fixed or floating interest rate. As the tenure of the loan is usually about 10 to 15 years long, a floating rate may not be the best option. This is because the regular fluctuations in the rates may result in you having to pay a higher amount to repay the loan. Meanwhile, a fixed interest rate ensures stability and helps you forecast the amount you need to pay more accurately. This makes planning for loan repayment easier and helps you budget better. 

• Prepay or Foreclose

Making consistent prepayments can help you save and manage your debt better. If possible, consider making regular part-prepayments. This helps reduce the loan tenure or EMI of your loan. In case you get a huge lump sum in the form of a bonus or inheritance, consider foreclosing the loan. This can help you become debt-free sooner than expected. However, do remember that utilising these facilities can lead to an additional penalty. Consider the related costs prior to prepaying or foreclosing your loan. 

• Utilise Tax Benefits

As per Section 80E of the Income Tax Act, 1961, you can save on tax by repaying your education loan. You can get an exemption on the interest paid each financial year, under this section. Also, unlike other sections, there is no upper limit to the amount you can claim for tax deductions. This enables you to save considerable amounts. The saved money can be used to meet your other financial obligations. Ensure to file your ITR on time to enjoy these benefits.

• Refinancing

If the EMIs are straining your finances, consider refinancing your loan. Transfer the balance of your loan from one lender to another. Consider negotiating to enjoy low study loan interest rates and better repayment options. Ensure to check the new lender’s track record, customer service reviews, and more. This will help you ascertain whether it is the right option for you. Most students consider refinancing their loans after getting a job. The income enhances your eligibility for a better offer. This can be quite beneficial when refinancing your education loan. You can also consider changing your lender during the moratorium period. However, check your current lender's policies and your loan agreement as in some cases this may not be possible.