We often need to pursue higher education to have successful careers. Yet, studying further can be expensive. With the increase in the costs of higher studies, an education loan is often the only way for students to afford high university fees.
There are many banks and financial institutions that offer education loans to students to help them finance their higher education. However, students must know to plan their loans smartly.
To help you out, this article lists down 3 things that students must avoid while taking an education loan.
1) Borrowing too much if you have savings
It is simple - the more you borrow, the more you will have to pay back. So, try to borrow a loan amount that you can repay within capacity. If you have a good amount of savings for your higher education, availing of a high amount of loan makes no sense and will ultimately ruin your budget. Plus, remember that it is not just the loan amount that you will be paying. You will also have to pay the interest amount on your loan which can make your overall payable amount costly. If you have put aside funds for your higher studies, then take a loan only for the remaining portion required for your education. Do not get tempted to over-borrow even if you qualify for more.
2)Not comparing different lenders
There are many banks and financial institutions that offer education loans to students. Each lender offers different features and benefits on their student loans. Some provide loans at low-interest rates and others are known to give loans that cover 100% of education and over-head costs. If you fail to do your research, you might lose out on getting a loan that suits your specific needs. So shop around for the lowest interest rates, best repayment tenures, suitable moratorium periods, and so on. Simply do not settle for the first option that is available to you. Additionally, lenders do apply fees such as processing fees, GST, verification costs, etc. on their loans. It is important to look for a lender charging the minimum fees on your education loan. This will reduce your overall loan amount.
3)Taking an educational loan for luxuries
Though banks and financial institutions promise to pay for all the overhead expenses incurred throughout your course period, those overhead costs are meant to be the ones related to your study essentials. These include study material expenses, field trip charges, library fees, project costs, and your other basic daily expenses. Remember, your education loan is not given to pay for living in luxurious apartments or shopping for the latest gadgets. All these expenses will just add extra weight to your debt and increase your overall payable amount. This will, in turn, make things difficult for you during repayment. Hence, do not take an educational loan for your luxuries but only for the essential expenses.
Hope this article has been useful to you. All the best!