By Rajesh Kachave, Chief Business Officer- Student Lending and Insurance Business, Avanse Financial Services
Remember, once you avail the loan, the interest starts from day one, so cultivate financial prudence and set aside some emergency corpus to continue for EMIs in case of contingencies
Education loans offer a perfect opportunity for students to embark on their academic journey without depending on their parents. In today’s competitive job scenario, quality education is instrumental in establishing a stable career with a higher income potential. Pursuing overseas education can unlock various prospects and career opportunities.
By offering hyper-personalised student loans, new-age education-focused NBFCs bridge the gap between the student community and their academic aspirations. As per a credit rating agency, in the fiscal year 2022-2023, educational loans offered by NBFCs surged twofold, escalating from Rs. 13,000 crore in the preceding year to over Rs. 25,000 crore.
For many students and their families, the education inflation and rising cost of living when planning for higher education can be a matter of concern. However, it doesn’t discourage ambitious students as they turn to education loans to finance their academic aspirations independently. Students need to conduct thorough research and keep in mind some essential factors to understand before commencing their education loan journey. A few key factors are as under:
Know the cost of education: When planning for higher education, utilising financial tools like the Education Loan EMI Calculator and College Course Expense Calculator are essential. The EMI calculator aids in estimating monthly loan repayments, while the expense calculator helps determine total education costs. Also, it is crucial to map the financial requirements to find the right education loan provider. For instance, students must know if they want a secured or unsecured education loan to find the financier that meets their finance-related needs. Making an informed choice based on financial circumstances is vital for a successful education financing strategy.
Choosing the right lender: When considering an education loan, thorough research is crucial. It’s essential to look beyond the interest rate when selecting a provider. Students should evaluate several key factors, including 100% financing options to cover all educational expenses. Additionally, students should assess the loan approval speed to ensure timely funding. Examining customer service quality and reviews can indicate the lender’s reliability and responsiveness. They should look out for potential hidden costs that might affect the overall cost of borrowing. The right education loan partner will be transparent about procedures, fees and costs. Finally, assess the range of expenses covered to ensure a smooth academic journey. A thorough evaluation of these factors will empower students to make an informed and sound choice for their education financing needs.
Comprehensive coverage: When selecting a financial institution for an education loan, it’s essential to consider the extent of expenses covered. Beyond tuition fees, potential coverage for costs like study material, learning devices, accommodation, equipment fees, and even airfare for international studies can significantly impact financial planning. Evaluating these aspects is crucial for making an informed decision before applying for an education loan.
Suitable repayment strategy: The moratorium period, which spans from the disbursement of the loan to the first EMI payment, offers payment exemption to students. However, it’s important to note that interest starts accumulating from day one. Therefore, we encourage our student community to make contributions in the form of simple or partial interest during this period. Since this is not an interest-free period, beginning the repayment early works in students’ favour and also cultivates financial prudence. Furthermore, students must set aside some emergency corpus to continue with the EMIs in case of contingencies such as a pandemic.
Choose the right course and university: Choosing a well-ranked university and a suitable course is essential for students to secure a successful career and effectively manage their education loan repayment. This strategic decision at the outset of their academic journey significantly impacts their future financial stability. Selecting a well-ranked university that can enhance the employability potential is recommended. Also, selecting a course aligned with the previous academic qualification and future career plans can open up lucrative career opportunities.
By conducting careful evaluations and comprehensive research, students can select the most suitable loan options, interest rates, and repayment terms. This proactive approach not only encourages students to fulfil their academic pursuits but also lays a strong foundation for a financially secure and promising future.
