Repay Your Education Loan Effectively_ 8 Simple Tips

What to Do if I can’t afford my Education Loan Repayments?

Struggling to afford your education loan repayments can be challenging, but it’s important to know the issue quickly to avoid further financial stress. By understanding your options and taking steps, you can manage your repayments more effectively. 

Let’s explore some practical solutions to ease the burden of repaying your education loan: 

1. Make the loan tenure longer.

If you can’t pay your EMIs, talk to your lender to lower them by extending the loan period. You can extend it from 5 years to 10 years, depending on the loan type. While longer tenures mean smaller EMIs, you’ll pay more interest overall. So, extend the tenure only if you really can’t manage the monthly payments.

2. Pay off early if you can.

Paying the interest on your education loan while you’re studying or during the break period can help lessen your debt later on. So, if you’re working part-time or if your parents can manage it, it’s a good idea to pay whatever you can during your studies and the break time. 

Also, many banks let you pay off your education loan early without any extra fees. So, when you start earning, try to pay as much as you can instead of just paying the monthly EMIs.

3. Find ways to earn more money

One good option is to take up a part-time job that fits your class schedule. You could consider tutoring, which not only helps you earn money. Internships related to your field of study are another excellent option. They not only provide financial benefits but also add valuable experience to your resume. 

By earning money while studying, you can cover the interest on your education loan, making repayment much easier later on. Plus, it teaches you important time management and financial skills that will be valuable in the future.

4. Discuss With Your Lender

If the interest rate on your education loan is much higher than what other lenders offer, it’s a good idea to discuss it. If you have a good relationship with the lender and a strong credit history, they are likely to consider your request and lower your interest rate. This will help reduce your monthly payments and lessen your overall debt.

5. Taking a new loan to pay off the old one (Refinancing).

Refinancing involves taking a new loan to pay off an existing one, often to secure lower interest rates or better terms. It can combine multiple loans into one, reduce monthly payments, or provide cash for other needs. Check the available options from lenders, compare the terms and make a decision. However, consider the related costs to make sure it’s financially beneficial.

6. Reduce the Unnecessary Expenses

When you start earning money, you notice changes in your lifestyle. But just making more money or taking longer to pay loans won’t help if you don’t control your spending. Many people find it tough to get out of debt because they spend too much. 

While you’re paying off your education loan, it’s smart to cut back on unnecessary expenses. This means spending less on fancy dinners, vacations, and expensive items like clothes and gadgets. 

Try to live within your means until your loans are fully paid off.

7. Limit Your Credits

Buying a house and a car are big financial goals for many people. Since they are expensive, most take loans. But don’t take new loans until you pay off your education loan. More loans can lead to debt overhang, which is stressful and can harm your mental health. 

Also, be careful with credit cards. Using them carelessly can trap you in debt, so use them wisely or avoid them.

An education loan is often the first loan people take before they start earning money. It’s important because it helps build your credit history. That’s why it’s a good idea to pay back your education loan on time. Following the steps we talked about can help you repay your loan smoothly and save money on interest.

Take out education loans using flexible criteria and pay back only after securing your dream job. Get 100% of the fees financed and focus on completing your education rather than worrying about the hassles of the education loan, such as cumbersome paperwork, low acceptance rates, and low percentage of the fees financed.

Why Propelld?

The following are the primary benefits of  Propelld.

FAQs About Education Loan Repayment

1. What is the moratorium period for an education loan?
   The moratorium period is the time during which you don’t have to repay your loan. It usually includes the study period and an additional 6–12 months after graduation.
2. Can I extend my education loan tenure?
   Yes, you can request your lender to extend the loan tenure to lower your monthly EMIs. This option increases the overall interest paid but reduces immediate financial strain.
3. How can I pay off my education loan faster?
   Pay the interest during the moratorium period, prepay whenever possible, and use extra income from part-time work or side jobs to reduce the principal amount.
4. What should I do if I can’t afford my EMIs?
   Speak to your lender about extending the tenure, restructuring the loan, or refinancing with a different lender offering better terms.
5. Can I prepay my education loan without penalties?
   Most lenders allow prepayment without penalties, but it’s best to check the terms and conditions of your specific loan.
6. Is it advisable to refinance an education loan?
   Refinancing can be beneficial if a new lender offers lower interest rates or better repayment terms. Consider all fees before making the decision.
7. Can I pay only the interest during the moratorium period?
   Yes, paying the interest during this period can reduce the overall loan burden and make repayment easier once the EMIs start.
8. Should I take a new loan to pay off my education loan?
   Only consider this if the new loan has a significantly lower interest rate or better terms. Evaluate all associated costs before proceeding.
9. What happens if I default on my education loan?
   Defaulting on a loan negatively impacts your credit score, making it harder to secure future loans. Lenders may also take legal action to recover the amount.
10. Can I negotiate the interest rate on my loan?
    Yes, if you have a good credit history and relationship with your lender, you can request a lower interest rate.
11. How can I manage expenses during loan repayment?
    Create a budget, avoid unnecessary expenses, and focus on essentials until the loan is fully paid.
12. Is it okay to take new loans while repaying an education loan?
    It’s better to avoid new loans while repaying your education loan to prevent financial stress and manage existing debt efficiently.
13. Does repaying an education loan improve my credit score?
    Yes, timely repayment builds a positive credit history and improves your credit score.
14. Can I delay my EMI payments?
    Delaying EMIs without informing your lender can lead to penalties. Contact your lender immediately to explore alternative repayment options.

How can I reduce my education loan interest burden?
Pay interest during the moratorium period, negotiate for a lower interest rate, or refinance the loan with a lender offering better terms.