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Guide to Education Loan Repayment

A repayment is a deliberate act of paying back the loan that the borrower has borrowed, and if not planned carefully, it can be a concern for most students. Students who lack good preparation view repayment as a significant liability, thus it is important to plan everything carefully, from choosing the bank to repaying the student loan. To arrange for the repayment of student loans, one must be aware of the policies and requirements of the bank. To get detailed information on repaying student loans and how to set up your repayment plan effectively, read this post.

Moratorium period

The moratorium period is regarded as the time frame prior to the start of the EMIs, and the borrower is exempt from making payments during this time. Due to the borrower’s ability to suspend payments, the moratorium period is often referred to as a repayment holiday. The moratorium period typically lasts the length of the course plus six months, although it can last up to a year.

But not all banks operate in this manner. However, if the applicant chooses a payment moratorium term, they are not forced to make any payments until their course duration plus their payment moratorium of 6 months or 1 year. Students who want to start their EMIs during the moratorium can do so at Government banks. In contrast, private banks and NBFCs (Non-Banking Financial Corporations) typically do not provide a no-payment moratorium period, meaning that during their moratorium period of the course duration plus one year, a student is required to pay either the whole or partial interest.

When to start repaying?

Education loans might be very useful if one wishes to go to a prominent university. Students who meet the requirements for an education loan receive funding from banks as well. Most students choose to repay their loans in full with interest over a period of five to seven years, which is the best time frame. Planning your payback, or how to pay off student loans, requires careful planning and diligence. It becomes a major problem once your studies are finished. As the moratorium is EMI-free but not interest-free, it is advised to begin loan repayment as soon as you can. Your loan is being charged simple interest, and throughout the payment-free moratorium period, that interest continues to accrue. In India, interest rates are very high, particularly in private banks and NBFCs. As a result, you ultimately increase the cost of the loan overall and the weight of interest.

Education loan repayment tips

Prioritize expenditure

places a strong emphasis on spending priorities. You can change your spending patterns and focus where it’s needed with the aid of this activity. Organizing your spending into three categories—fixed expenses, daily expenses, and avoidable expenses—is a simple way to get started. Once you’ve done that, focus on cutting back on unnecessary spending to see how much you can save.

Opt for fixed rates

As students need to understand how education loan interest rates can impact their EMIs, we urge them to choose fixed interest rates over floating interest rates. Fixed interest rates are fixed in nature and remain the same for the duration of your loan, whereas floating interest rates may change depending on economic conditions. Students who have chosen floating interest rates try to understand how interest rates change in response to market fluctuations. 

Utilize tax benefits

Students who took out education loans from Indian banks are qualified for the Section 80E tax credit. Under Section 80E, candidates who have taken out student loans and are repaying them are able to deduct the interest they are paying from their taxes.  

Take your loan amount whenever required

As the interest is determined by the amount withdrawn or used from your loan amount rather than the amount sanctioned, you should withdraw funds whenever necessary.


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