With the rising cost of higher education, nowadays, more and more students are opting for student loan to get themselves enrolled into desired courses.

Having a financial loan long before your professional career takes off is a big financial responsibility-cum-challenge. You must take this option only after enough due diligence. Every year many students graduate with the burden of huge debt.

Let’s find out the crucial areas, which you must not ignore before taking this big financial leap at an early stage of your life:

1. Make sure whether the course you are going to opt for has good employment opportunity and it is the best option for you.

2. Estimate your first year’s annual income from the prospective job after graduating. Ideally, the loan amount should not exceed from the amount of annual income. However, in reality it would not be logical considering the current tuition fee trends in colleges and universities.

Ensure that the amount you are going to take is affordable and can be repaid from your salary. Do not go for high loan amount.

3. Get a clear picture. Do you really need a student loan? If you can manage all the expenses from your savings and a part-time job then refrain yourself from taking this added financial burden .

Go for a comparative analysis about universities that offer the course at lesser tuition fee. Try to acquire scholarship to reduce expenses. You can also go for work-study mode of studying or take part-time jobs to fulfill requirements.

4. Chalk down a loan repayment plan after you decide to take a student loan. Create a roadmap about how you are going to repay the loan after getting a job.

5. Banks often ask for collaterals when loan amount crosses 7-10 lakhs mark. They also seek a guarantor or co-applicant to ensure loan repayment security. So, you better think twice before taking this route.

Things to Do Before Applying For the Student Loan

1. Choose the right bank after comparing loan offers of different banks and institutions. You can go for PSU banks as they offer student loans at much lesser ‘rate of interest.’

2. Read the terms and conditions of the loan carefully before applying. Take a close look at the offer document and check whether they have any hidden cost in order to avoid getting unpleasant surprises in future.

3. Often banks do tie-ups with certain institutions. In such cases you can get a differential pricing. Such loans are usually marginally cheaper.

4. You can take loan in installments instead of getting lump sum amount sanctioned in one go. Get the money disbursed from bank at the time when you need to make pay for each semester. This way you can save a lot on interest.

5. Forget Moratorium period. If possible start repaying as soon as you can. The earlier you start, lesser the money on interest you pay.

If you fail to bag a job due to genuine macroeconomic downturn bank may give you respite by extending the moratorium period.

Do not take repayment casually because if you fail to repay EMIs on time then you and your parents’ (or guarantor’s) credit score would get affected. You may not get loan for your needs in future due to Poor Credit Score. Always stay prepared to deal with the best and the worst possible conditions.

Meta Data- Your student loan may become a financial burden for you if it is not taken wisely. It is a big responsibility that requires prior research and knowledge.

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