Spend, Save and Invest Smartly
There is a famous saying "The educated differ from the uneducated as much as the living from the dead".You must have a good education even if you have to avail an education loan to do so. But what if you fall behind in your education loan payments? What if you cant pay education loan ? How will you crawl out of this mess?
What if you are not able to get a job after you complete your professional course? Is this the end of the road for you or is there a way out?
You repay your education loans in EMI’s.
EMI = EMI (Interest) + EMI (Principal)
You must request your bank to extend the tenure (time of repayment) of your education loan. An education loan charges you a high interest during the initial years of repayment. By extending the tenure of repayment of the education loan you are paying a higher interest on this loan. In spite of paying a higher interest on your education loan , you give yourself time to find a job and you should be able to easily repay the education loan. Most of the education loans have repayment tenure of 5-7 years. Bank will extend the period of repayment to 10 years and in extreme cases if you have availed an education loan for studies abroad even 15 years.
You can opt for the balloon repayment where the bank charges you a lesser EMI when you start repaying your education loan and the EMI’s are gradually increased with time. This helps you as you are paying a lesser EMI when you do not have a proper job and as you move on in your career you can easily repay a higher EMI on your education loan.
You can negotiate with your bank to pay only simple interest on your education loan until you find a suitable job.As your salary increases you could start paying higher EMI’s until your education loan is repaid.
You will have to start making your EMI payments 6-12 months after the completion of your education course or when you get a job, whichever is earlier.
This is the moratorium period.
You have to pay EMI’s on your education loan:
EMI = EMI (Principal) + EMI (Interest)
The bank levies interest on your education loan from the time it is disbursed. This means the interest on your education loan goes on adding up (increasing) even though you don’t have to pay it until the end of the moratorium period.
If you pay simple interest on your education loan when you are studying (doing your educational course) then the EMI (Interest) would reduce when it comes up for repayment at the end of the moratorium period.
When you have availed an education loan repaying it is your first priority. If you are not able to get a suitable job in your field of study (Say you have studied computer engineering but you are not getting a job as a computer engineer) then you must take up a part time job so that you can pay back your education loan. Getting the right job may take you some time. You cannot afford to let the EMI’s on your education loan go out of hand as you wait for the right job. Take up a part time job as you search for the right job and repay your education loan.
A typical floating rate education loan consists of a base rate as per your bank and a spread which is 1-2% above the base rate of the bank. The spread takes care of the costs and the profits of the bank. There is a chance that the interest on your education loan can increase with time if you have availed a floating rate education loan. If you are earning a good sum of money, then you need to set aside a part of your salary as a safety against hike in the interest rates on your education loan. You need to remember the famous saying "Debt is like any other trap, easy enough to get into, but hard enough to get out of". You must repay your education loan as fast as you can to avoid falling into a debt trap.