When it comes to higher studies, educational loans are a viable path that students can choose to have strong career prospects. With thoughtful planning, disciplined repayment and a clear understanding of loan systems, borrowers can stay in control to manage their finances. In this aspect, the following tips present key guidance to managestudent loan interest rates and the total amount in an efficient way.
1. Understand Loan Terms Before Signing
Carefully review the sanction letter during the education loan process. Along with that, analyse interest rates, repayment period, moratorium period, processing fee and interest rates. It is better to know what is expected of you beforehand so there are no surprises once the repayment phase begins.
2. Estimate the Total Cost of Borrowing
Compute the interest that is to be paid on the total tenure when you check for education loan eligibility. This assists in selecting a manageable EMI and gives a realistic picture of what the loan will end up being. To help you with that, Poonawala Fincorp’s education loan EMI calculator can be helpful in making comparisons between various tenures and interest combinations.
3. Borrow Only What You Need
Educational institutions frequently provide a wide range of services or facilities. These can include scholarships, part-time earnings, family contributions or savings. Besides that, taking a smaller loan not only reduces monthly EMIs but also the total burden of the loan upon completion.
4. Pay Interest During Study or Moratorium if Possible
Start paying the interest portion as soon as the loan is disbursed. You can also pay interest during the moratorium. This eliminates interest capitalisation. The future EMI will be more manageable when the principal is held constant.
5. Choose Repayment Tenure Based on Expected Income After Graduation
With Poonawalla Fincorp’s education loan, you can get up to ₹1 crore collateral-free loan amount and 15 years of loan tenure. A long tenure may result in lower EMIs, but it can increase the total interest you pay for the loan. On the other hand, a short tenure offers the opposite pattern; EMIs may become higher, but the total interest may reduce significantly. To get the best value, calculate your living costs and professional growth, along with choosing a tenure that fits your financial situation.
6. Use Prepayment or Part Payment Options
Several loan options allow borrowers to make an advance payment for loans. These features can be used strategically if you receive payments like a stipend, a bonus, freelance earnings or a gift. With such earnings, you can contribute a significant portion of the amount to reduce the overall loan amount.
7. Confirm All Allowable Expense Categories Before Budgeting
Education loans cover many more things, along with tuition fees. Some of these expenses include living, travel, insurance, study materials and any other related expenses. To identify the eligibility of expenses, check the official list of covered costs that are included with your education loan.
8. Claim Tax Benefits on Interest Payments
The interest you pay on education loans can be claimed as a tax deduction as per Section 80E of the Income Tax Act. The yearly limit for the deduction is ₹40,000 (for both principal and interest). This tax rebate is applicable for loans taken for higher education – full-time studies in any graduate or post-graduate, professional, and pure and applied science courses. The deductions will be applicable with a maximum of 8 years starting from the day of loan repayment.
9. Maintain Complete and Organised Loan Documentation
Managing documents plays an important role in education loan repayment.In this aspect, keep copies of the sanction letter, loan agreement, disbursement slips, EMI schedules, interest certificates, and payment receipts. Organising these records can help you track the principal amount and interest in an accurate way.
10. Track Your Outstanding Balance Regularly
Reviewing your loan statement at each quarter helps you understand how much principal and interest are paid and how much is remaining. This step can help to plan your next EMI payments and to opt for prepayment in a smoother way.
Common Education Loan Options
In India, there are several loan options available with public sector banks, government subsidies and education loans from Poonawalla Fincorp. Let’s have a look at how the platform makes a greater choice for higher education loans:
|
Loan Type |
Maximum Loan Amount |
Repayment Tenure |
|
NBFCs |
Up to ₹1 Crore without collateral |
Up to 15 Years |
|
Public Sector Banks |
Loans of up to ₹1 crore. |
Up to 15 years |
|
Government Subsidised Loans |
₹40 Lakh or 90% of the course fee |
Up to 12 years |
|
Private Bank Education Loans |
Up to ₹1 Crore without collateral |
Up to 15 years |
To Conclude
Higher education is now more affordable with the help of student loans. On top of that, having a clear picture of repayment tenure, maximum funding, and expenses covered, you will be able to organise the arrangements of payments more effectively. This knowledge can also be combined with reasonable borrowing, proper documentation and use of tax benefits to achieve the best out of the education loan.
FAQs
1. Why is it important to understand loan terms before taking an education loan?
Knowing the terms of the loans will make you aware of the interest rate, the loan repayment time, and the charges. This helps to avoid unexpected situations in the future and enables you to prepare to repay.
2. How can estimating the total cost of borrowing help me manage my education loan better?
It is better to calculate the entire cost, including the interest during the whole term of the education loan. This assists you in deciding an EMI and tenure that meets your financial comfort.
3. How does choosing the right repayment tenure affect my loan?
The increase in tenure implies that there is a decrease in the monthly EMIs at the expense of the overall interest outflow. The shorter tenure increases the amount of EMI but considerably lowers the amount paid in the long run.
4. What documents should I maintain for smooth education loan management?
Always keep sanction letters, agreements, disbursement and EMI schedules and interest certificates in an organised order. With proper documentation, you can easily monitor your loan and make it easier to pay taxes and repayments.
5. What expenses can an education loan cover?
Apart from tuition fees, education loans may cover living expenses, travel, insurance and study materials. To confirm that, check your education loan’s eligible list of expenses.