Wednesday, 3 August 2016

Tips for Paying of the Student Loan Faster

A student loan usually is the first borrowing that an individual might make. It is important that one is extremely responsible about repaying their student loan dues on time as this creates your first credit trail. It also makes sense to try and repay an education as soon as possible as in the early phase post employment the responsibilities are considerably lesser so repaying a bigger chunk is not likely to dent the monthly budget boat. So here are a few ideas that can help you in repaying your student loan faster.

The Moratorium Period is Important
Usually banks do not ask students to start repaying their dues immediately after they start a job, there is moratorium period ranging from six months to one year. This moratorium period should be used wisely and one should make the best of this duration and this is the first step one could take to paying of their dues earlier than scheduled. This time could be used to collect a lump sum amount which could come in handy to make partial pre-payment or pre-payment EMIs. Either of the options could ease your burden in the months to come. Obviously the cost of pre-payment must be considered before utilizing this option. One can also consider the option paying interest during the course of the study period; this will also help in reducing the EMI burden.
  1. Pay More the Minimum Amount:
    While not paying your dues at all or delaying them could put you on CIBIL defaulters list but, paying more than the minimum amount could help you clear your dues early. Obviously the first thing is not to miss an payment at all and whenever possible pay extra i.e. more than the minimum amount due.  Work your monthly budget and see if you can afford to pay some extra amount every month or once in a while, make paying your education loan your priority. If one gets a bonus then a part could be used to repay the loan and so on.
  2. Keep an Eye on the Interest Rate:
Though education loans are not exorbitant like personal loans, their interest rate is still linked to the base rate. So it is possible that when you borrowed initially the rates were higher and now they have softened. If such is the case then one could consider the option of a loan balance transfer. Balance transfer is the option where a borrower transfers the unpaid amount of the loan from a bank which is charging a higher interest to bank that is charging lower interest in the current scenario. A balance transfer makes sense only if the saving made by making the loan transfer outweighs the expenditure that will be incurred in doing so.  You can use a Loan EMI calculator to calculate the actual saving that you will make when you switch a loan to a lower interest rate. Making a balance transfer in the early years is beneficial and do consider all charges before opting for balance transfer.
  1. Don’t Wait For the Dream Job.
Banks usually give you some time to get a job so that you can start you monthly payments. Often once one finishes their course they may not get the desired job, so one may be tempted to wait for the right offer to come along before one accepts it. Remember the later you start the longer it takes you to repay the loan plus the additional interest burden. So do not delay taking up a job inordinately waiting for the “dream job” and start with something good so that you can grab the right offer once it presents itself.
So if you are student who is about to taken a loan or has already done so then make sure you follow the above to make an early payment of your loan. While early payment is an option, timely payments are not. So whether you choose to repay early or not do remember to pay on time.

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