What should students do to manage their loans and expenses?

What should students do to manage their loans and expenses?

The recent interest rate hikes and rupee devaluation has made education loans expensive for Indian students who are pursuing higher education abroad.

The recent interest rate hikes and rupee devaluation has made education loans expensive for Indian students who are pursuing higher education abroad. This article comprises some tips to help students manage their education loan debt efficiently.

Loan Management:

Already possessing an educational loan:

Refinance your education loan: The hike in the interest rate hike will impact the EMIs. This happens especially if the tenure of the loan is less. Refinance your education loan with other lenders which helps in reducing the interest rate. This works mainly for those who have graduated and have a job as this makes it easier to negotiate the education loan.

Budget your finances and evaluate the options for paying off the loan: There are two conditions available if you have the funds to pay off the loan wholesome.

Firstly, Paying off the loan would be an ideal condition if the period of your education loan has ended and you have used the schemes to waive the interest amount. Schemes reduce the burden of interest during the study period.

Secondly, you can pay off the loan if the interest you are paying to the lender is more than the post-tax interest that you make on your investment.

Income currency: If you are earning in a currency stronger than the INR, you must explore options to save money on forex. Channels like GyanDhan help to transfer money without much cost. Often hefty amounts are paid for forex services.

In the process of taking an education loan:

Calculate the total loan: One must calculate the total expense they will incur to know the amount they need from the bank. Explore lender options that offer the lowest total cost deal, lowest interest rate, ancillary charges and processing fees. You can acquire the help of Education Loan marketplaces to get the best deal.

Know the terms and conditions: Know the terms and conditions of different loan products. In order to manage the loan efficiently, the interest amount, repayment terms, loan tenure, holiday period and penalty of delay must be noted. You must also discuss the terms and conditions for an extended grace period with the lender if you are not able to secure employment after the course.

Types of interest rates: Learn about fixed and floating loans and compare the benefits of each one separately. Floating rates of interest will fluctuate with market trends. The fixed rate of interest remains the same throughout the tenure of the loan.

Make provisions for interest rate fluctuations: The increase in interest rates has increased the EMI burden on students. Students must maintain a contingency fund to create a buffer in such unforeseen situations. This can help students pay regularly and avoid defaults.

Capitalize on Government provisions such as tax benefits and schemes: The government offers interest subsidy schemes that help you reduce the interest amount burden. Moreover, Section 80E tax deduction helps in reducing the financial burden. You can apply for these provisions at the time of finalizing the education loan.

A loan default impacts the credit score negatively. This reduces the possibility of securing future loans at reduced interest rates.

Expense Management

Make a practical budget plan: You must make a list of your expenses and cut off the unwanted ones.

Learn to cook: The list will give you a clear picture of the amount you spend eating outside. Thus, you can use the budget to buy groceries and make your own food. Thus, 30% – 50% of the budget can be saved.

Get a roommate: Sharing accommodation works well in cutting down the rent and subsidiary costs. If you wish to stay by yourself, you can choose a less expensive renting option.

Get student discount cards: Students discount cards for travel, buying books or laptops, shopping at retail stores, etc., which offer a reduction of up to 10%-30%.

Buy used books and digital copies: Consider the option to download PDFs of the books or buy used books. You can also sell the books you have used at a less price.

A part-time job to help with the expenses: A part-time job can help in paying for the expenses which can be cut down while studying.

Ditch expensive leisure activities and explore the city: Reduce the activities that require you to spend excess money. You can choose to go for a picnic or host a movie night rather than going to a fancy cafe or cinema.

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