5 common student loan mistakes that are easy to avoid
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June 28, 2019
CStudent loans are simply amazing – there are no two ways about it. They help aspirants achieve their dreams, despite the increasing cost of education. Moreover, they help save a lot of money through lucrative tax benefits. Therefore, if you’ve been thinking about applying for a student loan, you are indeed thinking along the right lines.
However, education loans mean large amounts of debt – debt that some borrowers mismanage. It’s no surprise really. Most students are first time borrowers and have no experience or little knowledge about loans. Often, this leads to mistakes during the borrowing process - mistakes that the following article will tell you about and help you avoid. Check it out!
1. Not comparing.
This is one of the most common mistakes. Many students borrow from a lender their parents prefer and some finalize with the first bank/NBFC that they come across. It might seem like a convenient thing to do but one could miss out on better finance solutions in the process. One should look at as many options as possible, if not all the options, before making a final choice.
2. Don’t get fixated on interest rates.
Many students and parents focus heavily on interest rates. Sure, interest rates are important but you shouldn’t lose sight of the other factors involved. Further, in many cases, lower interest rates come at the cost of collaterals, down payments and rigid finance solutions. So, when looking for education loans, do not forget to consider things like processing fees, turnaround time, flexible repayment plans, the extent of financing, need for collateral, etc.
3. Do not borrow more than you need.
Next on the list of common mistakes is over-borrowing. This means paying interest on money you don’t actually need! So before you apply, make a list of all the expenses you need to cover with the loan. You might not end up with an exact amount, but at least you’ll have a ballpark estimation to go on.
4. Don’t depend on moratorium too much!
It’s one of the greatest and most thoughtful features of an education loan. It ensures repayments never cloud your thoughts while you are studying! However, this doesn’t mean you rely fully on the moratorium period. You should find a job and try paying only interest, if not the whole EMI.
Why? Because during the moratorium period, all lenders will charge simple interest and add it to your outstanding balance. A part-time job will not only help you with handy pocket money while studying but it will ensure you do not have a huge outstanding amount to repay when the moratorium period comes to an end.
5. Not considering refinance.
Refinance is considered as a time consuming and tiring process. Due to this misconception, many students drop the idea of a balance transfer, even if it provides them with significant savings. However, one should note that refinancing is quick and easy these days and definitely worth considering if the savings are lucrative enough!
We hope these pointers have been helpful. If you need an education loan in the future, we at InCred can help you with customized finance solutions that are designed to suit your specific needs. We can also assist you if you wish to transfer your existing education loan to us; all you have to do is get in touch.
Good luck and all the best with your studies!