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Many students opt for a study loan to pursue higher education. However, taking an education loan is a life-altering decision which needs to be well planned. If you fail to proceed with caution, these loans can cause severe financial consequences. So, to prevent that from happening, here are a few mistakes you should avoid when taking a study loan.
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Many students opt for a study loan to pursue higher education. However, taking an education loan is a life-altering decision which needs to be well planned. If you fail to proceed with caution, these loans can cause severe financial consequences. So, to prevent that from happening, here are a few mistakes you should avoid when taking a study loan.
Borrowing more than required Just because you can draw to the limit from a bank does not mean you should. Borrow an amount that helps you pay off your college bills. Keep in mind that loan money is not free. The more money you take from a financial institution, the more you will have to pay back in terms of interest. So, make sure to calculate your net education expense to get a fair idea of how much money you will require for your course. 2. Not comparing options Several banks and financial institutions offer education loans. As taking a study loan is a big decision, it is essential to look for an option that offers the best interest rate, loan repayment terms, tenure, moratorium period, etc. Most people tend to go with the first financial institution they visit. However, it is important to carry out a fair comparison to get the best loan scheme suited for you.
3. Choosing a long tenure A long tenure involves paying a small EMI every month, while a short-term plan requires you to pay a high monthly EMI. So, many students get tempted with smaller EMIs and tend to opt for the longest duration they can. Yet, this method sees you pay more interest. A short duration will see you pay high EMIs but lower the overall cost of the loan. 4. Relying on education loan for other expenses Study loans should be used only for educational expenses like tuition fees, study materials, examination fees, etc. Do not spend this money on luxuries like shopping or a spring break vacation. Try to fund all the other overhead expenses by getting a part-time job. This will help you clear off your debt quickly without altering your savings.
5. Failing to apply for scholarships Many students overlook the importance of scholarships. This is one of the biggest mistakes you can make when deciding your loan requirement. By qualifying for a scholarship, you can get some of your tuition paid for free. So, make sure to put your best foot forward and provide a well-written application to get selected for a scholarship. 6. Not reading the clauses properly Many students end up buying a study loan without reading the fine print of the document, only to find out later that it does not cover the required expenses. It is essential to go through all the details and clauses carefully. You can also seek professional advice if you have trouble handling personal financial matters. It may cost a little but will help you save a lot in the long run. We hope this article helps you survive your education loans with your finances intact. Try to keep these points in mind while selecting a study loan. Good luck!
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