What are the various factors to keep in mind while applying for an education loan?

Several students, after completing their basic education, wish to pursue their higher education with a university locally or abroad. While this might be large dream to accomplish, there are certain factors that are involved when it comes to finance. While an education loan will seem like the best possible solution, there are certain benefits and drawbacks to it, which we will be mentioning in this article.

Loan amount value
A student loan can be the perfect financial respite, especially when you need to pay your academic and admission funds in one go. With this loan, you will have to pay back to the lending financial institution only after you have finished your education and have begun with your job. However, depending on the type of education loan you have taken, the amount can quite large, often varying from 15 to 20 lakhs. Most of the top institutes abroad have high quality standards and equally high tuitions fees. Some education loans may or may not include additional features like stationary reimbursement, hostel stay and travel repayment. While it is essential that you look for a financial product that offers you these facilities, it must be noted that the additional facilities will increase the overall loan amount and also increase the overall interest rate.

Repayment
The repayment clause is an important factor that impacts the student loan repayment process. Most banking institutes specify the period and tenure of repayment as per the student’s convenience and the job market scenario. This is an additional boon as there will be a great deal of consideration given to you until you can get the right job in the market. Financial institutes, for the most part, offer a grace period of 6 months to get a job, after the student has completed his course, giving him a reprieve to apply for a high pay and low risk job. However, in many occasions, while hurrying to accept academic applications, students immediately apply for the first education loan possible, without first checking for other possibilities and the clauses that may be involved. The job market can be unpredictable and there is a high chance that a job may not be offered the moment your graduation is completed. There is also a possibility that after graduation, a job may be offered, but the salary is not sufficient to repay back the loan within the fixed repayment timeframe. If a graduate student ends up paying for a loan that is extended for more than 20 years, he will be unable to save up for additional financial requirements like emergency funds or even retirement funds. Thus, it is essential that you keep this in mind and discuss this thoroughly with your financial lender.

Impact your credit score
This loan is an ideal way to build up your credit score for the future. Ideally, a student loan will ensure that you have prioritized your career and simultaneously managed your finances, thereby making you a low risk investor in the eyes of the banking institute. However, due to the ever changing and unpredictable market scenario for the job industry, the guarantee for a job can be low. This could cause a delay in the repayment of student loan, thereby opening up the possibility of having a black mark on your credit score. Defaulting on such a loan can be also be a drawback in certain professional courses like medicine or law and even impact your loan applications for the future. Thus, carefully consider the right time frame that will give you enough leeway to ensure that you don’t find yourself compromised.