Busting The Myths Around Education Loans
Education loans provide
reassurance for many students and have become essential to finance higher
studies. Whether it is in India or abroad, there are several loan plans that
are offered by financial institutions to make it possible for students to
pursue higher education.
However, there are people who are
still doubtful about taking education loans. There are myths around the
education loan that would only cloud their judgment further.
In this article, we will bust some
of the common notions that students have surrounding education loans and debunk
them, one by one.
Myth 1
Starting my
career by taking an education loan is not a good idea
This being one of the biggest
concerns that every student and parent would have. It is definitely not a good
idea to begin your career with debt. But if you see education loans finance
your education and that would make you more employable, increasing your income
over time. So, starting your career with an education loan is a good idea as it
also helps in creating a good credit history if you repay on time.
Myth 2
My application
for an education loan won’t be considered, as I don’t have a good academic
record or any collateral to provide
This is the most common myth that
discourages students from applying for education loans. Having a well
maintained academic record and just in case if you have collateral to offer,
will definitely increase your chance of getting an education loan, However,
there are alternate choices to that as well.
The best way to go about it is to
opt for an unsecured loan in case of unavailability of collateral. Several
lenders offer education loans without collateral. You would be required to have
an earning co-applicant with a good credit history to apply for a loan without
collateral. Apart from these factors, the college/university that you have
chosen, the course, and the future earning potential are also taken into
consideration.
Myth 3
Education loan
plans are not meant for online courses or short term courses
Education loans market earlier
were restricted to financing just undergraduate or postgraduate courses. But
now, you have various types of lenders with varying loan offerings for
short-term financing needs too. You just need to research more and look beyond
the traditional lenders to look for an optimum product. There are NBFCs that cover smaller sectors of the education loan
market too that help students fund their education goals without paying out of
pocket huge sums of money.
Myth 4
Education loans
won’t impact my credit score
This is false. As with any loan,
education loans can have a positive or negative effect on your credit score
based on your payment history.
Myth 5
I shouldn’t worry
about the education loan until I graduate
Students often believe that
repayment of the loan will and should start after graduation. Well, there are
financial lenders who have a moratorium period in place to reduce the financial
burden on a student, wherein the repayment starts after the student secures a
job.
However, you should keep in mind
that interest is charged the minute the funds are disbursed. Simple interest is
charged during your study period which is then compounded after your
graduation. The apt time to repay the loan completely depends on your financial
situation and planning.
Nevertheless, it is financially
advisable to start paying the loan when the interest is simple and not
compounded. You can plan your loan repayment with an EMI calculator to avoid
unnecessary financial burdens.
The market has various lenders that
would offer different loan offerings, when selecting Education loans it
would require time and research to find the right product. They may not be the
ideal choice for everybody but students should not be taken down by these
myths.
We hope this article helps.
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